Chapter 7 Bankruptcy

Published on: April 2, 2018

Bankruptcy Debtors Affected by New Florida Law Prohibiting Fighting Foreclosure

There a lots of reasons a debtor needs to file a bankruptcy. However, debtors should be warned that they are likely giving up valuable rights to fight a foreclosure of their home if they do so — unless they reaffirm the mortgage. Over the last few years, many debtors elected not to voluntarily reaffirm an underwater home — this would allow them to be personally sued for any deficiency balance even after the bankruptcy was over. Another problem is the decision to reaffirm sometimes comes up before a loan modification review is complete and debtors aren’t sure whether reaffirmation is in their best interest.

Bankruptcy case law has been building in various Florida jurisdictions over this conflict. Many courts have seen this as an issue of debtors “having their cake and eating it too” when debtors are released of their liabilities under the mortgage, but yet they can continue to fight the foreclosure and live rent free.

In response to this dilemma, Governor Scott just signed a bill on March 26, 2018 that stops defendants from defending a foreclosure if they have previously agreed in bankruptcy to surrender the property to their lenders.

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Published on: March 25, 2018

Social Security Disability Overpayments Can be Eliminated in Bankruptcy

By Christie D. Arkovich, P.A.

Would you know what to do if the Social Security Administration mailed you a letter stating that you have been overpaid and that you owe the government tens of thousands of dollars? No problem, this oversight can be eliminated in a bankruptcy filing. My colleague, attorney Jonathan Ginsberg in Atlanta, Georgia practices both bankruptcy law and Social Security law and I asked him to answer the question “can bankruptcy help you if you owe Social Security for a disability overpayment?” Here is what Jonathan says:

Surprisingly, the answer is yes – as a general rule Social Security disability overpayments are dischargeable in bankruptcy. You can use Chapter 7 to wipe out overpayment claims or Chapter 13 to pay back these claims as general unsecured debts.

Why Social Security Disability Overpayments Happen

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Published on: March 12, 2018

Student Loan Debtors Getting Kicked Out of Income Driven Plans in Bankruptcy

By Christie D. Arkovich, P.A.

Reports have been surfacing that the Department of Education is kicking borrowers out of Income Driven Plans when they file bankruptcy. It makes no difference if they are in a Chapter 7 or 13. It also doesn’t matter if the debtor is current in their payments. The National Association of Consumer Bankruptcy Attorneys (NACBA) views this as a direct violation of 11 U.S.C. 525 (Protection against Discriminatory Treatment).

There are ways to counter this and remain in an Income Driven Plan to continue progress toward debt forgiveness including Public Service Forgiveness. A new development is spreading across the country to file what is called the Buchannan provisions in a Chapter 13 Plan. We have recently adopted this in Tampa, Florida.

On January 5, 2018, Trustee John Waage and Judge Catherine McEwen agreed to the following Non-Conforming language in In re Hyland, 8-17-bk-01564-CPM that now allows for Income Driven Repayment Plans concurrently with a Chapter 13.

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Published on: February 19, 2018

What to Do When You Believe(d) Your Student Loans Were Discharged in a Prior Bankruptcy

By Christie D. Arkovich, P.A.

There are a ton of people who believed their student loans were discharged when they loans were simply listed in their bankruptcy. It may have been years before the private student loan companies started to communicate with the borrowers to collect this debt which added to that impression.

As it turns out, there may be a way to argue this after all – in instances involving private loans. Private student loan lenders have to prove their loans are in fact “qualified education loans” and meet other criteria in order to be exempt from a general discharge. We are now filing cases where we do not believe the private lenders can meet this burden and the loans are and should have been considered discharged all along. This opens the lender and servicer to a potential FDCPA and FCCPA case if it has tried to collect on previously discharged debt. Moreover, it also opens up the lender to potential claims to refund monies paid toward these loans since discharge.

An easy way around this would have been for the private student loan lenders to have filed their own adversary actions in the debtor’s bankruptcy to obtain a declaratory judgment that its loans were excepted from the general discharge. However, this was never done.

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Published on: February 7, 2018

Do Not File Your Tax Return If You Are In Default on Your Federal Student Loans: File an Extension and Cure the Default First

By Christie D. Arkovich, P.A.

Are you expecting a large tax refund this year?

If so, and you have had some financial difficulties this year, do NOT file your tax return if you are in default on your federal student loans OR about to file bankruptcy.

Instead, some pre-planning is in order. For federal students loans, cure the default before you file your taxes. File an extension if you must to gain some additional time.

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Published on: November 8, 2017

How Can I Keep My Home In a Second or Even Third Bankruptcy Filing?

By Christie D. Arkovich, P.A.

The automatic stay that normally applies when a debtor files bankruptcy, does not work the same in a second or even third bankruptcy case. This has caught many debtors unaware and may cause the loss of a home.

In a 2nd bankruptcy filing, the automatic stay expires after 30 days. During that time you have to get it extended. We recommend filing a motion to do so when the case is filed to have enough time to get an order entered before the stay expires.

Sometimes debtors find it necessary to file a 3rd bankruptcy. Perhaps a job loss or insufficient paperwork caused the prior bankruptcies to be dismissed. If so, it’s important to know that the automatic stay does not apply at all for a 3rd bankruptcy. As soon as possible, the debtor would want to file a motion to impose the stay, even to the point of filing a request for an emergency hearing if a foreclosure sale is looming. It’s also important to note that you cannot file bankruptcy on the eve of a foreclosure sale because there is no stay until you can get one in place. Typically you would have to identify factors in the motion and at the hearing as to why this third case will be more successful than the prior ones that were dismissed, as well as show the feasibility of any plan to keep the home (which could include a loan modification at an estimated payment of 31% of your gross income).

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Published on: September 30, 2017

Bankruptcy Trustee’s 341 Meeting: What to Expect and Watch Out For

By Christie D. Arkovich, P.A.

All debtors must appear at a meeting called the “341 meeting of creditors”. Creditors may, but usually do not appear, and it is the Trustee asking most of the questions. This 341 must occur for a bankruptcy to be successful and applies in both a Chapter 7 and 13.

The trustee will first verify your identity. While this sounds simple, you must bring an original social security card or an original government issued document that shows your full social security number. You’d be surprised at how many people think they know where they keep their original SSN card, but can’t find it when they are in a hurry about to leave to the 341 meeting. So look for it early. The meeting cannot be held without that documentation.

Also, make sure that your driver’s license has the exact name that is listed on your petition for bankruptcy. If it is different, you’ll likely need to amend your petition to show that name and any other iterations of your legal name that you may use (“a/k/a”).

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Published on: September 15, 2017

What Happens If A Spouse Dies During a Bankruptcy?

By Christie D. Arkovich, P.A.

Property owned by a husband and wife is ordinarily protected in Florida from creditors of only one spouse. There are requirements to being able to use what is called the Tenancy by Entireties Exemption such as the property must have been acquired at the same time etc.

One question that was recently addressed by a bankruptcy court dealt with what happens if a debtor has exempted real or personal property in a Chapter 7 bankruptcy and his or her spouse dies during the bankruptcy. Is the exemption then lost?

The Chapter 7 debtor’s right under Code § 522(b)(3)(B) to exempt real property owned in a tenancy by the entireties with the debtor’s non-filing spouse was not extinguished by the postpetition death of the spouse. The rights of sole creditors against property held by the debtor as a tenant by the entireties are fixed as of the petition date, and the Bankruptcy Code does not provide for those rights to expand or contract upon the postpetition death of the non-filing spouse.

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Published on: June 22, 2017

Who Determines Household Size for Filing Bankruptcy In Florida?

By Christie D. Arkovich, P.A.

The word “household” appears in over a dozen sections of the Bankruptcy Code, but it is not defined in the Code. Household income and size are extremely important in bankruptcy and determine whether someone qualifies for a Chapter 7 or the length and amount of a plan payment in a Chapter 13. A debtor’s median income is determined by their family size.

In a Chapter 7, a bankruptcy debtor’s above – or below – median status determines whether the debtor is subject to the means test.

In a Chapter 13, a bankruptcy debtor’s status as above – or below median determines whether the debtor’s maximum plan term is three or five years. It also determines whether the debtor’s expenses, for the purpose of calculating the debtor’s projected disposable income, are based on the means test or Schedule J.

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