Student Loan Collection and Bankruptcy

Chapter 13 bankruptcy has become an attractive solution for those facing student loan collection including garnishments. While student loans are still not dischargable, collection can be halted for up to 60 months while in a chapter 13 bankruptcy plan. Chapter 13 plans allow debtors to postpone student loan collection by pledging to pay their disposable monthly income, or what they can afford, into a chapter 13 bankruptcy plan. This buys consumers time, but is not a permanent solution since the loans will not be discharged.

At the end of the Chapter 13 plan student loan collection can resume. The goal is to have a change in circumstances that will allow the borrower to afford their student loan payments after bankruptcy. However, if this is not the case, the option to file a new bankruptcy case is available. By the end of the plan laws could also change that give student loan debtors more repayment or forgiveness options.

The Chapter 13 bankruptcy also allows protection from other creditors while in the plan. It consolidates all debts into one affordable monthly payment while stopping all collection. This allows debtors to get their finances back on track while relieving the stress caused by harassing debt collectors. Although the Chapter 13 will not discharge the student loan debt it will give borrowers the breathing room they need to financially provide for their families.

If you have questions regarding bankruptcy in Indiana please contact Jackson & Oglesby Law at (877) 489-0908 or visit us at www.IndyBankruptcyLaw.com.  We are experienced bankruptcy attorneys and can help guide you through the entire bankruptcy process. Call us today to schedule your free consultation.

Benefits of Filing Chapter 13 Bankruptcy

There are two types of bankruptcies consumers most often file.  The most common is a Chapter 7 bankruptcy but many people find Chapter 13 to be more beneficial.  While it’s true that some people must file a Chapter 13 because they do not qualify for a Chapter 7, others file Chapter 13 because of the many benefits it has over a Chapter 7.  Below are some reasons to consider filing a Chapter 13 bankruptcy.

•  Save a Home from Foreclosure – Chapter 13 allows mortgage arrears to be paid over the life of the Chapter 13 plan (36-60 months).  The bankruptcy will stop the foreclosure and allow the homeowner time to get caught up on payments to save the home.
•  Avoid or Strip a Second Mortgage – If a homeowner owes more on their first mortgage than their home is currently worth they may be able to eliminate or strip the second mortgage lien from a property’s title in a Chapter 13 bankruptcy. 
• Cram Down Interest Rates – In most cases interest rates can be lowered for secured debt in a Chapter 13.  This includes secured debt for cars and even household goods. 
• Cram Down Car Value – If more is owed on the vehicle than it is worth the amount paid to the car creditor in a Chapter 13 can be crammed down to the fair market value. 
•  Preserve Your Chapter 7 Option – Chapter 7 can only be filed once every eight years.  While a person may need bankruptcy protection now to stop wage garnishment or creditor harassment they may also be anticipating more debt.  For example if a person has a medical condition and know they will be incurring medical bills due to cancer or another illness they may need the option of including the new debt in the future.  A Chapter 13 can be converted to a Chapter 7 in the future and debt incurred after the original Chapter 13 filing can be included in the converted Chapter 7 case.   To convert a person still must qualify for a Chapter 7 based on income and other factors that a bankruptcy attorney can explain in detail. 
• Length of Time on Credit Report – A Chapter 13 bankruptcy remains on a person’s credit report for seven years whereas a Chapter 7 will show up for 10 years.
• More Affordable – In some cases a Chapter 13 plan payment may be less than what a person is paying for their car, and the car would be included in the Chapter 13 plan payment.  By cramming down interest rates and loan values a Chapter 13 could save money in the long run compared to keeping the car in a Chapter 7 bankruptcy.

There are many factors to consider when deciding which bankruptcy case may be right for you.  Chapter 7 and Chapter 13 are both great options for solving financial problems.  However, before you choose which chapter to file, make sure you have all the facts and speak to an experienced bankruptcy attorney.    Most offer free initial consultations and I would recommend speaking to a local attorney in your area about what benefits you may expect from filing a Chapter 13 bankruptcy.

If you have questions regarding bankruptcy in Indiana please contact Jackson & Oglesby Law at (877) 489-0908 or visit us at www.IndyBankruptcyLaw.com. Jackson & Oglesby Law can assist you with all aspects of your bankruptcy case. If you have questions regarding Chapter 7 bankruptcy, Chapter 13 bankruptcy, stopping foreclosure or wage garnishment, avoiding liens, stopping law suits, discharging debt, etc. we can help! Please call us today for your free phone consultation to determine which bankruptcy may be right for you.

Tax Time and Bankruptcy...Is My Refund Protected?

Tax time is fast approaching and a common question is “Will I get to keep my tax refund if I file bankruptcy”?  With some careful planning you should be able to protect your tax refund from the Chapter 7 Trustee when filing bankruptcy.  Several factors do come into play so it is always a good idea to consult a bankruptcy attorney with regard to your taxes and bankruptcy.

A Trustee in a debtor’s bankruptcy case can intercept a tax refund for the benefit of the creditors.  To do so, the bankruptcy must have been filed prior to receiving and spending the tax refund.  Therefore, one sure way to protect your tax refund in a Chapter 7 bankruptcy is to file bankruptcy after the tax refund has been received and spent.  It is important to note that the refund must be spent on necessary living expenses and it is a good idea to keep a list of what the money was actually used for prior to filing bankruptcy.

Even if the bankruptcy case has been filed prior to receiving your tax refund the refund still may not be taken.  Some factors the Trustee will consider:

·        How much of the refund is Earned Income Credit?  EIC is protected and cannot be taken for the benefit of creditors.

·        Does the debtor owe past tax debt?  If so, the IRS or State may be entitled to the refund to offset liability.

·        How large is the refund?  The amount must be enough to be a meaningful distribution to creditors.  In Indiana the refund typically needs to be around $1,000 or more before the Trustee will be interested in taking it.

·        Can the debtor exempt any of the refund?  In Indiana each individual debtor may exempt up to $350 of intangible property.  Therefore, part of the tax refund may be exempt depending on how much other intangible property was owned by the debtor when the case was filed.

·        When was the bankruptcy filed?  The amount of the tax refund allowed to be administered by the Trustee is pro-rated over the year.  Therefore, the Trustee may only be able to take 75% for instance.

The rules can change from state to state and Trustees’ decisions can vary regarding the tax refund.  Therefore, to ensure your tax refund is protected when filing Chapter 7 bankruptcy, consult a local bankruptcy attorney.  A bankruptcy attorney will be able to determine when the best time to file will be and can give advice on how to spend the refund prior to filing the bankruptcy case.

If you have questions regarding bankruptcy in Indiana please contact Jackson & Oglesby Law at (877) 489-0908 or visit us at www.IndyBankruptcyLaw.com. Jackson & Oglesby Law can assist you with all aspects of your bankruptcy case. If you have questions regarding Chapter 7 bankruptcy, Chapter 13 bankruptcy, stopping foreclosure or wage garnishment, avoiding liens, stopping law suits, discharging debt, etc. we can help! Please call us today for your free phone consultation to determine which bankruptcy may be right for you.