How Did Bankruptcy Change With the New Laws in 2005?

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Before 2005 it used to be fairly easy and cheap to file bankruptcy. When the bankruptcy laws changed in 2005 the process for filing for bankruptcy became more complicated. Due to the complications of cases fees across the country for filing bankruptcy also went up.

Bankruptcy Questions

One of the main things that changed is the requirement to pass the “means test” in order to be able to qualify to file a Chapter 7 bankruptcy.  Generally speaking, if your average monthly income is less than the states median income, then you will pass the means test. If your average monthly income is more than the states median income, then there are a few other things that are taken into account to determine if you will pass or not. In this case, the means test looks into your income, expenses and the total amount of debt you owe. If that determines you have enough income to pay a certain amount to those creditors each month, then you will fail the means test. This means that you will not qualify to file a Chapter 7 bankruptcy but, instead, you can seek bankruptcy protection under a Chapter 13 bankruptcy.

Another thing that the new laws now require is the debtors have to provide proof of income. This means that they must provide their tax returns for the previous year to the trustee. If the previous years’ taxes have not been filed, they must get filed before the bankruptcy filing can proceed. This goes for both Chapter 7 bankruptcies and Chapter 13 bankruptcies.

The new laws also now require people who file bankruptcy take a credit counseling course and a financial management course.  These must be through government-approved agencies, so make sure to check with your attorney to find out which ones are government-approved.  If these companies suggest a repayment plan or other options, you do not have to follow them. For bankruptcy purposes you only have to be able to show that you have taken the course. A lot of debtors feel that these courses help and give them good information.

These are a few of the main changes that accompanied the bankruptcy law changes in 2005.

What Is A Complaint? | Parts of A Civil Lawsuit

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When the sheriff shows up at your door and hands you a stack of papers with a bright yellow sheet on top, what are they actually giving you? Most likely they are giving you what is called a complaint. A complaint is the first step in initiating a lawsuit. This means that someone has filed papers with the court to begin the legal process to write some sort of wrong. Most of the complaints clients who come into our office see are ones saying they owe someone money.

Bills in Mailbox

So what does a complaint typically say? It will state which county the complaint has been filed in and whether it is in the District or Superior court for that county. The title of the complaint will also say who is filing the complaint, the plaintiff, and who they are filing it against, the defendant. The case number will also be stated in this section.  Below that it will also state why they are filing the complaint. For example, say John Smith owes ABC Bank $10,000 that is past due on a credit card. The body of the compliant will list this, along with the specifics of when the card was applied for and the actual card number.

There will also be several statements that are numbered and they will list the terms of the complaint. These typically state who the plaintiff is, where the defendant lives, that the defendant opened an account and agreed to the term and conditions of the account and that they then have failed to pay on that account. The last paragraph will state what the plaintiff wants as a remedy or result of filing the complaint. What the plaintiff will typically say they want is a judgment for the full amount the plaintiff owes plus a certain amount of interest and attorney’s fees.

It is important that you respond to the complaint by filing an answer. If you do not respond to the complaint then you will automatically be found liable for the lawsuit. The courts will view it as you failed to respond and, therefore, you admit that you owe the money and are liable to the plaintiff. The court will then issue a default judgment saying you are fully liable for the amount owed. Be sure to read our other blog post on how to respond to a complaint with an answer. Also know that if you do have a lawsuit against you bankruptcy may be an option worth exploring more.

Why You Might Need To Do A Quitclaim Deed Or Deed in Lieu of Foreclosure Even After Filing Bankruptcy

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Whether or not someone who files bankruptcy also needs to do a quitclaim deed or deed in lieu of foreclosure is a question that many bankruptcy attorneys and clients are asking themselves these days. A few years ago, most banks and mortgage companies (we will call them banks for this blog) foreclosed on a property – house or land – within three to four months of the bankruptcy filing. At the foreclosure sale, the bank would pay the property taxes on the house as well as any homeowner association liens on the property. For many people, that is now considered the “good ole’ days”.

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Are Workers’ Compensation Benefits Protected in Bankruptcy?

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In many cases when a client walks in our office to seek bankruptcy advice it is because they are at the end of their rope and under severe financial distress.  Often times, many clients have already lost or are at risk of losing nearly everything they have.

When someone has been injured at work they are no longer able to receive their full compensation if they are unable to work due to their injury. Instead, they get workers’ compensation benefits which are typically 66.6% of their regular income. Workers? compensation benefits may be the only asset or source of income a person has. In these situations, one of the first questions a client will ask is whether or not their workers compensation benefits will be protected, and will they be able to continue to receive the benefits if they file bankruptcy.  Well, in most cases the answer is ?yes?.

Workers compensation benefits may include payments you receive from your employer after being injured in an accident at work. These benefits/payments are usually based upon a percentage of your wages and are considered income and will not be affected by filing bankruptcy.

Under North Carolina law, workers? compensation benefits are exempt. When you file a bankruptcy, the bankruptcy Trustee does not have the legal right to seize any benefits that you are receiving at the time.  Although the Trustee cannot take your benefits, your benefits are considered income and will be used for the Means Test to determine whether or not you can qualify for a Chapter 7 bankruptcy and/or the amount that you will need to pay back to the court in the event that you file a Chapter 13 bankruptcy.

If you are expecting a large workers compensation settlement, it is very important that you discuss the pending settlement with your attorney ahead of time. Once a settlement is reached, it is necessary in some districts of North Carolina that you obtain the Court’?s approval to settle the claim and the exemptions in your bankruptcy are amended.

Mortgage Companies Are Taking A Long Time to Foreclose, Isn’t That A Good Thing for Me?

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As discussed in a previous blog post, it is taking mortgage companies an extraordinary period of time to foreclose on properties these days.  Unfortunately, the delay in the foreclose process seems to be a “double-edged sword” depending on the homeowners’ goals.

Mortgage Company Foreclosing on House

In some cases, it is a benefit to the homeowners, since they may be able to live in their home for a year or more before the foreclosure is completed.  This delay allows the family to stay in “their” home and allows their children to finish the school year in a familiar setting with friends and teachers they adore.  In other cases, it is purely a financial decision.  The delay provides time for the family to save money, since they are not paying the mortgage loan on the house or rent on another property.  When the day comes to move out of the home, the family has the funds needed for moving costs and for the security deposit and rent on the new apartment or house.

On the other hand, the family down the street has made the decision to move on with their lives and have already moved out of the house.  The house represents a negative time in their lives and they want a fresh start in new surroundings.  In other cases, a member of the family has accepted a new job in another state, so they have no option but to move.  These homeowners want the mortgage company to foreclose as soon as possible so this chapter of their lives can be closed.  The family has moved on, unfortunately the house is still legally their responsibility.  These families receive stack after stack of letters from the mortgage company offering workout plans and other alternatives to foreclosure.  On top of that, the homeowners association (HOA) is sending threatening letters regarding tall grass growing in the law, mosquitoes in the swimming pool, and delinquent assessments, dues and fees.  The HOA is threatening to file a lawsuit against the homeowners if they do not pay the debt.  Pay a debt to the HOA for a house they do not live in?  Yes, the HOA assessments, dues and fees are still the homeowners’ financial responsibility until the property is no longer in their names, so the HOA debt must be paid.  As the old saying goes, these families can’t get the “monkey, aka house, off their backs”!

As a result, the delay in foreclosing on a house can be a good or bad thing depending on the homeowners’ goals.  As the homeowners, you can ask the mortgage company to expedite the foreclosure sale but often that is unsuccessful.  You can also look at signing a deed in lieu of foreclose or possibly quit claiming the property to the mortgage company.  These options will be covered in a later blog.

Why Is It Taking Mortgage Companies So Long to Foreclose on Houses?

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This is a question that many people are asking these days, why is it taking the mortgage companies so long to foreclose?  As bankruptcy lawyers we deal a lot with people who are trying to save their homes as they enter the foreclosure process. So knowing how long it takes until a home enters into the foreclosure process is important for many of our clients. There are several reasons for the delay in foreclosures.

Question About Bankruptcy

Needless to say, the slow-down in the economy has resulted in the loss of numerous jobs throughout the country.  For those lucky enough to keep their job, deep pay cuts have often occurred.  Add predatory lending practices from a few years ago and it all spells disaster for countless Americans and the lending institutions or mortgage companies.

Unfortunately, many Americans found they could no longer afford the American dream of a home.  With no way to make their mortgage payments, many people began defaulting on their mortgage loans and lending institutions began the process of foreclosing on many homes.  As the economy has continued to suffer, the sheer number of foreclosures has increased to a point that mortgage companies are simply overwhelmed by the volume.

As you may have read or heard in the media, mortgage companies have been heavily scrutinized regarding their foreclosure practices over the past few years.  The practice referred to as “robo signings”, where mortgage company officials signed off on foreclosure proceedings without fully investigating the accuracy of the documents they signed, has been investigated by federal regulators as well as state attorney general’s from all 50 states.  In several cases, bank officials admitted to signing foreclosure documents without reviewing them or verifying their accuracy.  Although this practice is not condoned, most of us understand how this may have happened.  The officials signing the documents may have believed their signature was merely a formality, and that the documents had already been verified for accuracy before reaching their desk.  So with a pen in hand, and a huge stack of foreclosures on their desk, the robo-signing began.

The investigation into robo-signing foreclosures disclosed many disturbing scenarios.  There were cases where homeowners were actually not behind on their mortgage payments but were facing foreclosure due to errors in paperwork.  In other cases, the homeowners were in the process of or had recently completed loan modifications with the mortgage companies while on a parallel path to foreclosure.  Needless to say these practices outranged many people.  The outcry resulted in the government’s investigation into the foreclosure process and then a self-imposed moratorium by many mortgage companies.

If you are like most homeowners, your mortgage company has changed at least once since you obtained your loan.  In many cases, the loan has changed hands two, three and even four times.  As a result, paperwork has often been misplaced or simply lost during the process.  These issues may delay the foreclosure process, since the legal documents needed to complete the foreclosure cannot be located.

As a result of these issues and others, most mortgage companies and lending institutions are completely overwhelmed with the sheer volume of foreclosure files.  As a result, it is taking some mortgage companies a year or more to foreclose on a home.  Obviously the timeframe varies, so there is no guarantee it will take the mortgage company that long to foreclose on your home!

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

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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?

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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.

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

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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.

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

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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.