Can A Creditor Freeze My Bank Accounts If I File Bankruptcy?

/in , , , , , /by

Family Riding Bicycles TogetherOnce you default on a payment to a creditor, they then have their legal rights to pursue means of collection from you.  When you have something secured, such as a house or a car, if you ignore their repeated attempts of collection, the creditor can simply come and take back what was theirs in the first place; but what if it’s for a credit card or other unsecured debt?  Many people have the misconception that the credit card companies cannot do anything to them personally and are just “out” on the money that is owed to them.  Wrong!

Once you default on a credit card, the credit card company will send you to a collection agency who will attempt to collect the debt.   When they cannot collect the debt after several attempts they will “charge off” the debt and send your account to an attorney (if they choose to, not all defaulted credit cards are sent to attorneys).   The law firm may make several attempts to collect the debt as well and, after not being able to collect on the debt, they will file a civil complaint with the court for a judgment on the debt; meaning that it is court ordered that you pay that debt back.

Once the judgment is against you, the attorneys for the credit card company will send you something called a Notice of Right to Have Exemptions Designated.  At this time you will list your personal property and attempt to protect it from the creditors whom are suing you.  Your personal property in this matter would consist of homes, vehicles, bank accounts and such.  Most people will either fail to fill out the paperwork or do so improperly. If not completed correctly or if all of your property is not protected, you will receive something called a Writ of Execution which allows the sheriff will come to seize any unprotected assets.  So what does this have to do with your bank account? If you did not properly exempt your bank accounts the sheriff will contact your banking institution(s) and have your account(s) frozen.

Filing bankruptcy will take care of the debt of the judgment but does not automatically take care of any repercussions of the judgment.  In the example of a frozen bank account, your bank account would not be unfrozen simply from filing a bankruptcy; the sheriff who ordered the account to be frozen must take additional steps. The sheriff must receive proof of your bankruptcy filing and contact the banking institution and order the account to be unfrozen. That could take several days which means you could go days without access to money within your bank account.

Although a creditor must take several steps to freeze a bank account – they are able to freeze a bank account after they obtain a judgment if the proper steps are not taken to ensure your property is protected.

 

Can I Still Tithe or Give to the Church If I File Bankruptcy?

/1 Comment/in , , , , , , /by

There is no doubt about it, bankruptcy will (at least for the short term) have an effect on your everyday life where finances are concerned – from your living situation, the way your bills are paid, how you can get credit and so on and so forth; but does it also effect being able to tithe or make donations to your church?

Lady Justice with the Sun Behind Clouds

Typically the answer is ?no, you should still be able to tithe and contribute to your church?. In your monthly budget there is a specific place for you to list the amount that you plan on giving to the church in the future. There is also an area in the petition to list all gifts/donations made to the church within one year before filing bankruptcy and that average will also be used in your means test for qualifying for the bankruptcy.

Keep in mind though, the bankruptcy Trustee will allow the tithing or charitable contributions if there is a history of giving.  Let me explain why. The bankruptcy courts are worried about people who have too much disposable income each month (which could determine wither they file a Chapter 7 bankruptcy or Chapter 13 bankruptcy) all of a sudden “finding Jesus” as a way to dispose or get rid of that disposable income problem. If you have a history of giving to the church then you usually will have no problem with the bankruptcy Trustee. However, if you decide to start giving large amounts of charitable contributions to the church, for the first time, at the same time you decide to file bankruptcy the courts could have an issue with your newfound religious yearning.

If you have been tithing to the church the bankruptcy Trustee or bankruptcy courts may require a written letter from your church (or any charitable group for that matter) showing you have been giving the amounts stated in your bankruptcy petition. The bankruptcy courts also look at what percentage of your income you are giving to your church each month. Your contributions have to be within reason.

If you are someone who tithes or donates to your church on a regular basis you will need to make sure that these donations/gifts are listed in your monthly budget. Also, you may want to go ahead and gather copies of any payments you made to your church within the last year just in case they are needed or requested at a later time.

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

/in , , , , , , /by

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?

/in , , , , , , , /by

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?

/in , , , , , , /by

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!

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

/5 Comments/in , , , , , /by

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.

Read more

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

/72 Comments/in , , , , /by

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.

Read more