Do I Need to Include a Creditor on My Bankruptcy If There Is No Balance on the Account?

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.

Blue Credit Card

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.

Why Do I Have to Include My Spouse’s Income If They Are Not Filing Bankruptcy?

Filing bankruptcy is not as simple as it once was.  You have to meet certain qualifications to determine which bankruptcy you may file.  This is normally done by what is referred to as the Means Test.  The Means Test will determine how your household income compares to the State median income and whether or not you can afford to pay some of your debts back or can qualify for them to be wiped out.

Young Couple in White

The Means Test is based on the household income.  Household includes anyone living in the home who receives income of some sort, which would include your spouse.  Regardless of whether or not they file the bankruptcy with you, the court looks at the combined household income for purposes of the Means Test.  The bankruptcy court basically enacted this law to make sure that you cannot take advantage of creditors by one spouse filing a Chapter 7 bankruptcy to wipe out all of their unsecured debt while the other spouse is making $150,000 a year. Therefore, the household income is used for purposes of the Means Test.

One part of the Means Test deals with your income but another takes into consideration your expenses each month.  Any secured payments, taxes, health insurance, and other “qualified” deductions would be reflected.  If you are in the situation where you may be filing bankruptcy but your spouse is not, then this is where you would reflect any of the deductions that your spouse has as well.  This gives you the opportunity to show the court that while all of your income may be combined, your spouse still has their own debts.  Maybe there are small amounts of credit card payments that are only in your spouse’s name and they want to continue to pay those or a vehicle that is solely in their name only they are obligated to pay.

Unfortunately, the saying, “What’s mine, is yours” goes a long way and the court understands that income and expenses for a household are combined. The court is simply making sure that you cannot “get over” the system.  Including your spouse’s income and expenses in the Means Test is the best way to ensure that a person or couple filing bankruptcy is doing it in the fairest way possible.  We understand this question is, often times, asked because you are worried about your spouse’s credit. Including your spouse’s income in the bankruptcy will not have a negative impact on their credit.

Am I Responsible for the Loan On My Car If I Voluntarily Turn it In?

Yes, you will still be responsible for the loan or debt on your vehicle even if you voluntarily turn it in. If you have a vehicle that you cannot make payments on, you have the choice of voluntarily surrendering the car or you can let the creditor repossess it. What many people do not know is voluntarily surrendering the vehicle is still considered a reposession on your credit report, a voluntary reposession.

Questions About BankruptcyWhen you voluntarily surrender a vehicle, you take the vehicle back to the lender on your own terms. You can usually contact the lender and they will work with you on a time to turn the vehicle back in.

If the vehicle is non-voluntarily or involuntarily repossessed, they will come and get the vehicle on their terms. The lender may not care when this is and it could even occur at night or at a time when you are not around.  There are also fees associated with a repossession that you can avoid if you voluntarily surrender the vehicle.

Although voluntarily turning a vehicle in sounds like a better option, it’s important to know the consequences of a voluntary reposession. When you surrender a vehicle, it will be sold again. The lender will then send you a bill for what is called a deficiency balance. This is the difference between the amount you owed on the vehicle and what they were able to sell the vehicle for. So say if you owed $14,000 and they sold the vehicle for $8,000, you would still be responsible for the difference of $6,000. This is the same thing that would occur if the lender had involuntarily repossessed your vehicle.

So in the long run, you will be responsible for part of the loan if you voluntarily surrender your vehicle.  Depending on how much you owe on the vehicle and how much the lender resells the vehicle for will determine the deficiency balance. You will be responsible for the deficiency balance and the voluntary reposession will still show up on your credit report.

If you file for bankruptcy then you may be able to avoid the repossession appearing on your credit report (if you file before the repossession) and you can wipe out the deficiency balance on the vehicle.

Do I Have to Pay my Homeowner’s Association Dues after Filing Bankruptcy?

It all depends. If you are filing a bankruptcy in which you wish to keep the home, you are required to continue to pay your homeowner’s association (HOA) dues.

If you are surrendering or giving up the home in the bankruptcy, you are responsible for the HOA dues as long as the home is still titled in your name.  In the bankruptcy code, the federal law, Section 11 USC  523(a)16,  states the legal homeowner is responsible to pay HOA dues, fines, and assessments.  This is an issue that is becoming very problematic. The good news is when you file the bankruptcy any homeowner’s association (HOA) fees owed up until the time of the bankruptcy filing are eliminated.  The problem is this relatively unknown law in the bankruptcy code. Most bankruptcy lawyers agree it is not a fair law but, nevertheless, it still exists.

Young Family in Front Yard of House

This law states any HOA dues, fees, assessments, attorney’s fees, or fines incurred after the bankruptcy filing is the responsibility of the registered owner of the property.  You are probably thinking that is all right, I gave up the house in the bankruptcy.  The potential problem is many times the mortgage company “drags their feet” after you filed the bankruptcy and does not immediately foreclose on the property.  It could be many months or even years before they foreclose and the home is sold at a foreclosure sale. Until the mortgage company forecloses and sales the property at a foreclosure sale, you are still the legal owner of the home and property.  Therefore, you are still responsible to pay the HOA dues and any fines assessed until the home is sold at the foreclosure sale and you are no longer the legal owner.

 

You will need to be concerned, especially during the summer months, about mowing the loan, trimming hedges, etc.  When you move out of the house, and the grass becomes high, the HOA will send you, as the legal owner, a notice to mow the grass.  The HOA may threaten to fine you $50 per day for each day the grass is not cut.  The HOA can sue you if you do not mow the grass, etc., and collect the $50 per day fine. Again, we agree this is not fair, but this is the law!

Contrary to popular belief, your neighbors on the HOA committee or board have immense  power and can sue you if you do not pay your homeowners association’s dues.  In limited situations they can even foreclose on your home if you do not pay the HOA dues and fines. However, at this time, some states are trying to enact laws that forbids HOA from foreclosing on a home for nonpayment of HOA dues and fees.

If you are deciding to give up the home in the bankruptcy, you may want to consider staying in the home until the actual foreclosure sale.  This could be months after you “give up” the house in the bankruptcy.  You can live there rent free, but be prepared to move out with a few days notice.  While you live in the home, you must maintain the lawn, etc., to keep the HOA happy. You are still responsible to pay the HOA dues until the house is sold at a foreclosure sale and the legal title is changed to someone other than you.

Another option is to talk to the mortgage company and do a short sale on the home before you file the bankruptcy.  Then you are no longer the legal owner of the home and we can eliminate any deficiency balance owed to the mortgage company in the bankruptcy.

Another very good option is to do a deed in lieu of foreclosure and deed the property over to the mortgage company before or after you file the bankruptcy.  Check with an attorney before you do this. There could be legal ramifications for “deeding” the home shortly before you file a bankruptcy.  You must receive court approval to sell or deed the home during the bankruptcy proceedings.

The bottom line: Until you are no longer the legal owner of the property that you gave up in the bankruptcy, your homeowner’s association can still come after you for fees and penalties incurred during your ownership and after the filing of your bankruptcy.

What is the Fair Debt Collection Practices Act?

The Fair Debt Collection Practices Act is an act that was passed to keep consumers from being abused by creditors.  Already feeling abused and harassed by the constant calls or the condescending tones or the threatening letters?  There is something you may be able to do about it.

Blue Credit Card

Whenever my mother was frustrated by someone or some corporation she would firmly state, “I’ll show them, I am going to write them a letter.”  It doesn’t sound empowering, yet in this case, she was definitely onto something.  Under this act, you are allowed to write a letter to each creditor requesting they stop contacting you.  This is also commonly revered to as a cease and desist letter. Make sure you make copies of this letter and send it certified mail to all your creditors.  One caveat: this only prevents them from contacting you on a regular basis; the company is still within their own rights to take legal action they deem necessary.  Also, this letter does not magically erase this debt- but a Chapter 7 bankruptcy may be able to wipe out your debt!  Once the creditor has received this letter the only contact they may engage in is to let you know they have received your request and will honor it, or to let you know they have taken legal action.

In addition, this Act also limits the times and the places a creditor may solicit payment from you.  For instance, they are only limited to the hours of 8am to 9pm to call- not that your phone gets much rest, but at least you can sleep with your phone on and know only emergencies are calling you during the night!

Now the important question: are creditors allowed to contact me at work? Unfortunately, they may call once if they somehow obtain your work number, but if they are verbally told or in writing told they are prohibited, it is in violation of this act if they continue to do so.  This also goes for third parties, such as family members.

I have retained Duncan Law, PLLC for our bankruptcy, will that stop creditor calls? Once you have retained an attorney, you may give the creditor your attorney’s information.  At that point, they will typically stop contacting you because they know they aren’t going to be able to collect the debt – they would rather move on to the next person they think they may actually be able to get money from.  However, they are not required to stop all forms of communication to collect a debt until you have actually filed the bankruptcy.

If you feel as though you are being treated unfairly by a creditor who is trying to collect a debt from you, visit the Federal Trade Commission’s Guide for Consumers to learn how to report improper collection attempts.

Garnishment- yikes! Can creditors take my paycheck or tax refund or bank account? The only way a creditor may access your funds and assets is by entering a legal action with the court, such as a suing you.  If the creditor wins, then the court will enter a garnishment order on the creditor’s behalf.  Federal Benefits: most of these are protected and may not be garnished under any circumstance.  However, if you owe student loans, taxes, child support or alimony, be prepared to have you monthly income docked automatically if you are behind on these payments.

If you are being sued, always answer the complaint.  You may represent yourself, which is also known as pro se representation. If you choose to work with us we can help show you how to answer the complaint served against you.

When all seems lost and you feel as though no one is on your side, take a second and read over your rights under the Fair Debt Collection Practices Act.  Most people in your position are at this point due to unforeseen circumstances and have already exhausted every option.  Bankruptcy is a way to get a fresh financial start, but until then, use this Act to protect your privacy, your phone, and your sanity.

If I File Bankruptcy, Is A Co-Debtor Protected?

So what if you need to file bankruptcy but you have a loan or credit card that has been co-signed with someone else? The most common circumstance this occurs is when a husband and wife decide only one of them actually needs to file bankruptcy but they are both on several of the loans together. When filing a bankruptcy, only the filing debtor is protected. If a co-debtor is listed, they will still be held responsible for the debt after the bankruptcy is filed.

Mother and Daughter

For example, if a person is behind on a mortgage loan and wants to let the home go in bankruptcy but the loan is co-signed on by someone else, then the debtor that is not filing  will be responsible for that loan when the bankruptcy is filed. This means they most likely would need to file bankruptcy themselves if they want to get rid of that loan also. If it is a credit card that was co-signed on, the co-signer will most likely be responsible for that debt when the other person files bankruptcy. This means that they are liable for the debt and the collectors are able to come after them for the remaining balance.

If you are filing a Chapter 13 bankruptcy and have a co-debtor, it depends on what type of debt that a co-debtor is on. If it is a credit card, the co-debtor is only fully protected if you pay back 100% of that debt. Otherwise they will be held responsible for that debt.

Make sure you tell your attorney about any co-debtors when filing bankruptcy. This is important so that the attorney can make sure that the other party understands what they will still be responsible for the debt after the bankruptcy is filed.

Am I Required to Pay Property Taxes On My Vehicle if I Surrender it in Bankruptcy?

The answer is yes. Property tax evaluations on vehicles are done the year prior to issuing the bill.  Meaning, you’re paying the taxes from the previous year when you had the vehicle.  Just because you are now surrendering the vehicle when filing for bankruptcy, it does not mean you were not the owner of the property for the previous year.  Since you were the registered owner of the vehicle at the time the evaluation was done, you will be responsible for the bill when it comes.

Questions About Bankruptcy

Once you surrender your vehicle through the bankruptcy, it is very important that you turn your tag in to the Department of Motor Vehicles. You may also be required to fill out additional paperwork letting the county and state know that you are no longer the owner of the vehicle.  The county and state has no other way of knowing what the situation is regarding your vehicle unless you notify them.

Also, if you do decide to surrender your vehicle in bankruptcy, you will want to set aside the necessary funds to pay your property taxes when the bill arrives, or you could face the penalties of the county in which you reside in.

Can A Person Incarcerated File Bankruptcy?

Thumb Tack IconA person who is incarcerated can, in fact, file for bankruptcy. However, there are some extra steps that will have to be taken.

Since a person who is in prison obviously cannot leave, they must file a power of attorney so that a friend or family member can meet with the bankruptcy lawyer who is intending to file the bankruptcy.  This would have to be done as soon as the incarcerated person decides that a lawyer needs to become involved. This is because the lawyer will need power of attorney information from the very beginning of the meetings in order to discuss anything with the friend or family member.

One of the things that is required when filing bankruptcy is the debtor has to take the credit counseling course and financial management course. Since a person who is incarcerated most likely will not have regular access to the internet, a motion must be filed by the attorney to waive the requirement to take these courses.

There is also one other motion the attorney will most likely have to file. Since the incarcerated person will not be able to attend the 341 Creditor’s Meeting, a motion will have to be filed stating the reason that the debtor cannot attend.

All of this information is based on the debtor being in the Western District and Middle Districts of North Carolina. Most likely some of these steps will be the same in different districts, but be sure to check with your attorney because there very well could be different requirements.

Are Debts Ordered in a Separation Agreement Dischargeable in Bankruptcy?

When the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) became effective October 17, 2005, debts ordered in a separation agreement, divorce decree or other order of the Court became non-dischargeable.  This can be reviewed in detail at 11 U.S.C § 523(a)(5) and 523(a)(15).  Domestic support obligations, inclusive of alimony, child support and other debts ordered to be paid by the court, cannot be eliminated in bankruptcy regardless of whether it is ordered before, during or after the date of the bankruptcy filing.  In addition, the debts cannot be eliminated regardless who is owed the debt – spouse, ex-spouse, child, guardian of the child or a governmental unit.  1 U.S.C § 101(14A).

If you are in the process of a separation and divorce, it is important to understand what you are obligating yourself to pay prior to signing the paperwork.  A couple of common examples are provided below:

Person doing research on computer

Example One: You and your soon to be ex-spouse have a credit card with a balance of $10,000.  You and your spouse incurred this debt when trying to start a business.  During the negotiations of the separation agreement, you decide to take responsibility for the credit card.  You feel this is the right thing to do since you pushed the development of the business.  In this case, your spouse is “held harmless” for this credit card balance.   As a result, you must pay this debt.

Example Two:  You and your ex-spouse own a home.  Your ex-spouse and two children live in the home and want to continue to live in the property.  Both of your names are on the first mortgage loan but only your name is on the second mortgage.  You have agreed in the divorce decree to pay the mortgages on the home until your youngest child graduates from high school.  Once again, since you took responsibility for the debts under the divorce decree, you cannot file bankruptcy to eliminate the debts on the two loans.  You are now solely responsible for the debt on the house.

There are obviously many examples, but these are two of the more common scenarios we see at Duncan Law.    Again, it is extremely important to assess your ability to pay prior to accepting responsibility for the debt¸ since it will not be dischargeable in bankruptcy.

What Happens If We Get A Divorce While in A Chapter 13 Bankruptcy?

When you enter into the union of marriage, you are not normally thinking that it will not last.  Like most, you begin a life together and when creating a life together you may accrue a lot debt.  Unfortunately, relationships change and often times the only solution is divorce.  Just as the divorce affects your jointly owned property, it also affects many other things in your life.  And if you and your spouse find yourselves getting divorced during an active bankruptcy, you should be aware of the impact the divorce will have on your bankruptcy.

Parents walking with young child while holding handsWhen you file bankruptcy as a joint couple, all of your information is shared with one another.  When you divorce, unfortunately sometimes circumstances get ugly.  There are many times that the relationship has ended, not so peacefully let’s say, and one party wants absolutely no contact with the other party.  In fact, they want to just “disappear” from their spouse and want their spouse to have no idea as to their whereabouts.

As your bankruptcy attorney we are privileged to a great deal of personal information, which we must honor.  How can we withhold your information from the person whom you filed with and we represent as well? We wouldn’t, which is why we would need to file a Motion to Withdraw.  We are privy to personal information, and representing the both of you while in a bankruptcy would be a conflict of interest.  The separated couple must then seek separate attorneys who will advise you going forward.

If you and your spouse are in a Chapter 13 bankruptcy due to income (meaning that together, you do not pass the Means Test), there may be an option for your case to be bifurcated or split. In other words, if you pass the Means Test on your own, you may be able to convert to a Chapter 7 individually as a result of the divorce. Even if you both remain in a Chapter 13 or if you both convert to a Chapter 7 bankruptcy, you may do so individually by having your case split into two individual cases.