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Month: December 2020

Your Student Loan Debt CAN be Discharged Through Bankruptcy

There has been long a perpetuating myth that student loan debt in America cannot be wiped out by declaring bankruptcy. The truth is quite the opposite. A court can grant you a discharge provided you can prove it is causing you ‘undue hardship’.

Courts will use different tests to evaluate whether it might be causing you undue hardship. The commonly used is the Brunner test. Passing it requires you to prove that:

1. You and your dependents are unable to maintain the ‘minimal’ standard of living because of the debt

2. Additional circumstances exist that will make such a state of affairs to persist for a long period

3. You had made real effort to repay your student loan debt.

On the surface, this does make it seem that qualifying for a discharge might be difficult, but an empirical student from Villanova University found that judges have granted a hardship discharge to 40% of debtors who sought one.

In such a context, it may be surprising to find that 99.9% of debtors who have filed for bankruptcy don’t even attempt to discharge their student loans. With more and more individuals suffering from mounting student loan debt, it remains highly critical to raise awareness about how it could potentially be wiped out.

Link to the study: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1894445

#bankruptcy #chapter13 #chapter7 #studentloans

Photo courtesy:  www.aboblist.com / CC2 (In comments)

A Record Low in Bankruptcy Filings

Despite the economic uncertainty brought by the pandemic this year, paradoxically, the number of bankruptcy filings in the country hit a new 14-year record low this November. According to data released by the legal giant, Epiq, new bankruptcy filings across all chapters for the month was 34,440, the lowest since January 2006.

According to Deirdre O’Conner, Epiq’s managing director of corporate restructuring, the economic uncertainty itself is to blame for the unusually low filing count.

“These historic low bankruptcy filings reflect the overall uncertainty about our economic recovery. Bankruptcy is a legal tool to restructure, but in this unknown financial environment, the benefit from seeking bankruptcy protection is unclear for individuals, families, and even large companies,” – Deirdre O’Conner.

In addition, government intervention may have also partly contributed to the fall in bankruptcy filings. The various COVID-19 related government programs and state eviction moratoriums are lessening individual incentives for filing for bankruptcy.

Individual bankruptcy filings through the year as a whole have been low. Compared to 2019 for the same period, in 2020, non-commercial filings under Chapter 7 were down 21%, from 414,625 to 325,716, and in the case of non-commercial filings under Chapter 13, the tally was down by 45%, from 252,660 to 137,764.

Source: Globe Newswire

#chapter7 #chapter13 #bankruptcy #legalnews #bankruptcynews #bankruptcyUS #COVID19 #USLaw

What to Expect if You Get Sued for Debt

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It is not necessary that you only get sued for a loan that you remember. There can be a case where you get a legal notice for a long-forgotten debt, which is still left unattended.

For such scenarios, you should know what to do if someone sues you. Hence, we have gathered everything that you can expect if you get sued for a debt.

Go through this to get a better idea about the whole procedure.

The Time

The very first thing that you should cater to is the time wherein you have to respond to the notice. You can expect 20-30 days from the day you receive the notice to send an official response.

However, we suggest that you get this done at your earliest. By doing so, you may even have a chance of striking a deal with the creditor or debt collector before things reach the court.

The Debt Itself

You can expect the repayment amount to be more than the amount you borrowed. The amount stated by the creditor could be more than the debt itself and may include interest, charges, court, or even attorney fee as the process is not free for creditors.

Hence, you should expect an amount which can be more than what you owe. This way, you will be in a position of negotiating the amount in front of the court.

The Original Creditor

Another thing that you can expect for such a case is that it may not be the original creditor who is filing the lawsuit against you. This is precisely why we stated earlier that you could get sued for a long-forgotten debt.

Debts get sold, and when that happens, the chances are that the person suing you is not the one you owe your money to. Hence, the situation can get complicated, and you should be prepared with all the documentation you own.

Statute of Limitations

Since lawsuits are filed mostly against unattended debt, you should always check the statute of limitations for such cases in your state. If your creditor sued you within the time frame, the case might continue.

However, if the statute of limitations for this specific type has passed, you will have the upper hand in court. To be sure, do consult an attorney and discuss the possibilities beforehand.

Showing Up in Court

Lastly, you must attend all the court hearings. By doing so, you can make sure that any opportunity that you have of winning the case or having the decision slightly in your favor is not missed.

However, if you do not show up in court, you can expect dire consequences. This includes the decision being taken directly in favor of your creditor, which will eventually give them more power. This power means that your salary, property, and savings are all at risk, which is certainly a situation you will not prefer. Hence, make sure that you always show up for your case.

For more information, speak with an experienced bankruptcy attorney – schedule your free 1-hour consultation today: https://seanflynnlaw.com/calendar/

What is a 2004 Examination in Bankruptcy?

 

 

In a bankruptcy case, you are required by the court to reveal all information that is deemed necessary. This includes all your debts, assets, income, expenses, etc. In addition, you will be required to attend a 341 meeting, where your creditors will ask you further questions (HYPERLINK: 341 Meeting article).

Usually, the interested parties, such as your creditors or the court trustee, may be satisfied with the information you provide. However, in case they wish to investigate matters further regarding your bankruptcy case, they will schedule a special session called a 2004 examination.

What is a 2004 Examination in Bankruptcy?

A 2004 exam is a formal session that allows the interested party to acquire any information that they may want regarding your bankruptcy case. A 2004 examination meeting can cover a broad range of issues, which can include but are not limited to:

In a 2004 examination, the interested parties could also bring in anyone that has knowledge relating to your bankruptcy. Any witness subject to the session will not always be entitled to an attorney, and their right to object to any questions asked may be restricted.

The 2004 Examination Process

Because of the potential for abuse, an interested party is not automatically given the right to conduct a 2004 exam. Rather, they have to request it from the bankruptcy court by filing a motion. The party requesting a 2004 exam must convince the court that they have a ‘just cause’ for holding the session. If the motion is approved, the court will then issue an order, informing you or another witness of the date and time of when the session will take place.

Additional information

A 2004 exam can also be requested by you, and it can be advantageous to do so in certain cases, such as challenging the basis of a creditor’s potential adversary claim. It is also important to know that once an adversary claim has been filed, then a 2004 Exam can no longer be used to get information from the parties involved in that proceeding. Instead, the process will be conducted in a separate adversary lawsuit with its own set of rules.

Hire a Bankruptcy Attorney

You don’t have to confront your creditors alone in a bankruptcy case. An experienced legal professional can guide you through the long-drawn and complicated bankruptcy process and ensure a favorable outcome. To hire an attorney from our office or for any inquiries, call 512.640.3340.

For more information, speak with an experienced bankruptcy attorney – schedule your free 1-hour consultation today: https://seanflynnlaw.com/calendar/

Student Loans and Bankruptcy

When someone considers the option of going bankrupt, they are definitely in the most difficult situation and they cannot pay off their debts. However, when it comes to student loans, we have often heard that it cannot be discharged through this process. Well, it is high time that we start understanding student loans and bankruptcy in combination so that one can analyze if it is an option that they should go with or not.

Student loans can be discharged through a bankruptcy case by proving ‘Undue Hardship’ and this is one of the reasons why people get confused because the process itself is not that clear. While you know that this is what you need to prove in court, there is no set of rules which every court and judge has to abide by. Hence, most people are unaware when the question arises that ‘how to prove undue hardship for student loans?’

As stated, there is no set of rules, but we do know that if not all, at least most of the judges do follow a specific test, i.e. the Brunner test to determine whether someone is applicable for student loans and bankruptcy or not. We will now look at the 3 major things that the borrower needs to prove to pass the Brunner test on which the decision of the judge relies.

Minimum Standard of Living

The first and foremost thing that you need to prove in a court is that if you were to repay the loan amount, you will not be able to maintain the bare minimum standard of living for yourself and those dependent on you. Now, it is not necessary that only people who fall under the poverty line would qualify for this. However, it depends on the judge who is handling your case and what they think about your current living conditions.

Additional Circumstances

There can be additional living conditions for you or people that are dependent on you that can add on to the fact that you cannot earn more and pay your student loan. This can include any mental or physical illness, poor quality of education, and the fact that you have reached the highest-earning that you can make and are still incapable of generating enough money.

Good Faith

The last point which is also very significant is that the judge should know that you have tried your best until now and that bankruptcy is the only option left. For example, you can ask for a repayment plan with less interest rate before you apply for bankruptcy to show the legitimacy of your intentions.

While the Brunner test is followed by most courts, it is not a set standard and so you need to consult a lawyer in your area beforehand to have enough knowledge about this and other things such as the need of filing the adversary proceeding, knowing which option is better for you, i.e. bankruptcy chapter 7 or 13, and to have an estimate of how much will the bankruptcy itself will cost you!

For more information, speak with an experienced bankruptcy attorney – schedule your free 1-hour consultation today: https://seanflynnlaw.com/calendar/

The What, When, Why – Chapter 7 and Chapter 13 Bankruptcy

Chapter 7 and Chapter 13 are two common bankruptcy programs available to individuals to discharge their debts. If you ever got confused between the two, here is a quick what, when, and why to help you learn their differences.

What is Chapter 7 Bankruptcy?

Chapter 7 bankruptcy is a liquidation bankruptcy. Your non-exempt assets are sold by the court trustee to repay your creditors.

When is Chapter 7 Bankruptcy Needed?

When your debt becomes completely unmanageable, and you want a quick discharge to restart your financial life.

Why is Chapter 7 Bankruptcy Important?

It helps eliminate the risk of debt trap that, otherwise, individuals could fall into if they can’t keep up with the repayments.

What is Chapter 13 Bankruptcy?

Chapter 7 bankruptcy is a reorganization bankruptcy. Rather than a discharge, your repayment schedule is reorganized based on what you can actually pay.

When is Chapter 13 Bankruptcy Needed?

When you are struggling to repay your debt but don’t want to risk losing any of your assets.

Why is Chapter 13 Bankruptcy Important?

It allows you to prevent foreclosure or selling off of your assets by creditors by making repayment more manageable.

#bankruptcy #US #legal #Chapter13 #Chapter7

Steps to Take When You Are Sued by A Creditor

Whether you have a bank loan, a credit card loan, or even an unpaid medical bill, living with excessive debt can be risky. While we all have taken some debt at a given moment, it is necessary to keep track of everything that you owe.

If not, you might find yourself in a difficult situation where your creditor ends up suing you. While you should try your best to avoid such problems, you should also be aware of how to respond to a creditor lawsuit if it ever happens.

You would be surprised to know that a good majority of civil cases that the court addresses are debt cases. If you have received a letter for the same, you should follow these steps to resolve the issue:

Do Not Panic

While it sounds pretty basic, not panicking in such situations is extremely significant. As stated above, these cases are common, and if you have an unattended debt, there is a high chance that your lender will use this way to get their money back. However, if you are not in the right state of mind, you can make things even more difficult for yourself.

Do Not Ignore

Another thing that goes hand in hand with the above point is to respond to the situation. Yes, staying calm is important but that in no way means that you sit back and relax while ignoring the matter altogether.

If a creditor has filed a lawsuit against you, it means that things are pretty serious, and you need to be there to respond to it.

Additionally, you need to take court seriously and be present. Because if you miss court hearings, the final decision will ultimately be in favor of your creditor. Hence, you will lose any opportunity for negotiation.

Be Cautious

If you follow the above two steps, it will become easier for you to take things smoothly. You probably have a debt that has gone unattended for an extended period because of which the creditor had no option but to sue you.

However, this doesn’t mean that you should agree to everything that has been stated against you. Since filing a lawsuit is additional work and money for the creditor, they may include extra charges or interest in the overall cost.

Hence, be very cautious and not take liability for everything right away. However, you will need proper documentation for being in this position, which brings us to our next point.

Documentation

Documentation does not only mean asking the creditor to give you a copy of your complete account statement or other such documents. It also includes all your receipts, salary records, bills, and any other essential documents that may prove helpful in the future.

You may only need all of this if the case involves a debt that you are not in a position to attend. However, you should still keep everything to be on the safe side.

Talk to a Lawyer

Lastly, even if you think that your case is not too serious, you should at least consult a lawyer. This way, you will know the possible outcomes and be better prepared to handle the case. However, if the debt is enormous and you have no way of paying the amount back, you will probably need an attorney by your side.

For more information, speak with an experienced bankruptcy attorney – schedule your free 1-hour consultation today: https://seanflynnlaw.com/calendar/

CARES Act and Chapter 13 Bankruptcy

In March of this year, in response to the impending economic downturn, the US government passed the CARES Act. Beyond the massive $2 trillion dollar stimulus package, the Act has allowed for a number of different changes to existing laws to make it easier for both businesses and individuals impacted by the COVID-19 pandemic to whether the crisis.

Among these includes changes made to the Chapter 13 Bankruptcy Law. Where the previous maximum repayment plan duration was set to 5 years, struggling debtors can now have it extended by a further 2 years. In addition, any COVId-19 related federal emergency relief payments will not be taken into account by the bankruptcy court in calculating your current monthly income.

These changes apply to all bankruptcy cases filed after the Act was enacted and is likely to remain applicable for some time.

Have any further questions regarding the CARES Act or bankruptcy? Schedule your free consultation with our legal experts by calling 512-640 3340.

Alternatively, you can book one online by visiting our website:

Link: https://seanflynnlaw.com/calendar/

#bankruptcy #bankruptcyattorney #bankruptcylaw #bankruptcylawyer #TX #BankrutpcyTX #Chapter13 #Chapter7 #BankruptcyNews #COVID

The Effect on Chapter 11 Business Bankruptcies in 2020

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Bankruptcy is one of the most challenging options that one can only choose if the situation does not allow any other possible way. While there can be various kinds of bankruptcies, when we talk about this year, the first thing that comes to mind is business bankruptcies in 2020.

The reason why your mind will take you directly towards this is not just because of the obvious calculations of businesses facing a downfall due to COVID-19, but also because we now have statistics that confirm this case. Hence, before moving forward with everything you need to know about recent corporate bankruptcies, let’s take a look at some figures first to legitimize the significance of this topic.

Statistics

The best way of analyzing data in this situation is to compare it with the data for last year. Although we are not yet done with this pandemic and the year itself, one can still compare and contrast the statistics present for half of the year which were recently released.

While the overall bankruptcies for all chapters went down by 23% for the first 6 months from last year, there was an increase of 26% in chapter 11 bankruptcies from 2019 for the first half and a stark increase of 43% was noted for June 2020 in comparison to June 2019!

These figures are good enough to show how businesses have been opting for seeking help by filing bankruptcy amidst the pandemic even after knowing that there can be severe consequences.

Chapter 11 Business Bankruptcy

We are now well aware of how there has been an increase in business bankruptcies in 2020 for the first half only and the number will probably go even more up for the rest of the year. However, it is also essential to understand what exactly chapter 11 means and what effect does it might have had after the recent changes.

Chapter 11 bankruptcy is a reorganization process through which you can change your payment plan by proposing a new one that allows you to keep your business running while also being able to pay back to your creditor. The case is different for every business, but it is surely not like chapter 7 where you directly just give in and all your assets are taken to pay the debt amount.

In February 2020, an amendment came into effect which was basically for small businesses. This change was made in subchapter V of chapter 11 through which the process of bankruptcy was made faster and at a low-cost for small businesses. While this change was not specifically made because of the current pandemic, it did help a lot of people who because of coronavirus are now unable to pay their debt according to the payment plan that they were okay with at the start.

As a piece of advice, we would suggest that if you have a business which had to face a major setback due to the current situation, you should consult an expert before taking any big step and then do what might be the best option for now!

For more information, speak with an experienced bankruptcy attorney – schedule your free 1-hour consultation today: https://seanflynnlaw.com/calendar/

4 Quick Tips to Regaining Your Financial Health After Bankruptcy

A bankruptcy discharge can definitely hurt your credit score, but nonetheless, without the burden of your past debts, you can find it much easier to regain your financial health.

1. Plan a Budget

Budget planning is central to effective money management. On a spreadsheet or with the use of an online app, make a note of all your expenses, categorizing them on whether they are ‘essential’ or ‘non-essential.’

If the sum of your monthly income and expenses just break even or is in the negative, consider cutting on non-essential expenses until you can generate some savings.

2. Use Cash

Prioritizing cash spending can help you save money by limiting the amount you can spend at any time. With credit, it can be easy to indulge in excess spending, but while using cash, there is only so much you can buy before it runs out.

3. Set an Auto-Payment System

Regaining a good credit score means never missing the deadline on many repayments. However, with so much going on in our lives, it can be actually much harder than it seems. Fortunately, most financial agencies allow you to set up an auto-pay system to avoid any unintentionally missed payments.

4. Add Positive Accounts to Your Credit History

Provided they qualify, consider adding positive accounts to your credit history, such as your utility and phone bills, to improve your credit report. This can be especially helpful for those with little or no credit score.

#bankrutcy #finance #Chapter7 #tips

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