Some people mistakenly believe that overpayments of government benefits like unemployment and Social Security cannot be discharged in bankruptcy or are entitled to priority status, like recent taxes. In truth, these benefit overpayments aren’t entitled to any special treatment unless the government proves in a separate adversary proceeding that the overpayments were caused by fraud committed by the debtor. A recent Kentucky bankruptcy court decision ruled an overpayment of unemployment benefits was not a priority claim in Chapter 13 bankruptcy.Read more
New Guidelines for Student Loan Discharges in Bankruptcy
New guidelines from the U.S. Department of Justice and the U.S. Department of Education might lead to more federal student loans being discharged in bankruptcy. Although the new guidelines don’t change the Bankruptcy Code or prior caselaw, they might lead to a different approach and attitude by the U.S. Department of Justice when debtors in bankruptcy file adversary proceedings asking that their federal student loans be discharged. To seek a discharge of student loans in bankruptcy, debtors must go beyondRead more
Deferred Compensation Plans Protected From Creditors
In two separate rulings by the Iowa Supreme Court and the U.S. Bankruptcy Court for the Northern District of Iowa, debtors who have deferred compensation plans through their employer should have less concern about losing the benefit of those plans either inside or outside bankruptcy. Iowa law provides an exemption from attachment by a creditor for any payments made under a “pension, annuity, or similar plan or contract on account of illness, disability, death, age, or length of service.” InRead more
Divorce and Bankruptcy
Few issues cause more conflict in bankruptcy then a previous divorce with conflict between the spouses. Contentious divorces cause contentious bankruptcies. Some issues are clear. For example, alimony and child support can’t be discharged in any kind of bankruptcy. A property settlement obligation can’t be discharged in any kind of bankruptcy EXCEPT Chapter 13. But what about debts resulting from divorce that aren’t clearly identified as either alimony, child support or a property settlement? For instance, an award of attorneyRead more
Why Are You Waiting to File Bankruptcy?
Making the decision to file bankruptcy is not easy. I understand that as well as anyone. People are worried about what others will think. They’re worried about their future access to credit. They’re worried about whether they will lose any property. But the consequences of delaying the decision to file bankruptcy is so severe that debtors should ask themselves “What am I waiting for?” More and more, people are waiting until judgments have already been issued for delinquent debt orRead more
Willful and Malicious Injuries Not Discharged in Bankruptcy
Although almost all debts are discharged when someone files bankruptcy, there’s a small number of types of debts that aren’t discharged. For example, the bankruptcy code excludes from discharge any debts for willful and malicious injuries caused by the debtor. Prior to 1978 the standard for interpreting the phrase “willful and malicious” was whether the debtor had acted with “reckless or knowing disregard,” but passage of the Bankruptcy Reform Act of 1978 overruled that interpretation of the phrase. The bankruptcyRead more
Credit Reporting Changes For Medical Debt
All three credit reporting bureaus (Equifax, Experian and TransUnion) have voluntarily decided to change how they report medical debt collection information on the consumer credit reports they produce. The changes mean that information about medical debts already paid will no longer be included on credit reports. This removal of information about medical debts repaid after they go into collection will eliminate tradelines that will potentially negatively impact someone’s credit score. In addition, information about unpaid medical collection debt won’t appearRead more
Post-Bankruptcy Requirements
Although most attention is paid to what someone filing bankruptcy needs to do before filing, there are some things debtors must do after a bankruptcy is filed. Documents have to be produced, counseling has to be taken and a required “meeting of creditors” occurs about one month after filing. After a bankruptcy is filed, debtors (through their attorney) must provide the trustee administering their case certain documents. These include the most recent tax returns, statements showing the balances in anyRead more
Debt Burdens of the Elderly
According to the AARP, one of the main reasons people aren’t able to save money for retirement is the amount of money they’re already spending on repaying debt. The amount of consumer debt has doubled in the last twenty years, with consumers now owing nearly $16 trillion in debt. While almost three fourths of that debt is from home mortgages, about 25% is from student loans, vehicle loans and unsecured debt like credit cards and personal loans. Forty-five percent ofRead more
Credit Reporting After Bankruptcy Discharge
Bankruptcy clients frequently ask what their credit reports should say following the filing of bankruptcy. I generally recommend that clients check their credit reports a few months after their bankruptcy discharge. In 2008 a national injunction on how credit bureaus are to report debts included in bankruptcy was put into place because of litigation originating in California. That injunction (known as the “White Order”) requires credit bureaus, within sixty days of receiving notification of a bankruptcy discharge, to update creditRead more
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