Are delinquent personal property taxes dischargeable in a chapter 7 bankruptcy case?

Posted on March 28, 2012 by

It depends on how old the property tax is. If the property tax is older than one year it will be dischargeable. §523(a)(1) lists the exceptions to discharge and refers to §507(a)(8) which describes a property tax as priority when it is last payable without penalty after one year before the date of filing. Property taxes are due at the beginning of each year, and can be paid without penalty until end of the year. That means property taxes for 2011 are due in 2011 without any penalty. One year after 2011 they can be discharged, this means any case filed in 2012 that lists personal property taxes won’t discharge these taxes. If you want to included property taxes from 2011, you would have to wait with filing of your bankruptcy until 2013.

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Bankruptcy and Medical Debt

Posted on March 12, 2012 by

A difficult economy creates resulting fallout of its own. Businesses and manufacturing have downsized and have reduced or eliminated the benefits of workers who have managed to keep their jobs. The cost of healthcare continues to increase. The recently unemployed are often faced with high prices for COBRA, the program to bridge the gap after job loss so a worker can maintain health coverage for a period of time. Frequently, because of dwindling savings, people go without adequate healthcare coverage.

In the past few years, studies have shown that a greater percentage of Americans are choosing bankruptcy due to the pressures of unplanned medical debt. One study by CredAbility has reported nearly 20 percent of people have identified medical bills as the primary reason for declaring bankruptcy. This trend is up almost eight percent over several years. Sudden illness or catastrophic injury is usually devastating to the finances, particularly if it befalls one of the household’s primary wage earners.

Reports have indicated that most people who fall into the medical debt spiral do so for a variety of reasons. With the rise in unemployment, many families find themselves suddenly without medical insurance until new employment is secured. Many people find paying high premiums too difficult, so they purchase plans with cheaper premiums but higher deductibles. When misfortune befalls, they are not prepared for the rapid rise in medical bills.
The New York Times reports that health consumers tend to overextend in an effort to pay off medical debt at the outset. However, with little savings or an unsure job situation, these consumers resort to paying the initial medical bills with new or existing credit card accounts. Within a brief period, interest builds. Interest combined with reduced income may put some families and individuals into an insolvent condition. Further compounding financial difficulty, catastrophic injury or long term illness usually necessitates extended treatment and rehabilitation. Medical bills can mount.

Consumers quickly learn that medical debt, owed to hospitals or practitioners, is sent to collection agencies relatively early in the default process. Medical offices and hospitals lack the staffing and time to attempt debt collection on their own. These institutions do not have the time or resources to focus on collections. The trend is to outsource defaulted debts to third party collectors. Consumers who find themselves underwater feel pressured and stymied by the collection process. At this point, bankruptcy becomes a real option.

Individuals seeking bankruptcy protection against medical debt may consider Chapter 7.  St. Louis Bankruptcy Attorney Tobias Licker wrote a post about this issue in the Missouri Bankruptcy Blog. This form of bankruptcy may release a consumer from what is called “nonpriority general unsecured debts.” Medical debt will fall under this category. This type of debt will be eliminated once the Chapter 7 process has been discharged. Most clients qualify to file a chapter 7 bankruptcy case. In order to qualify, the debtor’s attorney will do a so called “means test” which is the average monthly income for the last 6 months. If the monthly income is below a specific amount, the the debtor automatically qualifies to file a chapter 7 bankruptcy case. If the income is above the median income, the attorney will look further at all expenses and other payments. If the disposable amount, that is the amount one has left after paying all their expenses, would not pay a meaningful amount to creditors, the debtor still can file a chapter 7 bankruptcy case. If the means test shows that there is still money left every months, the debtor can file a chapter 13 bankruptcy case and pay the portion he has left over each month to his creditors. At the end of the chapter 13, all debt paid or unpaid will be discharged. The means test has a few exceptions, especially for disabled veterans and National Guard or Reservists who incurred most of their debt during active duty.

For the consumer who qualifies, Chapter 7 may be the best option to eliminate medical debt and credit card debt incurred while attempting to pay for healthcare. People seeking to file forbankruptcy in the St. Louis Metro Area are welcome to contact the Licker Law Firm for a free consultation. Our firm has four offices through out the St. Louis Metro area: Florissant (North County), St. Louis (Hampton Ave), St. Charles and in the St. Louis Metro east, in Granite City.

 

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Does Chapter 7 Bankruptcy Eliminate All Bills?

Posted on March 9, 2012 by

Chapter 7 eliminates most of a debtor’s unsecured debts. A debt is unsecured when the debtor did not pledge a personal property or real property as security for a loan. Sometimes, a security agreement is made without that the debtor even notices it. For example, if you go to Bestbuy and purchase your new television with your bestbuy credit card. Your credit card contract most likely will say that everything you buy will be collateral for your bestbuy credit card balance. Another example is a title loan, you pledge your car as security for the loan. That means if you don’t pay your loan as agreed on the title loan company could sell your car to satisfy their claim against you.

What is a chapter 7 bankruptcy case?

Lawyers often refer to chapter 7 bankruptcy as the liquidation chapter. In almost all chapter 7 bankruptcy cases, the debtor filed bankruptcy and receives his discharge order without losing any property. The debtor’s bankruptcy attorney will determine before filing if any of the clients property is un-exempt and might have to be turned over to the trustee. The trustee then, would sell, liquidate, the property. When is property un-exempt? This depends on the exemptions in your state. Every state uses either its own exemptions or federal exemptions. Missouri and Illinois have their own exemptions. A car for example can be exempt for up to $3000. The debtor might have additional exemptions available he can apply to the value of the car. However, if the car has a value of $20,000 and no loan is on the car, the debtor would not lose his property, but he either would have to pay the un-exempt portion to the trustee or file a chapter 13 bankruptcy case and pay the un-exempt portion of the life of the chapter 13 plan.

Even though the bankruptcy law was changed in 2005, most people still qualify to file chapter 7 bankruptcy. One of the new requirements for a chapter 7 is the means test.

The Means Test

The means test looks at the average income for the last 6 months before filing. If that income is below the average income in your county, the debtor automatically qualifies for a chapter 7. What if the income is above the average income? Even lawyers sometimes answer this question incorrectly. If someone is above the median income, it does not mean that this person cannot file a chapter 7 bankruptcy case. It only means that the complete means test must be filled out. If the result is that no disposable income is available to the debtor, the debtor qualifies for a chapter 7 bankruptcy. Not the income but the expenses the debtor can deduct will decide whether the debtor qualifies to file for chapter 7. In the case the calculation shows some disposable income, the debtor will have to pay this amount in a chapter 13 bankruptcy to unsecured creditors.

The Chapter 7 Process

After a bankruptcy petition is filed with the court, the automatic stay goes into effect. This means that creditors must cease harassment and collections efforts until the case is over or the automatic stay is lifted through a motion for relief. The creditor may not attempt to garnish wages, seize the consumer’s bank account or make telephone calls.

Around one month after filing, the 341 meeting takes place. This meeting is also sometimes called meeting of creditors even though in almost all cases no creditors actually come to the meeting. Normally, only the bankruptcy trustee, the debtor and debtors’ attorney attend that meeting. The meeting takes only a few minutes. The trustee check the debtor’s social security card and picture I.D., and will ask if everything listed on the petition is true and correct. Within 3 months after the trustee’s meeting the court will mail our a discharge order which concludes the process in a chapter 7 bankruptcy case.

The Debts Covered by Chapter 7

The discharge order will say that all dischargeable debt is discharged and all non-dischargeable debt is not discharged. That does not help a debtor if he wants to know if for example a specific tax debt was discharged and wiped out through the bankruptcy case. Chapter 7 bankruptcy discharges will eliminate credit card bills, payday loans, medical bills, utility bills, unsecured personal loans and other unsecured non-priority debt. Student loans are normally not discharged. It is possible to discharge student loans but only in very limited circumstance.

Child support obligations are also not dischargeable in neither chapter 7 nor chapter 13. However, some debt that accrued in connection with a divorce proceeding may not be discharged in a chapter 7 but might be discharged in a chapter 13 bankruptcy case. The discharge in chapter 7 and 13 is not always the same. Income taxes for the last 3 years are normally not discharged. However, older income taxes might be dischargeable if certain conditions are met.


 

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Creditors Should Stop Calling Once You File Your Bankruptcy Case

Posted on March 5, 2012 by

Federal bankruptcy law prohibits creditors from contacting you about debts that are included in your bankruptcy.

One of the benefits of filing for bankruptcy is the peaceful feeling of knowing you have freed yourself from your debt. This means that the irritating continuous creditor calls should cease at last. The fear of answering your phone when it rings will finally begin to subside.

Once bankruptcy has been filed by your Bankruptcy Attorney, creditors generally have to stop attempting the collection of your debt during your bankruptcy case. This means that your creditors should not have the ability to foreclose or repossess your property and they cannot call you or write to demand payment. If any of your creditors do not obey these bankruptcy laws, and they attempt to contact you once you have filed for bankruptcy, they violate the automatic stay which takes effect with filing of the bankruptcy case.

Even once your bankruptcy case has been closed, your creditors are not permitted to contact you about any of the debts that were discharged in your case. Contacting you about these debts would violate your discharge order. If this order is disregarded by the creditor, you may be able to take action against that company.

It is mandatory for creditors to follow the regulations set forth by the Fair Debt Collection Practices Act. However, it is not abnormal for them to break these rules. Some of the more common tactics utilized by bill collectors include contacting you at work, adding unauthorized charges to your account, harassment of your family members including the use of abusive language.

Remember that creditors who were not part of your bankruptcy still have the right to contact you concerning your debt. When a creditor is part of your bankruptcy is not as easy to answer. The fact that a creditor was not listed on the bankruptcy petition and did not receive notice of your bankruptcy might not result in the conclusion that this creditor was not part of the bankruptcy filing. To say this very clear, even when a creditor is not listed on your bankruptcy petition, the debt might be still discharged and wiped out. Your discharge order will protect you concerning the debt you had when you filed, but any additional debt that you did not include in your bankruptcy, reaffirmed, or incurred after you filed is still collectible.

If you have questions about bankruptcy and live in the St. Louis Metropolitan area, please do not hesitate to contact us.

 

Posted in Automatic Stay, Collection Harassment | Tagged , | 2 Comments