Call Today for a FREE Consultation
210-342-3400
Recent Blog Posts
The Surprising Benefits: Deal with Student Loan Collection with Chapter 13
Qualifying for “undue hardship” to discharge (write off) student loans is not easy. But Chapter 13 gives you powerful help over the timing.
The Much Better Chapter 13 “Automatic Stay”
Last time we explained how bankruptcy’s “automatic stay” immediately stops student loan collections against you. But if you file a Chapter 7 bankruptcy this protection from collections lasts only the 3-4 months that the case lasts. If you qualify under “undue hardship,” you could discharge (write off) your student loan debt during your case. Then the student loan creditor could no longer collect that debt.
But if you can’t show “undue hardship,” Chapter 13 buys you much more time, and more timing flexibility.
Chapter 13 Simply Buys More Time
Chapter 13 buys more time because a typical case lasts 3 to 5 years. The “automatic stay” prevents collection actions this entire length of time. A student loan creditor could try to persuade your bankruptcy judge to allow it to collect before the end of your case. But usually this doesn’t happen. So regardless of anything else, Chapter 13 puts off your student loan creditor(s) for a fairly long time.
The Surprising Benefits: Stop Student Loan Collection
Chapter 7 “straight bankruptcy” stops student loan collection actions for a few months. Sometimes it can stop these actions permanently.
Bankruptcy gives you tools to deal with special debts—including those you can’t easily write off. Last week we got into income taxes. Today we discuss student loans, focusing on this special kind of debt in Chapter 7 “straight bankruptcy.” Next week, we’ll cover student loans under Chapter 13 “adjustment of debts.”
Let’s assume you owe a student loan that you can’t afford to pay. Here’s how Chapter 7 can help.
Student Loan Collection
Student loan creditors and collectors have extraordinary collection powers. Often they don’t need to sue you first and get a legal judgment against you, as most creditors must. These creditors and their collections have very aggressive collection procedures available to them. Besides the usual garnishment of bank accounts and paychecks, these special creditors can often grab your tax refund or a portion of a Social Security benefit check.
The Surprising Benefits: Stop Income Tax Collection
Income tax debts can be handled in bankruptcy more than you think. This is true even with those taxes that are too new to be discharged.
The Automatic Staying, and the Discharge, of Income Tax Debts
Sometimes people are surprised to learn that filing bankruptcy gives you power over income taxes. It does so in two big ways. First, filing bankruptcy stops the IRS and state from collecting your tax debts—either temporarily or permanently. This is the “automatic stay” applicable to pretty much all of your creditors. Second, bankruptcy permanently writes off (“discharges”) some income tax debts—generally older taxes.
If all the income taxes you owe qualify for discharge, then your situation is quite straightforward. You file a Chapter 7 “straight bankruptcy” case, which stops any ongoing tax collection during the case. Then 3-4 months later, near the end of the Chapter 7 case, your tax debt is discharged. The “automatic stay” protection against tax collection ends. But you no longer need to worry about tax collection because you no long owe any taxes.
The Surprising Benefits: Stop Collection of Support Arrearage
Ongoing child or spousal support is a very special type of debt in bankruptcy. So is support arrearage. Here’s how bankruptcy handles them.
Most Debts
Filing bankruptcy stops—or “stays”—the collection of most debts. (See Section 362(a) of the U.S. Bankruptcy Code about the “Automatic Stay.”) Then at the end of the bankruptcy case most debts are discharged—legally written off. (Sections 727 and 1328 of the Bankruptcy Code.) At that point the creditor is permanently forbidden to collect the debt.
Special Debts
However, filing bankruptcy doesn’t stop the collection of certain specific types of debts. And it only temporarily stops the collection of other types. These tend to be the types of debts that bankruptcy does not discharge.
Can You File Bankruptcy Without Your Spouse?
Many people mistakenly believe that if you are married and filing for bankruptcy, you must do so jointly. You have several options after determining that bankruptcy is the right choice. If you are unmarried, you will file independently. If you are married, you may file jointly or as an individual. Both spouses may also choose to file bankruptcy separately, at the same time. Strategically, one option may suit your situation better than the others, depending mainly on location, debts, and assets.
Texas and the Other Community Property States
Texas, along with nine other states, is a community property state. Meaning, any assets or property acquired during marriage belongs equally to both spouses, even if only one spouse’s name is on the contract. The assumption is that all decisions are made together, rather than individually, and both parties are contributing their fair share. Any items owned before the marriage are excluded from the community property, as are any items inherited or given only to one spouse after the union began; this is separate property.
The Surprising Benefits: Break a Tax Payment Plan through Chapter 13
Use Chapter 7 to stop paying an unaffordable income tax payment plan when the tax owed is dischargeable. Use Chapter 13 when it’s not.
Tax Agreement Payments Too High
We laid out the problem last week. You’d entered into a monthly payment plan with the IRS or your state because you couldn’t pay what you owed. But now you don’t have the money to make the payments. Or you’re in a payment plan but will owe more income taxes soon, putting you then in violation of your payment agreement.
If you violate your tax agreement the IRS/state could then take aggressive collection action against you. Or you might be able to add an upcoming new income tax owed into your current tax payment agreement. But the increased monthly payment may well push you over the financial edge. But even if you think you could afford it, you’d be going backwards instead of making progress.
Chapter 7 Makes Sense When Your Tax Owed Can Be Discharged
The Surprising Benefits: Break a Tax Payment Plan through Chapter 7
Can’t afford your current IRS/state monthly payment plan? Have an upcoming additional new year of taxes to pay? Chapter 7 can often help.
Tax Installment Agreement You Can’t Afford
It’s a common problem. You owed income taxes a year or two ago when you sent in your tax returns. Money was very tight so you couldn’t just pay it off. You found out that the IRS let you pay that unpaid tax through a monthly installment plan. If you also owed state income taxes, you likely found out that your state taxing authority lets you do this, too.
So you set up the payment plan with the IRS and/or state. But your financial situation only got tighter because now you had a new monthly obligation you absolutely had to pay. So now you are struggling to pay the monthly tax payment along with your living expenses and other debts. You wish there was a way to get out of your IRS/state monthly tax payment and other debts.
The Surprising Benefits: Getting Back Your Repossessed Vehicle
It’s much easier to prevent repossession by filing bankruptcy beforehand. But if you’ve already been repo’d, you now have to act very fast.
When Does a Lender Repossess a Vehicle?
When CAN a vehicle lender repossess your vehicle? Just about all vehicle loan contracts let the lender repossess the minute you are late on a payment. There may be a legal grace period, but not usually. This is also true for other breaches of the contract, such as if you let the vehicle insurance lapse. So usually a lender can repossess, without warning, when you are not in fully compliance with any contract obligations.
But most lenders don’t repossess right away. They’d usually rather have you make the payments so that they earn the interest on the contract. But they have the legal right to repossess, and sometimes act very fast.
So how much time do you have before your lender would actually repossess? That depends on your payment history and the repossession practices of the lender. It’s truly hard to tell how many days you can be late, or how long your insurance can be lapsed, before repossession.
How to Get Back a Repossessed Vehicle
In the United States, 170 million consumers depend on a vehicle for daily activities. From trips to the grocery store to a daily commute to work, Americans rely heavily on having independent transportation. Unfortunately, when financial hardship strikes, lenders are quick to repossess their vehicles, even if payments are only one month behind, in some cases. The next part of ur “Surprising Benefits” series explains how filing for bankruptcy can stop a repossession from occurring or even return a repossessed car back to your possession.
If It Is Still in Your Possession
In the state of Texas, repo agents do not need to notify you before taking your vehicle. Realistically, if your payment is in default, even just by a short time, a repossession agency may already be looking for your car, truck, motorcycle, RV, or any other vehicle burdened with a loan. Filing for bankruptcy may be a viable solution to your situation. Bankruptcy places an “automatic stay” is on all collection attempts for all loans, including your vehicle. For many Americans, this stay is enough to catch up on payments, without including it in the bankruptcy process.
The Surprising Benefits: Reinstating Your Driver's License Suspended for Unpaid Tickets
You may be able to reinstate your license in spite of one or more unpaid traffic tickets. It mostly depends on the traffic laws violated.
We’re deep into a series of blog posts about powerful, less familiar benefits of bankruptcy. One important one is getting your suspended driver’s license reinstated. Whether you can get your license reinstated through bankruptcy depends a lot on the reason for the suspension. Last week we covered suspensions for not paying a judgment from a motor vehicle accident while driving uninsured or underinsured. Today we cover suspensions for not paying one or more traffic tickets.
License Reinstatement Depends on Discharge of the Traffic Ticket(s)
Our last blog post showed how bankruptcy reinstates a license suspended because of an unpaid debt from an accident. These suspensions usually come from not paying a court judgment or debt from an uninsured motor vehicle accident. Usually such a debt can be legally written off (“discharged”) through bankruptcy. After bankruptcy takes away the reason for the suspension, the driver’s license can be reinstated.
Contact Our Firm
The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.
I have read and understand the Disclaimer and Privacy Policy.
Call Today for a FREE Consultation
210-342-3400
