Chapter 13

How to Manage Your Student Loan Debts Using Chapter 13 Bankruptcy

Across the United States, an increasing amount of young people are graduating from universities heavily indebted with student loans. The total student debt in the country right now stands at an astonishing $1.5 trillion and the figure continues to rise rapidly. The current bankruptcy laws make it extremely difficult, if not impossible, to discharge your student loan debt.

However, that doesn’t mean filing for bankruptcy still won’t be worthwhile if you are struggling with repayments. Here is how to manage your student loan debts using Chapter 13 bankruptcy.

Benefit of Chapter 13

When you filed for bankruptcy, the court will immediately grant an automatic stay period that extends until the completion of the bankruptcy process. During the automatic stay period, all debt collection activity, including that of your student loan debt is prohibited, meaning you will not be harassed by your lenders to make regular repayments on your outstanding debt.

Instead, the court will create a new repayment plan for the duration of the bankruptcy (usually 3 to 5 years) based on your ability to afford. Since student loans are considered non-priority unsecured debts, you will not be required to repay the debt in full by the end of the duration.

Depending on your circumstances, the actual amount you would need to pay monthly could be significantly lesser. If the court determines that you have little or no disposable income than you probably won’t be required to pay any amount towards your student loan debts throughout the stay period.

A Word of Caution

Keep in mind that interest will still continue to accumulate on your student loans during the duration of the bankruptcy. In some cases, this could translate to a considerable amount you’ll have to pay back once the automatic stay period expires.

Another thing to be aware of is that the court’s meaning of “what you can afford” may differ from your own. It is not unheard of for filers to be given a plan which may heavily compromise their lifestyle. The aid of a seasoned attorney is vital to make sure the outcome is more in your favor.

Concluding Note

If you fail to repay your creditors on your student loan debts, the consequences could be terrible. It could severely hurt your credit score, you could be subject to a lawsuit, or have your wage garnished. Filing for Chapter 13 Bankruptcy can make repayments on your student loan debts much more manageable and help you avoid such predicaments.

More information on how the Federal Reserve’s recently lowered rates impact preexisting debt and refinancing options.

Can You Get a Mortgage After Bankruptcy?

When a consumer is overwhelmed with debt and can’t find a way to pay their creditors, they often file for bankruptcy. Filing for bankruptcy can give you some relief from debts and stop collection activities such as repossession and lawsuits. However, bankruptcy can seriously hurt your credit and would stay on your credit report for a while. Does this mean that you can’t qualify for a mortgage after bankruptcy? No, this isn’t the case. Many lenders have established guidelines for consumers who emerge from bankruptcy and complete the waiting period. In this post, we will explain how you can get a mortgage after bankruptcy.

How Your Ability to Acquire a Mortgage Is Affected by Bankruptcy

Bankruptcy can lower your credit score and affect your ability to get loans. Fortunately, its impact doesn’t last forever. Before you can apply for a mortgage, your bankruptcy should be discharged. The court orders a bankruptcy discharge, and it eliminates your debts. The lender will want to see that your bankruptcy is discharged, and they will also look at your credit to determine whether you can qualify. There is also a waiting period that must be completed before applying for a home loan after bankruptcy. This period varies depending on the type of home loan you are applying for.

Waiting Periods

Waiting periods start once the bankruptcy is dismissed or discharged, meaning that the case is over, and you will be paying your debs without a bankruptcy payment plan. For Chapter 7 Bankruptcy, the waiting period is calculated from the dismissal or discharge date of the bankruptcy case. For Chapter 13 Bankruptcy, the waiting period for bankruptcy that is discharged isn’t the same as the bankruptcy that was dismissed.

Chapter 7 bankruptcy is removed 10 years after the date of filing, while Chapter 13 bankruptcy is removed seven years after the filing date. Credit reporting agencies normally delete bankruptcy from the consumer’s credit report after 10 or 7 years. However, it is still a good idea to check your report to ensure that there is no bankruptcy on it.

Waiting Periods of Different Home Loans

For Chapter 7 bankruptcy, the waiting period of conventional loans is 4 years, FHA loans’ waiting period is 2 years, that of the USDA loans is 3 years, and VA requires consumers to wait 2 years after the discharge or dismissal date.

For Chapter 13 bankruptcy, conventional loans’ waiting period is 2 years from the discharge date and 4 years from the dismissal date. FHA loans, USDA loans, and VA loans require consumers to wait at least a year after the discharge or dismissal date.

Final Thoughts

Getting a mortgage after bankruptcy isn’t an easy feat. But, if you are discharged from bankruptcy, wait for the required period and develop a good credit after bankruptcy, you may still be able to get a home loan.

6 Mistakes to Avoid Before Filing for Bankruptcy

1. Not Choosing the Right Chapter

The most common consumer bankruptcies are Chapter 7 and Chapter 13. However, there is a considerable level of difference between the two. Chapter 7 liquidates your assets as a means to pay off your outstanding debt, while Chapter 13 re-organizes your debt repayment schedule. Some people get confused between the two and end up realizing too late that they opted for the wrong one, after going halfway through the exhaustive process.

2. Withdrawing Funds from a Retirement Account

Retirement accounts, such as your 401(k), are exempt from bankruptcy proceedings. Many people, unaware of this, mistakenly withdraw funds from these accounts. However, such withdrawals are considered as income and are considered non-exempt.

3. Running up on Credits

Since filing for bankruptcy discharges your credit card debt, some people assume that they can get away with using their credit cards as much as possible before filing for bankruptcy. However, charges made 90 days before filing, or any cash advances taken out 70 days before filing, are not forgivable under a bankruptcy case, and the filer is still required to pay back the outstanding sum.

4. Transferring Assets to Someone Else’s Name

To avoid the risk of foreclosure, some people attempt to transfer the rights to their assets to a family member, friend, or person they can trust. However, doing so won’t actually guarantee the protection of your assets as transfers done with this intent is referred to as fraudulent conveyance. Courts are allowed to reverse such transfers if they occurred within four years of the day you file bankruptcy.

5. Paying Back Debt Owed to Family or Friends Before Filing for Bankruptcy

Family and friends often come first, but unfortunately, debt is a definite exception. If you pay back the debt you owe to your family or friends before filing for bankruptcy, the trustee may deem it a case of preferential payment and could potentially file a lawsuit against them for the return of these payments.

6. Not Taking the Help of an Attorney

Another major mistake many people make before filing for bankruptcy is not to take legal aid from an attorney to help them through the process. Most attorneys offer free consultations and can help you find the best route through the complicated legal process to ensure that the end results of the entire bankruptcy process are more in your favor.

Even today, many Americans have little knowledge of bankruptcy, which is why they end up making the wrong choices in the process that end up costing them dearly. Here are 5 mistakes to avoid before filing for bankruptcy. For a free consultation on consumer bankruptcy and more, book an appointment with the Law Offices of Sean T. Flynn by calling 512.640.3340 and scheduling one directly online.  

5 Biggest Reasons Why so Many Chapter 13 Cases Fail

According to available data, only 33% of Chapter 13 bankruptcy cases result in a discharge. For comparison, nearly 96% of Chapter 7 cases succeed.  There are many factors involved that result in such a striking failure rate for chapter 13 cases. We list down the 5 biggest reasons why so many chapter 13 cases fail.

1. Loss of Motivation

Filing Chapter 13 is a long and arduous process. Unlike Chapter 7, which usually lasts for only a few months, in the case of Chapter 13, you need to complete a 3-5 year repayment plan before the remaining debt is discharged.  Many filers simply get tired of the process and realize that fighting to retain certain properties simply isn’t worth their energy.

2. Not Enough Resources

A lot of individuals filing for Chapter 13 bankruptcy just don’t have the required resources to begin with. Often as a sort of last resort, they file for a Chapter 13 case to stop a foreclosure or lawsuit. It is only when once the process is started that the court discovers that the filer doesn’t have the financial means to go through the Chapter 13 repayment plan and dismiss their case.

3. Sudden Changes in the Financial Status

As mentioned before, a Chapter 13 plan is a long drawn process. During that 3-5 year period, a lot could change that would undermine a filer’s ability to go through the plan. They could lose their job, lose their medical insurance, or incur extra expenses due to some unforeseen circumstances. All this impacts their ability to go through with the repayment plan, and their cases are dismissed as a result.

4. Strategic Reasons

Sometimes, debtors themselves may file for Chapter 13 without the intention of completing it through. They do so for strategic reasons. This could range from wanting to delay foreclosures, to avoiding a lawsuit, to negotiating a new settlement with their creditors. Not all of them would necessarily benefit from discharge, and they drop out halfway through the case.

5. Not Hiring an Attorney

Chapter 13 Bankruptcy is a far more complicated process than most people realize. There is a lot of subjectivity in how the legal provisions are interpreted, and you need an experienced legal profession on your side to help you built up your case. According to a 2011 study by the Bankruptcy Court for the Central District of California, of all those who filed for Chapter 13 bankruptcy without an attorney, only less than 0.5% managed to get a confirmation. In comparison, those filers who were represented by an attorney have a confirmation rate of an astonishing 55%!

Struggling with debt and in need of legal assistance? Book an appointment online or call at 512-640-3340 for a free consultation with a seasoned attorney.

What Should You Expect at a 341 Meeting?

A 341 Meeting, also known as a Meeting of Creditors, may sound unnerving for first-timers. However, the process itself is fairly routine and quick. In the meeting, an appointed trustee will oversee your case, confirm your identity, and proceed to ask a series of questions about your bankruptcy paperwork. Here in this article, we give a detailed overview of what to expect at a 341 meeting.

Preparing for the Meeting

Before going to the meeting, make sure to double-check your bankruptcy petition in case you missed something. You should have all the information provided exactly as it, and as accurate as possible (e.g., the value of your assets, your name as it appears on your government issued ID, etc.). The trustee will be looking at the information you provided, and will check for any signs of misleading information or fraud.

What to Bring

The list of documents you need to bring along for the hearing is short. Typically, you are required only to bring along an approved photo I.D, your Social Security card, and any documents that reflect a financial change since you filed the petition.

The Hearing

Most 341 hearings last no more than 10 minutes. During the hearing, the trustee will ask you a series of routine questions which only demand a simple answer from you. Afterward, they may then proceed to ask questions more specific to your case. Creditors might also be present to ask questions about your finances. Although such cases are rare and most of the time, creditors won’t be present at the 341 meetings.

Some Typical Questions They May Ask

Below are some typical questions a trustee may ask during a hearing. However, different cases may involve a different set of questions, and thus, it always a good idea to check with an attorney before your scheduled 341 meeting.

  1. To the best of your knowledge, is all of the information provided in your bankruptcy papers correct?
  2. Did you recheck your bankruptcy petition and schedules before filing with the court?
  3. Have you listed all of your creditors in the petition?
  4. Have you disclosed all of your assets?
  5. Have you ever declared bankruptcy before?
  6. Did anything change since you filed for bankruptcy?
  7. Have you filed all your due tax returns?
  8. Do you have any domestic support obligations such as alimony or child support?
  9. In the last year, have you made any payments to creditors exceeding a total of $600?

Consider hiring an Attorney.

An attorney can help you better prepare for your 341 meeting by finding and fixing any honest mistake or inaccuracy that may be in your bankruptcy paperwork. Presenting accurate and complete information to the trustee is important, otherwise they may ask you to re-file an updated petition or worse, in case they mistakenly view the information you provided as fraudulent, alert the court. For a free consultation with a seasoned attorney, book an appointment online or call at 512-640-3340.

5 Things You Should Know Before Declaring Bankruptcy on Student Loans

Declaring Bankruptcy on Student Loans

Student loan debt is on the rise across the country as students take in more and more loans to finance their rising tuition fees. In fact, Americans collectively own more than $1.5 trillion in student debt, and the figure is still rising. If you are struggling with managing your student debt, you may wish to file for bankruptcy. However, there are some things you should know before declaring bankruptcy on student loans.

1. Qualifying for Chapter 7 Is Difficult

To file for chapter 7 bankruptcy, you must first make sure you are eligible for it by passing the means test. The income requirements often disqualify many bankruptcy filers from filing under this Chapter.

2. Filing for Bankruptcy Won’t Guarantee a Debt Discharge

Even if you qualify for Chapter 7, you would still have to prove to the court that you are not in the position to pay your student loan debt. You will have to convince the judge that the debt is inflicting extreme hardship on your well-being and that your financial situation is unlikely to change in the near future. As one would expect, cases that win out are quite rare. Filing under Chapter 13 is easier, but it would only reorganize your repayment plans based on your judged ability to pay back the loan.

3. Filing Bankruptcy Is a Stressful Process

It should be stressed that filing for bankruptcy is a lengthy process. Debt discharge can take up to 4 to 6 months under Chapter 7 – that is if you win at court. During the process, you will have to manage finances for the legal fees involved, as well as go through a lengthy list of paperwork. Therefore, seeking the advice of an experienced attorney can help ensure your case is successful. Don’t be discouraged though. While your student loans may not be discharged and the process may be stressful – you may still be able to get some relief. Bankruptcy can eliminate your other debts freeing you up to tackle your student loans or allow you to put them in a reorganization plan.  For some loans, there may even be an income-driven repayment program you can avail yourself of in conjunction with your bankruptcy case.

4. You Can’t Hack Your Way out with a Credit Card

Some clever-mind students may think that they can cheat the system by putting all their student debt on their credit card and then file for its bankruptcy. However, such an attempt would be categorized as fraud. If the court thinks that the attempt was deliberate, expect some negative consequences.

5. It Will Impact Your Financial Health

A completed bankruptcy can linger on your credit report for up to 10 years, impacting your financial health. This may sound discouraging, but not filing for bankruptcy and allowing your debt issue to worsen would also negatively impact your credit score. Discharging your debt allows you to start anew with a clean slate, and many are able to rebuild their financial well-being even before the bankruptcy gets dropped off their report.

Get Legal Help

If you fail to plan, you plan to fail. As mentioned before, filing for bankruptcy is a tiresome process and the court case will not always result in your favor. Therefore, a qualified legal attorney is essential for helping you navigate successfully through the figurative legal labyrinth.

At the Law Offices of Sean T. Flynn, PLLC in Austin, TX, I offer personalized legal assistance for filing under Chapter 7 and Chapter 13 the bankruptcy code. With over 8 years of experience in the profession, you can be sure to obtain a satisfactory resolution in a bankruptcy case. Call + 512-640-3340 or contact me online to schedule an appointment.

5 Steps to Take in Case of a Debt Collection Lawsuit

If you find yourself unlucky enough to be a victim of a collector’s claim, don’t panic! Here are 5 steps to take in case of a debt collection lawsuit.
Steps to Take in Case of a Debt Collection Lawsuit

Being unable to manage one’s debt is stressful enough; the last thing anyone would want is for them to get sued by their creditors. If you find yourself unlucky enough to be in this situation, don’t panic! Take a deep breath and tackle the problem methodically. Here are 5 steps to take in case of a debt collection lawsuit.

1. Respond to the lawsuit

Often, in a state of panic and stress, people will not respond to the lawsuit. Big mistake! By doing so, the default judgment may end up in the collector’s favor. Depending on the state law, the court could order a deduction from your salary for debt repayments, or give the collecting agency some access to your bank account. Thus, responding to the lawsuit is extremely important.

2. Weigh Your Options

Once you have responded, there are many options available to you to help turn the tide in your favor. Challenge the right of the collector to sue you by asking them to provide the necessary documentation. If they are unable to do so, the judge will dismiss the case. Consider asking for proof of the amount owed. This can make things more difficult for the collecting agency as accounts can often change hands multiple times before a lawsuit is filed. Even if this does not result in a case dismissal, the final settlement agreement would likely be of a much lower amount.

3. Point to the Statute of Limitations

The Statute of limitations is a law that states the specific time before a claim can no longer be legally filed. It can vary from state to state. In Texas, the time-span is 4 years for debt collection. In the case of debt collection, the period begins from the last time you were active on the credit account. If your debt is past the statute of limitations, the lawsuit may be liable to be struck out.

4. File for Bankruptcy

In some cases, filing for bankruptcy may be the right option to choose. During the bankruptcy process, your debt collector can’t harass you with collection claims. Filing for bankruptcy can negatively impact your credit score and financial well-being. However, when you are unable to make repayments on your debts, it is often the most viable option on the table, and allows you to start afresh on a clean slate.

5. Hire an Attorney

A qualified legal attorney will advise you better on all the possible options you have on the table to strengthen your defense and improve the chances of winning against the lawsuit. In case your attorney believes that the plaintiff has acted illegally in filing a claim, you won’t even have to pay their legal fees as the court will order the plaintiff to do so instead.

Sean T. Flynn is a veteran legal attorney with over 8 years of experience, specializing in bankruptcy law. If you are in need of a professional personalized legal service, call 512.640.3340 and schedule an appointment directly online.

Bankruptcy Simplified: Chapter 7 vs. Chapter 13

In this article we discuss the main features and differences between the two and whether you should avail Chapter 7 or Chapter 13 for discharging your debt.

If you are ever unlucky enough to get yourself in a situation of unplayable debt then filing for a Chapter 7 or Chapter 13 bankruptcy can be your way of minimizing, or even eliminating, the burden. Many people often get confused between the two, or are unable to decide which one is better for solving their personal debt issues. In this article, we discuss the main features and differences between the two, and whether you should avail Chapter 7 or Chapter 13 for discharging your debt.

What is Chapter 7 Bankruptcy?

Chapter 7 Bankruptcy deals with the liquidation of non-exempt assets as a means to pay off the debts. It can be filed by both businesses and individuals.  Debt discharge is quick, usually taking around 3 to 6 months in most cases. Chapter 7 is the simplest and most common form of bankruptcy program that people file for.

When to Choose

Eligibility for Chapter 7 debt discharge is restricted to only those debtors with a low enough disposable income. Check to see if you qualify by passing the Chapter 7 means test eligibility threshold. Individuals should choose to file for Chapter 7 if their debt is dischargeable, and if creditors are not legally barred from seizing their assets.

Benefits & Drawbacks

The main benefit of Chapter 7 is that you can quickly eliminate most, if not all, of your debt and get a fresh start. The biggest drawbacks are the risks of you losing your property. Fortunately, such case results are rare in the US, and more so in Texas with its more favorable laws. Another drawback is that it may cause a temporary drop in your credit score.

What is Chapter 13 Bankruptcy?

Chapter 13 Bankruptcy, on the other hand,  deals with the re-organization of your debt in order to make it easier for you to repay it. This Chapter is only available to individuals and the debtor cannot receive a discharge until the completion of the Chapter plan. 

When to Choose

You are only eligible for Chapter 13 bankruptcy if you earn a regular income, and if your debt does not exceed $394,725.00 (unsecured) or $1,184,200.00 (secured). Individuals should choose to file Chapter 13 if their debt isn’t dischargeable under Chapter 7, or the value of their assets is worth more than the available exemptions. Additionally, they can also file it if they just want to make up for past outstanding payments on their mortgage or car loan.

Benefits & Drawbacks

The main benefit is that that none of your assets are sold off to pay off your debt. Another advantage is that debt repayments are determined by what you can afford, and further interest isn’t incurred during the duration of the plan. A drawback is that most, or all of your disposable income will be tied up in repayments and you may temporarily see a decline in your credit score.

Before filing for either a Chapter 7 or Chapter 13 debt discharge, it is always recommended to speak with a legal attorney who can best advise you on the course of action you should take in discharging your debt with minimal losses.  If you are in need of a professional personalized legal service, contact The Law Offices Sean T. Flynn at 512.640.3340 or contact directly online.

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