Chapter 7 Archives

Bankruptcy Trustee Suing College to Recover Tuition Paid By Debto

Bankruptcy trustee suing college to recover tuition.  What happens when you pay your child's college tuition and then file a chapter 7 bankruptcy within the next couple of years? Some bankruptcy trustees are suing the colleges to get the money back to pay the creditors in the bankruptcy. The theory is the parent did not have a legal obligation to pay the tuition and received no benefit so the payment was a fraudulent conveyance and therefore must be returned. Some courts have agreed with this argument and required the college to return the money. In that case the student now owes the unpaid tuition. Some courts more recently have determined that the college does not need to return the money because the parent is receiving a benefit such as making child independent so parent does not have to support. However, there is certainly a risk at this point when a bankruptcy is filed after tuition payments were made.

Risk for Cosigner When Bankruptcy is Filed

At one time or another, most people have been asked to cosign a loan. The request is made because the credit of the borrower prevents that borrower from getting credit on their own. When someone agrees to cosign a loan, they are doing more then just lending their credit. They are putting themselves at financial risk in the event the borrower does not pay. For example, if you cosign on a credit card and the borrower files a Chapter 7 bankruptcy and eliminates their own liability, the cosigner remains responsible for the entire debt. In certain circumstances, such as the cosigning of a car loan, if the borrower files bankruptcy but decides to keep vehicle and continue to pay, the cosigner is ok as long as payments are made. However, if payments are not made and the car is repossessed, you are liable for the deficiency. Before you cosign a debt for anyone, know the risks. 

Keeping Home in Chapter 7 Bankruptcy

Whether you can keep your home depends on various factors including the amount of equity in the property. The amount of equity you can protect in your residence depends on the exemptions available. If you live in, for example,  Pennsauken New Jersey, you can protect approximately $24,000 each in your home. If you live in Philadelphia Pennsyvania you have the same Federal exemption of about $24,000. In Pennsylvania in the situation where property is owned by a husband and wife and there are no joint debts and only one spouse files the equity can be protected. Some states provide significantly more protection. Most times when a chapter 7 is filed the debtors can keep their home as long as they are able to make their mortgage payments

Chapter 7 Bankruptcy Eligibility as Determined by the Means Test

The bankruptcy means test is a significant factor in determining who can file for debt forgiveness through Chapter 7 bankruptcy. See  http://www.csmonitor.com/Business/Saving-Money/2016/0718/Why-the-bankruptcy-means-test-matters. It takes into account your income, expenses and family size as well as the state you live in to determine whether you can eliminate the debt or whether you have enough disposable income to repay some or all of your debts. Regarding the relevance of the state you live in, as an example, a family of four residing in Northeast Philadelphia Pennsylvania will need to have less income than a family of four residing in Pennsauken New Jersey because the statewide income is less in Pennsylvania then in New Jersey.

Credit Card Debt Elimination in Chapter 7 Personal Bankruptcy

Eliminating credit card debt is one reason many people file for chapter 7 personal bankruptcy. A drop in income, a divorce, or illness can cause credit card debt to accumulate. Bankruptcy is a good option in eliminating this credit card debt. A trustee compares your income to expenses and reviews the equity to your assets. A trustee will order the liquidation of your assets to repay your debt only if the equity in assets exceeds allowed exemptions. In most chapter 7 individuals keep all of their assets.  Bankruptcy exemptions vary by state. If a married couple owns a home in Cherry Hill New Jersey or Voorhees New Jersey and the home is worth $300,000 and there is a mortgage of $260,000, because each can exempt approximately $24,000 worth of equity in their home for bankruptcy purposes they would be able to protect the equity in their home and they would be in a position to file a Chapter 7. They could eliminate their credit card debt. If there is disposable income this would be used to repay creditors. Chapter 7 is often a good option to help get a fresh start. If you are struggling financial, you should consult with an experienced attorney about your options.

Credit Card Debt Can Be Eliminated in a Chapter 7 Personal Bankruptcy

Credit card debt can be eliminated in chapter 7 personal bankruptcy in many instances. Often credit card debt can become overwhelming because of a drop in income, because of a divorce, because of an illness or other reasons. Bankruptcy is often the best option in eliminating this credit card debt. In a bankruptcy, the court is going to consider your income compared to your expenses as well as the equity in your assets. However, even if you have some equity under bankruptcy law there are exemptions that are allowed. The exemptions in New Jersey and Pennsyvania may differ from states where various state exemptions are added to the Federal exemptions. By way of example, if a married couple owns a home in, say, Cherry Hill New Jersey or Voorhees New Jersey and the home is worth $300,000 and there is a mortgage of $260,000, because they can each exempt approximately $24,000 worth of equity in their home for bankruptcy purposes they would be able to protect the equity in their home and they would be in a position to file a Chapter 7 and eliminate their credit card debt. As indicated, income and expenses would also be taken into account to determine whether there is disposable income. An experienced bankruptcy attorney can assist in determining whether Chapter 7 is the best option.

Forgetting to include Creditors in Chapter 7 Personal Bankruptcy

What do you do if you filed a Chapter 7 personal bankruptcy and received your discharge and then realized you forgot to include a creditor. Prior to 1996 the debtor was required to file a motion to reopen the bankruptcy, pay a court fee, then file an amendment to add the creditor. There was also a court fee involved in filing the amendment. However, in 1996, the Third Circuit Court of Appeals in Judd v. Wolff, in the appeal of a New Jersey case,  concluded that in a no asset Chapter 7  bankruptcy case it would be a waste of the court's time to reopen a case to add a creditor when there is not going to be a distribution anyway. As a result, as long as the creditor has not been intentionally omitted from the bankruptcy schedules, the debt is eliminated even if the creditor was forgotten. Often a debtor will have their attorney write a letter to the creditor, citing Judd v. Wolf and advise of the impact of the case and the fact that the debt is discharged. Of course it is always better to list all creditors when the initial bankruptcy is filed. A credit report is a helpful tool in making sure all creditors are listed. However, if a creditor is forgotten, it can still be addressed.

Discharging Student Loans in Chapter 7 Bankruptcy

Contrary to popular belief, student loans can be discharged in bankruptcy in certain circumstances. While most borrowers would prefer to be able to repay their debts, sometimes their financial situation requires another approach. One way to eliminate student loans is to file a Chapter 7 bankruptcy and show a hardship. Under the bankruptcy rules, hardship is difficult to prove, but not impossible. The Brunner Test must be applied. Under the Brunner Test, the debtor must prove three things. The first two are not that difficult. The debtor must show an effort was made to pay in the past. The debtor must also show there is no ability to pay at present. Under the third prong of the test, the debtor must show he or she will not be able to pay in the future. For example, if you are permanantly disabled, you would have a very good chance of being able to discharge the debt.

What are exempt vs non-exempt items when filing for Chapter 7?

Although it doesn't happen usually overnight, a person can wake up and realize that he or she is too far in debt to be able to financially recover without help. While many consumers rush to file for Chapter 7 bankruptcy after realizing the truth of their financial situations, some New Jersey residents try to avoid bankruptcy because they fear that they will lose all of their possessions by filing. However, that is not the case. There are certain assets that are considered exempt from the liquidation process.

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