Reaffirming a Debt in Bankruptcy
There are times when clients who have filed chapter 7 or 13 bankruptcy will ask whether or not they should reaffirm a debt that would otherwise be discharged in their bankruptcy. Reaffirmation is an agreement made with a creditor to continue paying off a debt even after bankruptcy. There may be legitimate reasons for wanting to reaffirm a debt or loan. However, before the changes in bankruptcy law in 2005, it was not uncommon for creditors to use coercive methods to try and get debtors to reaffirm a loan. Reaffirming a debt means that you will be legally responsible for repaying the debt after your bankruptcy even though the bankruptcy would have released you of any legal responsibility to pay it back.
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When you hear “meeting of creditors,” you might imagine yourself having to face a room of people representing the banks and credit card companies. The reality is that the meeting of creditors is used by the trustee to ask you questions about your financial situation. These questions and your answers will help him or her carry out the responsibilities of the trustee. Creditors will rarely show up at this meeting. Bankruptcy judges are not allowed to attend the meeting of creditors.
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For many, bankruptcy is a confusing subject — and a daunting one. As with most issues involving the law, it can be hard to dig through all the legal jargon used. And when you’re feeling stressed about your finances, it can be even harder to understand the process.
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The Earned Income Tax Credit (EIC) is a tax credit that helps you keep more of what you earned. The credit was initially passed in 1975 to offset the burden of social security taxes and provide incentive for working. How is it calculated, and who qualifies?
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The majority of clients we work with in our bankruptcy practice would be considered “consumer” debtors. Credit card debt, home equity loans, car loans, and medical bills often make up the majority of what they owe to creditors. Bankruptcy laws are written to allow consumer debtors to exempt much of the property they have acquired. The ability to retain property is often a major factor in deciding to file bankruptcy. How much property is exempt under the bankruptcy law is also one of the determining factors in deciding whether to file chapter 7 or chapter 13 bankruptcy.
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Because there is additional proof needed to show undue burden, the majority of those individuals who file bankruptcy do not file the additional adversary proceeding necessary to receive a discharge. This accounts for very low number of student loan discharges given to debtors by bankruptcy courts each year.
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Filing for bankruptcy is complicated and stressful. You may be confused about what you are asked, or the state of your finances. This may lead you to be inaccurate or not thorough. And rumors and misconceptions about bankruptcy lead people to hide assets and not be upfront with their attorneys. All of this can lead to huge problems down the road. Below are the five biggest mistakes bankruptcy filers make when they file for Chapter 7 or Chapter 13 bankruptcy.
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A common question that comes up when clients are considering chapter 7 bankruptcy is what impact bankruptcy will have on IRAs and other retirement accounts. When we file your chapter 7 bankruptcy, we have the opportunity to use what are termed “exemptions” under the U.S. and Arizona bankruptcy laws.
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The answer to this is no…and yes. In Arizona, wedding rings are exempt up to $2,000. This means that for both you and your spouse, you can exempt a total of $2,000 of the value of your wedding rings. For most people, this is more than enough to keep their rings safe. But what if, during better economic times, you purchased more expensive jewelry? Technically, the Trustee can have you turn over your jewelry. Does this happen often? No. Could it? It could.
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In this next post we will be discussing the issue surrounding dismissal or conversion of bankruptcy and the role and mechanism of the means test and presumption of abuse
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