Damon Duncan

What is the Impact of Bankruptcy On Getting Financial Aid For School?

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I’ve filed for bankruptcy and now I want to go back to school. I need a loan to be able to do this. Can I still get a student loan?

Filing for bankruptcy should not affect your ability to get students loans that are federally funded.  As long as any other student loans that you may have are not in default and are being paid back, a student typically should not have any trouble getting any new federal student loans because of the bankruptcy.

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Privately backed student loans are a different story. Private student loans typically take your credit into consideration so that may make them more difficult to obtain after having filed for bankruptcy. But it is still possible to obtain private student loans after filing. They do look at your previous credit, but having a bankruptcy on your credit is not the only determining factor. The lenders will typically looks at more than just that. If a parent has gone through bankruptcy and the child is applying for a private student loan, then it is only the child’s credit history that is being looked at. One way that there might be a problem with getting this loan is if the parent is required to co-sign for it and they have filed bankruptcy before.

We understand that after filing bankruptcy you, or your children, may want to go to school to further their education. Most student loans are “need based”. This means they are based on your income each month. Filing bankruptcy obviously does not increase your income (although it may increase your disposable income). Therefore, you would still be eligible for students loans despite your bankruptcy filing.

Must I Disclose Gambling Income and Losses in Bankruptcy?

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If you file bankruptcy, gambling income for the current year and the two previous calendar years must be disclosed on your bankruptcy filing.  Gambling losses incurred in the past twelve months must also be disclosed on your bankruptcy.

The Internal Revenue Service (IRS) considers earnings from gambling as income and they are taxable.  Per the IRS, earnings from gambling includes winnings from lotteries, raffles, horse races, and casinos.  It also defines income not only as cash winnings but also the fair market value of prizes such as cars and trips.  Similarly, the bankruptcy code requires you to disclose the earnings on your bankruptcy.

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Losses from gambling must also be disclosed on your bankruptcy filing.  These losses are often scrutinized by the bankruptcy Trustee assigned to your bankruptcy case.  If large sums of money have been withdrawn from your bank account and you indicate it was lost gambling, you may be asked to provide the receipts from the casino, track or other venue where you gambled the money.  If it is in a location away from your home, you may even be requested to provide the hotel receipt or voucher.  With today’s technology, it is easy to determine the exact date and time you were at the venue and how much you won or loss while gambling.

If you took cash advances on a credit card, especially in the months leading up to your bankruptcy filing, and used those funds to gamble, the credit card company may question whether those charges on the credit card can be discharged or eliminated in bankruptcy.  In other words, the credit card company may argue the money was not spent on necessities but a frivolous activity.  They may also argue that you knew in advance you would be filing bankruptcy, so you decided to take your chances and gamble with “their money”.  And if you lost, you planned to eliminate the debt through bankruptcy.  As a result, they may object to the discharge of these debts in bankruptcy and you may be required to pay the money back to the credit card company.

As a result, it is important to speak openly and honestly with your bankruptcy attorney about any gambling income and losses you may have incurred in the past year.  Otherwise, you may find yourself owing money you otherwise thought could be eliminated in bankruptcy.

Can I Take Out A 401(k) Loan After Filing Chapter 13 Bankruptcy?

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As long as your 401(k) is ERISA qualified and was exempted (protected) in your bankruptcy petition, you can most likely take a loan against the account while in an active Chapter 13 bankruptcy. However, you MUST get the court’s permission! When you are filing for bankruptcy, one of the top concerns is to protect your … Read more

What If I Move During My Bankruptcy?

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Your mailing address is very important while you are in an active bankruptcy.  Your attorney as well as the Trustee and/or Bankruptcy Court, send you important documents during your bankruptcy for a number of reasons, such as updating you on the status of your case or sending you your final decree which lets you know your case is closed.

Young Family in their New Home

In a Chapter 7 bankruptcy, from your filing date, you will receive your Final Decree within 4 to 6 months.  As long as you have a mailing address that will remain the same during that time period, there should not be an issue.  However, in a Chapter 13 bankruptcy, it will be 3 to 5 years before you receive your final decree.  Therefore, it may be more likely for you to switch residences.  You should notify your attorney of your updated address, so they may file a notice of address change with the bankruptcy court. This is important because it will ensure that you receive important and time sensitive information from the bankruptcy court.

Also, please be aware that if you are selling your home, you must request permission from the Bankruptcy Court to transfer that property while in an active bankruptcy, regardless of which chapter you file.

Can I Purchase a Vehicle in a Chapter 13 Bankruptcy?

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The short answer is yes.  However, there is a bit of a process behind purchasing a vehicle in a Chapter 13.  First, your budget needs to be reviewed.  This requires your bankruptcy attorney to review your income and your expenses to make sure you can afford to have an extra payment in your budget.  Once it has been established that you are able to make a new car payment, a request to purchase a car must be made to the Bankruptcy Court.  This is done through a process called a Motion to Incur Debt.

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After your bankruptcy lawyer files the Motion to Incur Debt the bankruptcy judge will evaluate your situation to make sure that you can make the monthly payments without any problems. If there are problems, they will deny your ability to get financing for the vehicle. It is the judge’s job to make sure that you do not incur new debt and end up in the same situation that caused you to file bankruptcy in the first place.

What if you plan to buy a car without financing?  You will still need to obtain permission; additionally, you will need to explain where the lump sum of money came from.  It is always best to discuss this possibility with your attorney first to remove any possible issues that may arise from the access of extra money.

What is the Necessities Doctrine?

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Do you remember your wedding day?  Think back to your vows you made to one another, especially “through sickness and in health.”  When you promise to spend your lives together, you are also promising to provide and support the other person, making sure all their needs are met and expenses paid. These needs are recognized under state law as necessaries, which include, but are not limited to, medical bills.  Under North Carolina law, medical bills incurred during a marriage are considered the responsibility of both spouses.  If you find that the majority of your debts are medical bills and the expenses were applied during your marriage, both spouses should consider filing bankruptcy to avoid any further responsibility to the debt and creditor.

What if you are separated?  As long as you can prove that you were legally separated from your spouse at the time services were rendered, then the necessities doctrine should not apply.  To avoid confusion or personal responsibility of an ex-spouse, it is wise to provide the legal paperwork proving you are separated from each other before services and expenses were occurred.

The necessities doctrine is important in the world of bankruptcy because even if one spouse files bankruptcy, if there are significant medical bills, a creditor can still come after the other spouse to pay those medical bills. We always encourage a married couple where one, or both, of the spouses have significant medical bills to both file bankruptcy. This ensures the debts are completely wiped out and cannot be collected by a creditor.
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What Is A Writ of Execution?

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A writ of execution will be delivered by the sheriff.  Basically, it is a court order from the judge allowing the sheriff to take possession of any assets you may have on hand.  Why is this happening to you?  A writ of execution is filed after a judgment has been issued against you in favor of the plaintiff, such as a credit card company or other creditor.

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Creditor X has filed a civil summons (lawsuit) against you, concerning a credit card account you have with them that you have been unable to make payments on.  They have sent you settlement offers, and have now hired an attorney to sue you.  You have been “served” when you receive the lawsuit either by mail or service by a deputy sheriff.  When you receive a lawsuit you should respond in the legally required manner. This requires that you file a legal answer with the court within 30 calendar days of being served the lawsuit. You must also give notice by mail to the attorney for the creditor that is suing you. Do not just call up the attorney for the creditor asking to work out a payment plan or to give you additional time to pay the balance. Creditor attorneys love for you to do this. This is not a sufficient answer to the court. By filing the legal answer with the court, it will buy you some time.  Eventually, a court hearing is set. If you do not owe the debt in question, it is up to you to attend this hearing. This is when you would provide proof to the judge that you do not owe this debt.   However, if you choose to not attend the hearing, a default judgment will be entered in your case.  In other words, due to your absence, the judge automatically awards the plaintiff, Creditor X, the right to pursue the funds owed.  This is known as a default judgment award.

The next important piece of mail you will receive will be a motion to exempt property or designate exemptions. This is also sometimes called a Notice of Right to Have Exemptions Designated.  This is a form that you must fill out and return to the court. By properly filling out this form you can exempt or protect some of the property that you own under North Carolina state law.

When most people receive the notice of right to have exemptions designated form, they throw it in the trash. By not legally filing this paperwork with the court, none of your property is protected. In theory, the Sheriff’s office could seize all your property and sell it at a Sheriff’s auction. Again, it is imperative you respond to this! You usually have 20 days to do so.  At this point, Creditor X has a judgment against you and is looking for retribution.  Their lawyers will request a writ of execution from the judge.  This is when the sheriff gets involved and makes an appearance at your doorstep trying to collect nonexempt property from you to sell at a Sheriff’s auction. The sheriff can also levy or seize your bank accounts.
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First, you should always answer the door.  Avoiding the sheriff may make your situation worse.  You may ask the sheriff for more time to come up with the money owed or for time to file bankruptcy.  It is not a guarantee that the sheriff will grant you an extension, but it is worth asking.  If you tell the sheriff you are filing for bankruptcy then make sure you follow through because the sheriff will need a case number within a short time frame showing you have filed bankruptcy.  Remember, filing for bankruptcy can be an extensive time-consuming process and requires payment before you file a petition.  An emergency bankruptcy is always a possibility but there are more fees associated with the emergency filing of a bankruptcy. Hopefully, you have spoken to a bankruptcy attorney before this point.  If you have not, you should call one, like Duncan Law.

If you don’t file a bankruptcy or settle the lawsuit, the Sheriff will have the ability to seize any non-exempt property and they may use that property to sell at an auction to try to satisfy Creditor X’s judgment against you. You don’t want your property seized though, so be sure to act before this time comes. Not only do you lose property but you also have to deal with the embarrassment of having the Sheriff come to your door to take the property. If you have any questions on how we can help, please feel free to give us a call.
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Do I Need to Include a Creditor on My Bankruptcy If There Is No Balance on the Account?

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If you have a credit card or a loan with a zero balance, it is a personal decision whether you include them on your bankruptcy.  If there no balance, it may not be necessary to include them on your bankruptcy filing; however, it may be in your best interest to include them should there be any fees or interest charges that were placed on your account during the most recent billing cycle.

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Regardless of whether you include the creditor on your bankruptcy, the creditor will most likely find out about your bankruptcy filing and terminate your privileges with them.  For example, if you have a line of credit with no balance, you will most likely be unable to take any future draws on the line of credit.  The same would apply with a credit card.  Although you did not include the credit card company on your bankruptcy, they will most likely terminate your card.  As a result, attempting to make charges on the credit card after filing bankruptcy could lead to an embarrassing event.

If you have a credit card you would like to retain and use after filing bankruptcy, you will need to contact the credit card company in advance of filing bankruptcy and determine if their policy would allow you to keep the card.  A few companies have been willing to allow you to continue to use the credit card after filing bankruptcy; however, that is the exception.  Do not wait until after your bankruptcy has been filed to contact the creditor, since they will most likely not be willing to speak with you.  In addition, if you fail to include them in your bankruptcy filing and determine there was a balance on the account, you may be charged fees to add them to your bankruptcy.  As a result, it is always the safest approach to include the creditor on your bankruptcy filing regardless of whether there is a current balance.