Does Debt Disappear After Bankruptcy?

Does debt disappear after filing for bankruptcy? Debt relief attorneys at OlsenDaines in Oregon State

If you’ve found yourself battling against a mountain of debt, you may be considering bankruptcy as a way to get back on your feet. After all, filing for bankruptcy can be an effective method for relieving debt and regaining control over your finances. But, should you file for bankruptcy, will all of your debt disappear?

The answer to that question is a little complicated. Though bankruptcy can help relieve many different kinds of debt, there are some kinds that will stick with you. If you are considering filing for bankruptcy, it’s important for you to know what kinds of debts are covered and which kinds are not.

What Debts Can Be Forgiven by Bankruptcy?

Bankruptcy can help you regain financial stability by relieving a wide variety of debts. Your exact amount of relief, however, will largely depend on your specific situation and what kind of bankruptcy you qualify for. If you aren’t sure which path would be best for you, a bankruptcy attorney can help you find a solution that relieves as much debt as possible.

Chapter 7

Chapter 7 bankruptcy is intended for individuals with a lower income and fewer nonessential assets. To qualify for this type, you have to pass a means test, which verifies your income. The types of debt that this chapter can cover include:

  • Medical bills
  • Overdue utility charges
  • Outstanding credit cards
  • Collection agency accounts
  • Lease agreement deficiencies
  • Checks written on insufficient funds

Chapter 13

Chapter 13 bankruptcy is intended for individuals with more disposable income and more nonessential assets. This type of bankruptcy is considered “reorganization”, where you will create a payment plan to repay secured debts – such as alimony, child support, and mortgage delinquencies.

Depending on your specific situation, other types of debt may be reduced, but that is not always the case. Chapter 13 bankruptcy can be tricky to navigate, so it is best to contact a skilled bankruptcy attorney to determine the best approach for debt relief.

What Debts Cannot Be Forgiven by Bankruptcy?

Though bankruptcy can absolve many kinds of debt, there are a few types that usually cannot be discharged. The types of debt that bankruptcy generally cannot cover are:

  • Student loans
  • Alimony and child support
  • Tax debts

While these debts are generally not forgiven through bankruptcy, each person’s situation is different. A knowledgeable and experienced bankruptcy attorney can examine your unique circumstances to help you relieve as much debt as possible.

Experienced Debt Relief Attorneys

Bankruptcy can be difficult to navigate, and without the right guidance, you may miss
opportunities to relieve debt. If you are considering filing for bankruptcy, contact the skilled bankruptcy attorneys at OlsenDaines in Washington and Oregon today. Our experienced lawyers understand the ins and outs of bankruptcy law, and they can help you get the best outcome possible for your situation. We can help you through any step of the process so you can regain financial security as easily and effectively as possible. Call us today to schedule your free legal consultation.

What Role Does Your Attorney Play in Filing for Bankruptcy

Bankruptcy is a complex process that begins before the time you file and goes straight through to the debt discharge and the period when you will begin the process of rebuilding your credit. An experienced bankruptcy attorney can help you navigate the maze of decisions, paperwork, procedure, and compliance that goes along with a bankruptcy filing.

From the beginning, your bankruptcy attorney is there to determine the right course for you and your specific circumstances. We assess your financial situation, help you to determine your financial goals, and discuss the options that are available and most appropriate for you. We can also begin taking collection calls and other creditor communications on your behalf.

One of the main tasks your bankruptcy attorney will undertake for you is the preparation and filing of your bankruptcy petition. These forms are exhaustive, and often run to 30-60 pages or more. The attorney will ensure that the forms are filled out completely and accurately in compliance with the applicable state law. Once you have reviewed the information, your bankruptcy attorney will file the finalized, signed version with the bankruptcy court.

A bankruptcy attorney will also help you determine whether a Chapter 7 or a Chapter 13 bankruptcy filing is right for you. This involves you and your attorney assessing the size and makeup of your debt, what assets you are willing to risk in a bankruptcy, and your ability (if any) to repay your debts. When you have an initial consultation with a bankruptcy attorney, here are some of the key points to go over:

  • How you can leverage bankruptcy to achieve your financial goals
  • What you can expect during the bankruptcy process
  • Any difficulties or issues specific to your case
  • Whether you should file for Chapter 7 or Chapter 13
  • What can be done to make the bankruptcy process easier for you

 

 

What You Should Not Do Before Bankruptcy

Before filing for bankruptcy, there is a significant amount of preparation that you should take to ensure that nothing adversely affects the bankruptcy process. An experienced bankruptcy attorney is an invaluable resource when determining what steps you should take to prepare. Some actions can have a negative, or even irreversible, effect on your bankruptcy. Here are some common mistakes to avoid.

When you’re filling out the bankruptcy paperwork, and at the creditors meeting, it’s essential that you provide complete and accurate information about all assets, debts, income, expenses, and anything else pertaining to your financial history. You are doing so under the penalty of perjury. To knowingly misrepresent any of this information is to risk criminal prosecution. Fill out the paperwork carefully. Make sure you answer all the questions and include all the information requested; only leave something blank if you’re sure it doesn’t apply to you. If you leave something out that should have been included, it can cause problems later on in the bankruptcy process.

It’s also crucial to have filed your income tax returns. If you have not filed your returns for a minimum of two years prior to filing for bankruptcy, it makes completing your petition, schedules, and statement of financial affairs extremely difficult. Furthermore, it can effectively bring the bankruptcy process to a halt. Your tax returns are necessary to determine your past and current earnings and asset holdings, and to satisfy potential priority tax claims.  Under chapter 13 the court and trustee will require all returns that you were required to file within the previous four years be filed within the first couple of months of the case.  If you fail to do so the court can dismiss the case.

Do not run up any additional debt within the 70 to 90 days prior to filing for bankruptcy. If you do, the creditor(s) can object to your discharge on the grounds that you ran up the debt fraudulently (that is, without any intention of paying it back). A possible exception is if you took out a payday loan as part of a cycle of cash advances and repayment. An experienced bankruptcy attorney can help guide you through the process of preparing for bankruptcy to ensure that your filing goes smoothly.

 

 

Chapter 7 Bankruptcy and the Means Test

The main hurdle you have to overcome when attempting to qualify for Chapter 7 bankruptcy is the means test. The Chapter 7 means test is designed to look at your income and expenses and disqualify you for Chapter 7 if they don’t fit within certain guidelines. The means test will compare your average monthly income for the six-month period preceding your bankruptcy filing against the median income of a comparable household in your state of residence.

The means test is intended to prevent people with higher than average incomes from filing for Chapter 7 bankruptcy. Often, the better bet for someone who cannot qualify under the mean test is to go the Chapter 13 route. The means test comes across as relatively straightforward, but it can be more complex than you think. A good bankruptcy attorney can be an invaluable resource in guiding you through this process. Here are three common mistakes people make when completing the means test form:

  • Listing the wrong household size. This can be more complicated than it would seem since courts don’t always agree on what constitutes household size. A minority of courts take the view that everyone living in the house should be counted. Other courts determine household size by including only those people who are financially dependent on the debtor. Household size is extremely important to the means test because it is used to calculate the median family income to balance against your income, and the standard deduction amounts for housing and certain other expenses.
  • Your income doesn’t match up to the documentation you provide. This is information you have to go over carefully. The number of weeks in a month, the issue date of paychecks, and the timing of the bankruptcy filing are all factors that can affect the average income figures.
  • Failing to take all allowable deductions. Don’t miss out on a deduction you are entitled to. Court ordered payments like those in a divorce or child custody case are allowable deductions, for example.

 

How Do I Get Credit After Filing for Bankruptcy?

One of the fears many people have over filing for bankruptcy is that they won’t be able to get credit afterwards. This is simply not the case. While declaring bankruptcy will hurt your credit score, there are strategies for rebuilding your credit immediately after filing.  Most chapter 7 clients begin receiving credit offers within 30 days of filing the case!

Right from the start you might be a more attractive prospect to a lender, since you have just dramatically reduced your debt-to-income ratio (at least in the case of Chapter 7; in a Chapter 13 this process will take longer, but it will happen). Those who have filed for a Chapter 13 bankruptcy will benefit from the discipline of being on a repayment plan. This will also help in the long-term process of rebuilding credit.

It is important after filing for bankruptcy that you closely monitor your credit reports and credit score. Make sure you get a copy of your credit report from the three main credit reporting agencies: Equifax, Experian, and TransUnion. Go over the reports and look for errors and omissions regarding your current residence, employment and contact information. Some experts recommending avoiding credit repair agencies. Not all of them are above board, and even the reputable ones may not be able to do much that you cannot do yourself.

Another way to immediately begin rebuilding your credit score following a bankruptcy is to open a secured credit card account. A secured card is a credit card that requires a cash collateral deposit which then becomes the credit line for that account. After a period of timely payments, the bank will sometimes reward you by increasing your credit line without you having to make an additional deposit. The best way to utilize a secured credit card is to make a few purchases every month and then pay them off in a timely manner. Don’t carry a balance around on the card. OlsenDaines provides all our clients with a free credit rebuilding program, an invaluable resource in helping you make a plan for rebuilding your credit.

 

 

5 Myths About Bankruptcy

There are many myths and misconceptions surrounding the bankruptcy process. When making the decision whether to initiate the bankruptcy process, it’s important to be able to separate fact from fiction. Here are 7 of the most common myths surrounding bankruptcy.

  1. Bankruptcy will ruin my credit.

For many people considering filing, this may be a moot point as they likely already have a low credit score. In any event, filing for bankruptcy can actually sometimes improve your credit score. As far as your credit report goes, a Chapter 7 bankruptcy will show on the report for 10 years. Again, this may not be a bad thing. Borrowing opportunities may actually increase when prospective lenders see that you filed and are in the process of rebuilding your credit.

  1. I make too much to file for bankruptcy.

Even if you’re taking home more than your state’s median income, you may still be eligible for Chapter 7 bankruptcy. To qualify for Chapter 7, you need to pass a mean test. Basically, this entails that if you have a certain amount of cash left over after subtracting your expenses from income you will be denied. However, you may very well have significant expenditures that outweigh your income. This is where a good bankruptcy attorney comes in; your attorney can prove your need for bankruptcy relief in spite of your income.

  1. I’d be better off paying all of my debts.

While filing for bankruptcy is undoubtedly a serious financial step to take, it may still be the right one. The easing of financial stress and the sense of “wiping the slate clean” can provide a huge sense of relief. According to Time’s Money column,

“If your debts are more than 50% of your annual income and you see no way to pay them off within five years, bankruptcy is likely your best path toward living debt-free.”

  1. Filing for bankruptcy means I’m lazy or a deadbeat.

Many people buy in to the myth that bankruptcy is a personal failing. In fact, bankruptcy is simply a tool that can help people regain control over their financial state. Many people who file for bankruptcy have exhausted all other options in trying to resolve their debt problems. With stagnant wages and medical costs that continue to sky rocket, the truth is that bankruptcy is nothing more or less than a remedy for a specific set of financial conditions that can happen to anyone.

  1. If I file, I’ll lose everything.

The truth is you may be able to keep a lot more than you think. The majority of Chapter 7 bankruptcies are no-asset cases where the debtor doesn’t have to give up any possessions. In these cases, you are allowed to carve out exemptions for basic assets that are necessary for your daily life. This can vary depending on the state; for people in Oregon or Washington, your best bet is to contact a reputable bankruptcy attorney in your state to learn more.

Chapter 13 vs. Chapter 7: Which is Right for You?

When deciding whether to pursue a Chapter 7 or Chapter 13 bankruptcy, it is wise to sit down with a bankruptcy attorney and analyze your income, assets, debts, and your financial goals. For example, your situation might be such that you don’t qualify for Chapter 7, and would be better off repaying your debt over a period of time in a Chapter 13 repayment plan approved by a bankruptcy court.

A Chapter 7 is a liquidation bankruptcy designed to erase a person’s unsecured debts (e.g. credit card debt and medical bills). To qualify, you must have little to no disposable income. A Chapter 13 is a reorganization bankruptcy designed for debtors who still have a regular income and are capable of repaying at least some of their debt through a repayment plan. This is the option for those who cannot pass the Chapter 7 means test. Another reason to opt for a Chapter 13 is that it offers some benefits that a Chapter 7 does not (like the ability to catch up on mortgage payments you’ve fallen behind on). Below are some additional factors to consider.

Reasons why you might file for Chapter 7:

  • You do not have the ability to repay your debt in a repayment plan.
  • You urgently need relief from your creditors. After you file for Chapter 7, the bankruptcy court can issue a discharge order in as little as 3 months; following the discharge order, you will no longer be personally liable for any dischargeable debt.

Reasons why you might file for Chapter 13:

  • You are not eligible for Chapter 7 in the first place, or have significant debts that are not dischargeable under a Chapter 7 discharge.
  • You want to avoid home foreclosure, stop your car from being repossessed, or keep property that would be nonexempt under Chapter 7.
  • You want to repay your debt, rather than have it discharged.

Know Your Bankruptcy Rights as a Consumer

Bankruptcy laws are on the books to give people a fresh start when financial conditions have become too overwhelming. It’s a right provided to you when you are hit with circumstances like loss of employment, illness, divorce, and other financial hardships; it gives you the ability to stop harassing debt collection actions and provides various other means of relief. It’s important to know the rights you have as a consumer under our bankruptcy laws.

Creditors understandably want to protect themselves against the prospect of debts owed to them being discharged. One of the ways creditors sometimes try to do this is through adding a “bankruptcy waiver” clause to contracts and agreements. Understandable or not, these waivers are not binding. Any waiver of your future bankruptcy rights is not enforceable. Congress has expressly stated in the bankruptcy codes that a bankruptcy debt discharge halts any action against the debtor “whether or not discharge of such debt is waived.” 11 U.S.C. § 524(a)

Once your debts have been discharged, your creditors are prohibited from any collection action per the federal discharge order.  You do not have to tolerate any bullying or undue collection actions from creditors.   If a creditor attempts collection on a discharged debt they can be brought in front of the bankruptcy judge on a Motion for Contempt.

Even prior to filing bankruptcy creditors do not have the right to harass you with excessive telephone calls and letters, or unwanted visits to your residence. The Federal Trade Commission has established rules under the Fair Debt Collection Practices Act that creditors must follow. Creditors cannot:

  • Demand you pay more than you actually owe
  • Add additional fees to the agreement
  • Call excessively, call during unreasonable hours, or call you at your workplace if you have requested that they desist
  • Use threatening or obscene language
  • Contact your employer regarding your debt

If you are being illegally harassed by creditors, you do have recourse. To learn more about your bankruptcy rights, and how they can be enforced against creditors, set up a consultation with a bankruptcy attorney.

 

Q & A Session With a Bankruptcy Attorney

 

As bankruptcy attorneys, we are asked many of the same questions by our clients. In this blog post, we will present a hypothetical example of a typical question and answer session with a bankruptcy lawyer so that you can come away with a basic foundation of useful information.

Will collection calls stop if I file for bankruptcy?

The answer to this question is a resounding yes. When you file for bankruptcy, you get an automatic stay. This prevents most creditors from making any attempts to collect debts while the bankruptcy process is unfolding. It goes into effect immediately. Additionally, if you have legal representation, collection agencies are not allowed to call you. They are required to contact only your attorney.

Does a bankruptcy filing prevent a foreclosure?

Yes, bankruptcy can prevent a foreclosure. If you are behind on your mortgage payments, you can pay back the arrearage over time through a repayment plan in a Chapter 13 filing. In Chapter 7, up to $50,000 in equity in your Oregon home is exempt, so you can maintain ownership of your home as long as you are current on your payments if you have less than $50,000 equity ($50,000 for a married couple, $40,000 for an individual).

What is the difference between Chapter 13 and Chapter 7?

We will provide a short answer here. Chapter 13 is a reorganization bankruptcy. You are allowed to keep your property, and your debts are reorganized so that you can make affordable payments over a three-year or five-year period. Many debts are eliminated in a chapter 13 just like a chapter 7. Chapter 7 is a liquidation bankruptcy. Nonexempt property (if there is any) will be liquidated by the bankruptcy trustee to pay back as much of your debt as possible. Unsecured debts like credit card bills, old utility balances, medical charges, and unpaid lease obligations would be discharged completely.

How long will a bankruptcy filing remain on my credit report?

It depends on the type of bankruptcy that you file. A Chapter 7 bankruptcy will remain on your credit report for 10 years, and a Chapter 13 will last for seven years. The time period starts the day we file the case with the bankruptcy court.

Take the First Step Toward a Fresh Financial Start!

Now that you know some of the basics, you may be ready to move forward and have a detailed discussion with a licensed bankruptcy attorney. We have offices in Tigard, Salem, Klamath Falls, Albany, Grants Pass, Bend and several other cities in Oregon, and we also have locations in Vancouver and Tri-Cities in Washington. If you would like to schedule a free consultation, give us a call at 800-682-9568.

Feeling at Ease With Your Bankruptcy Attorney

Money matters are sensitive and personal, and there are not too many people that are anxious to discuss their financial affairs with someone they have just met for the first time. This is certainly a prudent way to conduct yourself, but the “close to the vest” approach can have a downside if you are having financial difficulties. A bankruptcy attorney can guide you toward an effective debt management solution, but you may feel a bit uncomfortable asking for help.

This is understandable and it is human nature, but you don’t have to be concerned. Our bankruptcy law firm has been assisting people for more than three decades, and we have worked with tens of thousands of clients in Oregon and Washington. Given our vast experience, there is no scenario that we haven’t seen before, and we always go the extra mile to make our clients feel comfortable throughout the whole process.

We get to know our clients, we put them at ease, and we answer all of their questions in a thorough but down to earth and understandable manner. For some individuals, a Chapter 7 liquidation bankruptcy will be the best choice. With this form of bankruptcy, unsecured debts are discharged entirely, and you can usually maintain ownership of your home and your car if you are up-to-date on the payments. Other people will be better served by a Chapter 13 reorganization that allows a person to make payments over time until the debts are paid or discharged.

Our firm offers free case evaluations, so you have the opportunity to meet us and get to know your bankruptcy attorney before you make any firm commitments. This is a simple but effective way to break the ice, and we also make personal interactions quite convenient for people in many different parts of Oregon and Washington. We have offices in Portland, Eugene, Medford, Grants Pass, Coos Bay, Tigard, Bend, Klamath, Salem, Vancouver, and Tri-Cities, so you won’t have to travel very far to get sound legal counsel. If you will like to take the first step toward a comfortable financial future, send us a message through our contact page to request a consultation with a licensed OlsenDaines bankruptcy attorney.