Is the Information on My Bankruptcy Petition Private?

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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?

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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?

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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?

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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.

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

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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.

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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.

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.

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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.