What is a Clincher Agreement in a Workers’ Compensation Case?

In a North Carolina workers’ compensation case a “clincher agreement” is a compromised agreement or settlement between an injured employee or worker and an employer or their insurance company. When the worker and the employer’s insurance company agree on a settled amount the insurance company’s attorney will draft a clincher, or agreement, stating that the parties have reached a final resolution of the case.

Writing on White Paper with PenThe clincher agreement usually states the employee will receive a lump sum cash settlement in return for releasing all future liability against an employer. In order for a clincher to be allowed, it must be approved by the North Carolina Industrial Commission. A clincher must meet the requirements of Rule 502 of the North Carolina Industrial Commission and, if it does, the Industrial Commission will typically approve the clincher agreement. The main purpose of this approval by the Commission to make sure the employee is treated fairly.

How are Medicare and Medicaid Liens Treated in an Injury Case?

Doctor Looking at an X-Ray of a PatientThere are two types of financial medical payment assistance provided by the federal and state governments.  One is Medicare, which was enacted in 1965. Medicare is a federal agency that pays medical care for elderly (usually over the age of 65), the disabled and other limited classes of medical recipients.

In contrast, Medicaid is usually a state run, but federally sponsored, program that provides financial medical assistance to low income families or individuals.

Medicare and Medicaid usually pays for medical care in the event the injured person is eligible for Medicare or Medicaid assistance and is unable to pay their medical expenses.  Medicaid and Medicare are secondary payers and will pay only after private insurance has been exhausted.

In a medical malpractice case, both Medicare and Medicaid have a statutory lien on any recovery from a jury award or a settlement with the defendant in which Medicare or Medicaid has provided payment for the injured person’s medical care.

In other words, Medicare and Medicaid will be paid back any money they have spent to provide medical care to the injured person from the injured person. They will demand under federal and state law this money to be paid back from the settlement or jury award in the medical malpractice case.

Usually the attorney representing the injured person has the legal obligation to reimburse Medicare and Medicaid for any monies they have paid for the care of the injured person. If the attorney does not pay this amount from the settlement or jury award, the attorney is personally liable for the lien.

In conclusion, the law states Medicare and Medicaid must be reimbursed for any money they have provided for the care of an injured person in a medical malpractice case.

Can You Wipe Out A Small Business Administration (SBA) Loan in Bankruptcy?

The short answer is, yes, a Small Business Administration (SBA) loan is considered a dischargeable debt.

New entrepreneurs or small business owners who are looking to revamp their business sometimes need an additional guarantor on a loan, due to certain factors, such as not having enough collateral.  A guarantor takes responsibility for the debt and promises that the loan will be paid back in full.  The Small Business Administration (SBA) is a government funded entity that was created to encourage and support the success of small businesses.  The SBA can guarantee up to 85% of the loan, leaving 15-20% to the small business owner to provide evidence of collateral, in addition to proving there will be sufficient cash flow from the proposed business to make the necessary monthly payments.  The more risk involved with the success of the business, the smaller the percentage the SBA loan will be cover.  This is of course necessary just in case the loan goes into default.

Doing Bankruptcy Research on a White Laptop

An SBA loan has 5 different headings that owners may apply under: 7(a) loan, the 504 economic Development loan, microfinance loan, disaster recovery loan, and the special purpose loan.  A small business owner or a new entrepreneur may apply for a loan at a lending institution of their choosing.  From there, the lending institution may require the business to apply for one of the SBA loans in order to guarantee the loan.

When filing for bankruptcy, depending upon the type of bankruptcy you file, you may be required to include all of your debts (and you should probably list down all of your debts either way).  If you file a Chapter 13 bankruptcy you must list down the SBA loan as a personal debt, if you personally guaranteed the debt, which you almost always do. In a Chapter 7 bankruptcy you can choose to list the SBA loan and discharge the debt so they cannot collect from you personally if the business defaults on the loan. However, if you discharge the debt personally and the businesses defaults on the loan you probably will not be able to get a new SBA loan in the future if you try to restart your business.

Again, a loan from the Small Business Administration may be discharged in a personal bankruptcy. They may, however, still come after the business to try to collect on the debt if the business defauls on the loan and has assets.

Is the Information on My Bankruptcy Petition Private?

For many, filing bankruptcy can be a very stressful, emotional and embarrassing time in your life.  Ask any bankruptcy attorney, and they will tell you this is a question they are asked quite often. Most people would prefer to not tell the world of their financial problems and keep the information in their bankruptcy private. However, bankruptcy is a public filing and is a matter of public record.

So what does public record mean?

Public record usually refers to any information that is filed and/or maintained by a government agency, such as a court house. When you file for bankruptcy, your case is assigned to a district of the United State Bankruptcy Court. Your bankruptcy then becomes Public Record and the information in your bankruptcy is made available to the public. However, certain information in your bankruptcy, such as social security numbers, loan numbers and other identifiers are kept private and cannot be accessed by the public. Federal Bankruptcy law requires that notice of your bankruptcy case must be sent to all your creditors. This includes every individual and business owed, as well as any co-signor(s) of loans.

The chances of your family, co-workers, friends and neighbors finding out you?ve filed bankruptcy are unlikely, unless you owe them money, they co-signed on a loan for you, or they specifically go looking for it. We are also asked all the time whether or not bankruptcy will appear in the local newspaper. The answer is, it depends where you live. Some local papers will run a list of people who have filed bankruptcy. However, if a paper is running a list of people who filed bankruptcy then the chances are the paper doesn’t have a high readership anyways.

It?s important to remember you are not alone facing financial hardships. You?re filing bankruptcy to take control of your financial situation!

Why Does the Means Test Look at My Gross Income Instead of Net Income?

This is a question frequently asked by clients.  You do not have access to your gross income, since a great deal of it goes to pay federal and state taxes, health insurance, life insurance, long and short-term disability, 401(k), etc.  The net income or your take-home pay is what you have available to pay your house payment, utilities, food, clothing, gas, car payments, etc., so shouldn’t this be used to see if you qualify for bankruptcy?

Family Riding Bicycles Together

Unfortunately, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) decided to establish a process for determining whether a person qualified for bankruptcy, specifically a Chapter 7 bankruptcy.  BAPCPA decided it was prudent to conduct a “Means Test” for each potential bankruptcy filer.   As part of the Means Test, it was determined that gross income would be the fairest starting point for all bankruptcy filers.  Although two people may have the same gross income, their net income may vary considerably due to different payroll deductions.  In addition, median household income for each state is based on gross income, so this provided a consistent base for comparison.

So, why is your gross rather than net income considered in the means test used in bankruptcy?  BAPCPA requires it!

What Happens If My Vehicle is Deemed a Total Loss While in Bankruptcy?

North Carolina Road SignIf you have an accident while in bankruptcy, the approach with the court will depend on the type of bankruptcy you are involved in, Chapter 7 bankruptcy or Chapter 13 bankruptcy.  This blog will discuss only Chapter 13 bankruptcy cases.  These are guidelines specific to the Middle and Western Districts of North Carolina, so you should speak with your bankruptcy attorney regarding any nuances to your bankruptcy court’s procedure.

In addition, this blog does not address the process for settling any personal injury claim you may have against the negligent party in the accident, only property damages to your vehicle.  You should seek the advice of a personal injury attorney if you believe you are injured in the accident.  The bankruptcy court’s approval of a personal injury settlement is required, but may or may not be involved in the initial settlement for property damages; therefore, it is not discussed in this blog.

If your vehicle is involved in an accident and deemed a total loss by the insurance company, you must work with your bankruptcy attorney to obtain the bankruptcy court’s permission to settle the claim, modify your bankruptcy and purchase another vehicle.  The steps required by the various parties are outlined below.

Steps you, as the debtor, should take in the process:

Contact the insurance company that will pay the claim, yours or the negligent party’s, and let them know you are in a Chapter 13 bankruptcy.

Give the insurance company your bankruptcy attorney’s name and phone number.

Give your personal injury attorney, if applicable, your bankruptcy attorney’s name and phone.

Contact your bankruptcy attorney’s office and let the appropriate person know the vehicle has been involved in an accident.

Tentatively agree to the property damage settlement offered by the insurance company.  (If you have a personal injury attorney, you may speak with him/her regarding the value offered on the vehicle, but it is usually dictated by the insurance company’s guidelines.)

Speak with your bankruptcy attorney regarding the process for obtaining a replacement vehicle.

Look for another vehicle, if necessary, and with the assistance of your bankruptcy attorney determine how much your budget will allow you to spend for another vehicle.

Amend your budget for another vehicle payment, if necessary, and provide it to your bankruptcy attorney.

Attend the hearing to obtain permission to settle this insurance claim, modify your bankruptcy and obtain approval to purchase another vehicle, if necessary.

Steps the insurance company should take in the process for the bankruptcy:

Offer you a property damage settlement on the totaled vehicle.

Provide the written offer for the vehicle to your bankruptcy attorney.

Pay the finance company or the Chapter 13 Trustee the proceeds from the insurance settlement.

 

Steps the finance company, if there is a loan on your auto, should take in the process:

Provide a letter of guarantee to the insurance company that upon settlement of the claim the salvage title for the vehicle will be provided to the insurance company.

 

Steps by your bankruptcy attorney in the process:

Contact the Chapter 13 Trustee’s office and request that the monthly payment on the auto loan, if applicable, be placed on hold or reserved until the insurance company offers a settlement on the property damages and approval is obtained to settle the claim from the bankruptcy court.

Contact the Chapter 13 Trustee’s office to determine what your Chapter 13 payments can be reduced to after the anticipated property settlement on the vehicle.  Keep in mind that the settlement offer by the insurance company may not be sufficient to pay off the amount owed on the vehicle.  As a result, any balance owed to the finance company will be considered a claim in your bankruptcy.  The amount paid on the finance company’s claim balance will be based on your specific Chapter 13 bankruptcy plan.

After receipt of the settlement offer from the insurance company, file a Motion to Settle Insurance Claim, Motion to Modify Plan and a Motion to Incur Debt, as applicable.  There are specific timelines for these motions, and as a result, you should anticipate 30 calendar days to obtain the bankruptcy court’s approval.

The Motion to Settle Insurance Claim requests the bankruptcy court’s approval for you to sign the documents to complete the settlement with the insurance company and for the insurance company to pay the claim.  It also tells the insurance company who the settlement check is made payable, either the finance company or the bankruptcy Trustee on your behalf.

The Motion to Modify Plan requests your Chapter 13 bankruptcy plan be reduced for what has been paid to the finance company for your totaled vehicle.  It may also request that your Chapter 13 plan payments be reduced so you can afford a replacement vehicle.

The Motion to Incur Debt requests the bankruptcy court’s permission for you to go into debt and sign loan documents to purchase another vehicle.  This is to ensure you purchase a vehicle that is within your budget.

Attend the hearing in front of the bankruptcy judge with you.

Submit the Orders on the motions to the bankruptcy judge for approval.

Ensure you Chapter 13 bankruptcy plan is adjusted as appropriate for the totaled vehicle.

Each bankruptcy case is different, so your case may not follow these exact guidelines.  However, you should contact your bankruptcy attorney and they will assist you in maneuvering through the bankruptcy court’s process.

Can I Purchase a House While in a Chapter 13 Bankruptcy?

While in a Chapter 13 bankruptcy, you must get permission from the bankruptcy Trustee to incur any new debt. This includes a mortgage if you want to purchase a new house. When you are serious about buying a new home within a Chapter 13 bankruptcy, you should let your bankruptcy lawyer know. They will get in contact with the Trustee for you and let him or her know that you would like permission to incur debt. They will file a motion with the court for this. Once the trustee makes a decision, the attorney will let you know.

Young Family with Children in Front of Home

Obtaining a new mortgage while in the middle of a Chapter 13 bankruptcy may be difficult, depending upon your situation. The longer that you are in a Chapter 13 bankruptcy and making your monthly payments on time, the more likely a lender will be willing to give you a better interest rate in a mortgage. Be prepared to shop around a bit. There may be some lenders who will not give a new loan to someone who has recently filed a Chapter 13 bankruptcy. Be patient, we find a lot of our clients will get pretty decent mortgage rates about a year and a half to two years after filing bankruptcy.

Also beware that many people have to have a decent amount of money up front for the purchase of a house. That may be for a down payment on the home or for closing costs. The bankruptcy courts are going to want to know where you came up with that money. If you have been able to save that amount over time then they may feel the need to increase your monthly Chapter 13 payments. Most of our clients get the money from the support of family.

If you are interested in getting a new house while in a Chapter 13 bankruptcy you need to contact your bankruptcy lawyer. They will help guide you through the process and will be able to let you know whether they think the bankruptcy judge will approve your Motion to Incur Debt so you can get the financing necessary to purchase the home.

What is the Statute of Limitations for Debts in North Carolina?

You might be wondering exactly what “statute of limitations” means.  The statute of limitations is the time period a creditor can still sue you for debts. Creditors only have a certain duration of time they can attempt to collect a debt by suing you. If the creditor fails to successfully collect the debt or file a lawsuit before expiration of the statute of limitations, then the debt is no longer applicable for collection by a lawsuit against you.

North Carolina Flag

In North Carolina, Section 1-52.1 of the North Carolina Rules of Civil Procedure explains the statute of limitations for debts is 3 years for auto and installment loans, promissory notes, and credit cards.  This means if a creditor is going to sue you, they must do so within three years from the date of your last charge or activity on the card. Now the magic question is, what is activity on the card? This is a source of litigation throughout the state.  There are many times no clear-cut answer to this question. The creditor may claim there was activity on the credit card or personal loan within the past three years before the lawsuit was initiated. It would then be your word against their word as to when the last activity on the card took place.

The law states after the three years has passed, if the creditor has not sued you for the debt, they are barred from filing a lawsuit against you for that debt.  However, they may still call and request a payment from you. They cannot successfully sue you if the statute of limitations has expired and you raised that defense in your legal response to the lawsuit.

Now let’s clarify this last statement. Anyone can sue anyone! So the fact is they may sue you on the debt, but you have the defense on the lawsuit the statue limitations had expired and the lawsuit should be thrown out of court. However, to raise this defense of the statute of limitations against the lawsuit, you must file a legal answer with the court and appear in court to state your defense of the expiration of the statute of limitations. If you do not raise this defense, you will probably lose the lawsuit.

The statute of limitations for debts timeframe is different for each State.  For example, most debts are three years in North Carolina, but six years in Hawaii.  Depending on which state you live in the timeframe of the statute of limitations will vary.

Beware though, although you may believe the statute of limitations has run on a creditor’s ability to collect a debt, if there was activity on the card or if the creditor has filed a lawsuit, the statute of limitations may not have expired. Be careful assuming the statute of limitations has run on a debt – be sure to fully research your debts and when they were last used. You need to raise the defense of the expiration of the statute of limitations in your legal response to the lawsuit.

What Happens If I Die During My Bankruptcy?

Bankruptcy Questions AnsweredShould you die in a bankruptcy, depending on what type of bankruptcy you file, your death can impact the bankruptcy in different ways.

If you were to have filed a Chapter 13 bankruptcy, then many times your estate will make the payments for the bankruptcy on your behalf and the case will continue as normal if the judge will allow it.  Just as any normal Chapter 13 bankruptcy, your case will be dismissed or “kicked out” due to non payment, so if your estate were to fall behind, the same repercussions will apply. If that were to happen, the deceased’s estate would be responsible for their remaining debts.

If you have filed a Chapter 7 bankruptcy, most of the time the case continues as if you were alive.  Rule 1016 of the US Bankruptcy Code states, “Death or incompetency of the debtor shall not abate a liquidation case under chapter 7 of the Code.  In the event that the estate shall be administered and the case concluded in the same manner, as far as possible, as though the death or incompetency had not occurred.”

Beware though, as any matter or the law, there are loopholes and technicalities.  You technically must show up to your 341 Creditors meeting and if you have passed away, obviously you cannot attend, and therefore if the judge in your case wanted to, they could dismiss your case since you did not show up.  If there is a life insurance policy involved in your estate the trustee has right to take it and your family may lose out on the funds.  If you are in poor health, it may be a good idea to discuss the possibility and what may happen should you pass away during your bankruptcy.