Student Loans In Chapter 13 Bankruptcy

The Bankruptcy Code does not provide much relief for student loan debt. This is unfortunate, because it is often the greatest burden for debtors, in some cases the only major debt. In general, student loan debts are not dischargeable in bankruptcy. Student loans will only be completely dischargeable if they meet the "undue hardship" standard which is quite difficult to meet under bankruptcy law.

In a Chapter 13 bankruptcy, some payments can be made towards student loans, allowing the debtor to reduce their student loan burden while eliminating unsecured debts such as credit cards, medical bills, unsecured bank loans, etc. It is an important component of bankruptcy planning.

In most Chapter 13 bankruptcies, student loans can be paid at the same rate as other general, unsecured creditors (such as credit cards, etc.). So, if your Chapter 13 plan requires your credit cards and other unsecured debts to be paid at 50% of their total value, you can allocate student loans to get paid at the same rate for the duration of your Chapter 13 bankruptcy plan. This allows you to reduce your student loan burden, while lowering the amount you are required to pay other unsecured creditors. It's a win-win situation for bankruptcy filers.

Now, it should be made clear, the balance owed on your student loans not paid through the Chapter 13 bankruptcy plan is not discharged at the end of your case. You will be required to resume making payments in the likely scenario that there is still a balance. But, as stated above, at least this balance will be reduced by 3-to-5 years of payments. And it will be done by paying less money to your credit cards, medical bills, and other unsecured debts.

If you are having trouble with student loans in addition to other debts, contact us to see if you qualify for relief by setting up a completely free consultation. I am an experienced Pittsburgh Chapter 13 bankruptcy attorney who can help explain your rights and options.

What Questions Are Asked at the Meeting of Creditors?

The Meeting of Creditors is commonly a cause for concern and stress for individuals filing bankruptcy. However, this concern and stress is normally misplaced... the Meeting of Creditors normally runs smoothly without the creditors even showing up, and a little preparation makes it a clear and straightforward process.

Of course, the Meeting of Creditors normally runs smoothly as long as you have hired an experienced bankruptcy attorney who has prepared your case with expertise and care. While the questions are simple, it is more important that the underlying petition is completed correctly.

The process is less mysterious and intimidating when I review with my clients the questions to be asked by the Trustee. The questions normally asked in Western Pennsylvania include:

• How did you arrive at the listed value of your home?
• Have you transferred any property to a friend or family member in the last 2 (or 4) years?
• Have you ever filed bankruptcy before?
• Have you reviewed the information sheet prepared by the United States Trustee's office?
• Do you have any claims or lawsuits against anyone else?
• Have you filed all of your taxes that are due?
• Do you have any domestic support obligations?
• Have you lived in Pennsylvania each of the last 2 years?
• Have you read and reviewed the petition? Are you personally familiar with it? Did you sign it? Are there any errors or omissions to report?
• Have you completed a credit counseling class?
• What is your reason for filing?

These questions are very straightforward. Different trustees may ask different versions of these questions, but the gist of the questions are always the same... do you have (or do you expect to receive) property that can be used to pay your creditors? Have you given away property that could be used to pay your creditors? Have you filled out your petition truthfully?

The Trustee assigned to your case asks the questions as a way of review your petition, making sure it is complete and truthful, and verifying that you are familiar with its content. The Trustee is not looking to trick or deceive you. Simple "yes" and "no" answers are appropriate for almost every question. The "reason for filing" question is asked only for survey purposes, and can be simply answered with responses such as "overspending" or "loss of income".

As long as you have been honest and thorough with your attorney during the preparation process, the Meeting of Creditors should be a simple formality. These questions normally take less than 5 minutes to ask (NOTE: different questions may be asked in more complex cases involving business assets). Thorough preparation and a short review before your hearing will assure there are no problems at all.

Paying the Chapter 13 Trustee

While most Chapter 13 payments will be made to the Chapter 13 Trustee via wage attachments or bank attachments, some payments will be made directly by the debtor on their own.

Typically, this occurs at the beginning of the case before the wage attachment takes effect, or when the debtor is transitioning between jobs. This post describes how to make these direct payments.

All payments to the Chapter 13 Trustee must be mailed via normal mail to the following address (NOTE: Do NOT use any form of mail that requires a signature from the Trustee, such as certified mail, as the Trustee will NOT accept it.):

Ronda J. Winnecour

P.O. Box 1132

Memphis, TN 38101-1132

Payments will only be accepted by the Chapter 13 Trustee if they are money orders or certified checks... personal checks and cash will NOT be accepted. 

Your money order or certified check should include your bankruptcy case number, which will be in the form of 16-12345 (year the case was filed, dash, and then five digits). Keep a record of your payment in case it is lost in the mail or otherwise mishandled.

Your first payment will become due 30 days after your case is filed (otherwise, your case will be dismissed). Typically, you will stop making the payment directly when you see the wage attachment come out of your paycheck, or the bank attachment come out of your bank account. But, always verify this with your attorney. Missed payments could result in the need to increase your plan payment to catch up, or in a worst case scenario, the dismissal of your case.

So, to summarize, here is everything you need to know about mailing your payment directly to the Chapter 13 Trustee when your attorney advises you to do so...

• Mail (regular mail)  to Ronda J. Winnecour, P.O. Box 1132, Memphis, TN 38101-1132
• Money orders and certified checks ONLY, no personal checks or money orders
• Remember to write your case number on your certified check or money order
• The first payment is due 30 days after the filing of your case

If you have any questions about your bankruptcy payment, contact us immediately.

Keeping Your Car in Bankruptcy

One of the most common fears of people considering a bankruptcy filing is that they will lose their car. For many of my clients, this is absolutely not an option, as they need their car to get to work, pick up their kids, and run errands.

Well, good news... as long as you can afford to keep it, you will NOT lose your car! The bankruptcy code recognizes the importance of cars in everyday life, and has accounted for it. You can absolutely file bankruptcy AND keep your car.

First, Federal bankruptcy exemption law provide an exemption of $3,675.00 for each bankruptcy filer (both husband and wife in a joint filing). This protects the value in your car(s) from creditors you owe money to. If property is exempt, they can't touch it. Now, there is a very good possibility your car is worth more than $3,675.00; however, the exemption need only be used towards the equity you have in the car. Equity is the value of the car MINUS what you owe. This amount is often less than the exemption amount, as cars lose value very quickly. In addition, there is an additional "wild card" exemption that normally covers any equity above the $3,675.00 limit.

Chapter 13 bankruptcy will even allow you to keep a car that you are behind payments on. You can catch up significant arrears through a 3-5 year Chapter 13 plan, and it is quite often used to help individuals who fell behind on a car payment due to temporary loss of job or other financial issue. The arrears are caught up over the course of the plan, with is normally quite affordable, while allowing continuing use of the car.

I did mention earlier that you can only keep a car you can "afford". There are some limitations on keeping your car in bankruptcy. The greatest limitation involves Chapter 7 and delinquent car payments. You can NOT keep a car you are behind payments on in a Chapter 7 bankruptcy. I will often advise clients who qualify for a Chapter 7 bankruptcy, yet owe back payments on a car, to catch up with the payment before filing the Chapter 7. If this is not possible, we will consider filing a Chapter 13 bankruptcy reorganization. Either way, I always tell my clients I am not in the business of having them lose their car... if there is a way to keep your car (no matter how desperate your situation), I will figure it out.

All this being said, through the exemption rules and general policy, bankruptcy law is designed for you to keep your car. People often erroneously believe they will lose their car, and refuse to consider a bankruptcy that could be hugely beneficial. Don't let this misplaced belief limit your financial options.

Contact us if you are having issue with a car payment or wish to discuss your financial issues in a free consultation.

New Year, New Start

New Year's Day is a day for looking back, but also a day for resolutions and fresh starts. New Year's resolutions need not be related to dropping weight or working out. You can also resolve to fix your finances.

Credit card debt, late payments, missed bills... they can all add up to wear you down and break your spirit. But, this doesn't need to be the case. It might not seem like you have options (credit card companies don't want you to think you do!), but you do. Just a few options at your disposal:

• Chapter 7 bankruptcy- if you qualify, it wipes out most types of debt (credit cards, medical bills, payday loans, creditor lawsuits, etc) AND allows you to keep ALL of your property!
• Chapter 13 bankruptcy- a bankruptcy reorganization, Chapter 13 provides lots of options. You can pay back taxes, catch up a mortgage deep in arrears, pay credit cards at 0% interest. It's a great way to get your finances in order with Court protection.
• Debt settlement negotiations- I can also negotiate directly with your creditors. They know I can file a bankruptcy, so they are a lot more open to listening to my offers than your own experience with creditors would make you believe.

There is no reason to let your finances and debt weigh on your thoughts going into 2016. The law is often on your side, so use it! You can be feeling the relief you have been hoping for before the weather turns warm.

I always offer a free, in-person consultation. Contact us to set one up today. I'm an experienced Pittsburgh bankruptcy attorney who has helped countless people just like you. I'm happy to listen, discuss, and plan with you. Let's make 2016 a happier, financially healthier, year for you!