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Non-Dischargeable Debts
Non-Dischargeable Debts
When you file for bankruptcy, most of your debts will be discharged, which means the debts are wiped out. Debts that can’t be wiped out through a bankruptcy proceeding are called non-dischargeable debts. These include student loans, most federal, state and local taxes, money borrowed on a credit card to pay those taxes. child support, and alimony.
Debts that are otherwise dischargeable can become non-dischargeable if a creditor files an adversary proceeding against a debtor based on the debt being acquired by fraudulent acts,embezzlement, larceny or breach of fiduciary responsibility.
Texas Bankruptcy Non-Dischargeable Debts
The following debts can’t be discharged in either Chapter 7 or Chapter 13 Texas bankruptcies, meaning that the court always considers these debts to be non-dischargeable.
Bankruptcy Exemptions in Texas
Bankruptcy Exemptions
When you file for bankruptcy, the state the debtor files in gives debtors the opportunity to keep certain assets using what are called “exemptions”. Exemption laws are designed to allow a debtor to keep property that debtors will need in order to maintain a job and household. Exemptions vary by state, and some states allow you to use state exemptions or federal exemptions.. In Texas, you get to choose between state or federal bankruptcy exemptions. However, since Texas bankruptcy property exemptions are one of the most generous in the United States, in most cases, it’s more beneficial to use Texas State exemptions over federal exemptions.
There is also property you cannot keep called nonexempt property. In a Chapter 7 bankruptcy, non exempt property will be sold to pay creditors and in a Chapter 13, you can choose to keep non-exempt property, but pay the value of said property, nondischargeable debt, and disposable income through the repayment plan for creditor benefit. It is rare for a Texas bankruptcy filer to have non exempt property.
How to Keep Tax Refund in Chapter 13
Also known as the wage earner’s plan, Chapter 13 enables those with regular income to develop a repayment plan. Debtors propose a plan to make installment payments over three to five years, though under the CARES Act it can be extended up to seven years. Most of the time, debtors must turn over any tax refund received for more than $2,000.00 to the Chapter 13 trustee but there’s a way they might be able to keep it.
What happens when a debtor is anticipating a tax refund? Under Chapter 13, debtors are pledging all their disposable income into the repayment plan and usually don’t have a cushion for unexpected expenses. Tax income is considered disposable income that could be used to pay creditors so you might be wondering how to keep tax refund in Chapter 13 of the bankruptcy code.
Why is tax refund generally considered disposable income?
Under Chapter 13 debtors must use all their disposable income to make payments to their creditors under the plan. Any income that is not used for transportation, food, shelter, or necessities under IRS standards is usually considered disposable. When tax refunds aren’t included in the calculations used to support the repayment plan trustees might consider it disposable income. However, it’s possible to keep the tax refund.
Repossessed Car? Here’s What You Need to Know
While owning a car can certainly be a luxury, in most cases it is a necessity. When you lease a car or borrow money to buy it, you must make monthly payments. With so many financial obligations, many people struggle to stay on top of car payments. This is especially true if you also have mortgage and student loan debt. If you do not make a loan payment on time, your loan is then considered to be delinquent.
Delinquent car loans could ruin your credit and end in car repossession. For this reason, it is important to understand how the repossession process works and what you can do about it.
What’s repossession and when it is allowed
When a borrower is behind on payments, they risk getting their car repossessed. This means that the bank or leasing company retrieves the vehicle from the borrower; once statutorily required notices have been given the vehicle will be taken without warning. Cars can be taken away on tow trucks, or lenders might send someone to collect the car.
Bankruptcy During COVID-19: What You Need to Know
The coronavirus outbreak has created an unprecedented situation that has placed the majority of people in financial hardships. Unfortunately, a lot of people have been laid off due to the pandemic which means less money to pay for their bills. And while you may be doing your part by saving as much as you can, it’s almost impossible to stop debt from accumulating.
Local, state, and federal governments are providing safety nets along with many creditors during the COVID-19 crisis. For several people increased unemployment benefits, mandated holds placed on evictions, cash payments, and utility shut-offs will help to make this situation more manageable. However, this crisis might last longer than expected so these measures won’t guarantee financial stability in the long run. The best thing to do is to be prepared and have a plan that will ensure you’ll get back on your feet during these tough times.
Learn How the CARES Act has Temporarily Changed the Bankruptcy Code
Amidst the COVID-19 pandemic, there have been some temporary changes to certain bankruptcy rules under the Federal Coronavirus Aid, Relief, and Economic Security (CARES) Act. The CARES Act aims to provide emergency assistance and health care for individuals, families, and businesses that are being affected by the 2020 COVID-19 pandemic. The CARES Act also modified certain provisions of the Bankruptcy Code which will last for one year, expiring on March 27th, 2021.
CARES Act changes to Chapter 7 and Chapter 13
Under the CARES Act, the government has been providing stimulus checks and other payments that are meant to provide some financial assistance during the crisis. These payments will not count as monthly income for debtors that are considering filing under Chapter 7. They also will not count as disposable income for those seeking to file under Chapter 13. In other words, stimulus checks will not affect your eligibility to file under either chapter or any required payments to unsecured creditors in a Chapter 13 Bankruptcy.
Mortgage Payment Deferral
The Federal Cares Act allows you to delay mortgage payments for up to 6 months if you’re suffering financially due to the COVID-19 pandemic. Pausing mortgage payments can provide some relief for people who have lost work during these times. However, there’s a lot of confusion about how you’re supposed to make those payments.
The Federal Housing Finance Agency has announced that Fannie Mae and Freddie Mac are making available a new payment deferral option. This allows borrowers who are in forbearance the ability to repay their missed payments at the time the home is sold, refinanced, or at maturity.
What is Forbearance?
Forbearance is a special agreement between the lender and the borrower to delay mortgage payments. When mortgage borrowers cannot meet their repayment terms, lenders can opt to foreclose on the property. A forbearance allows the borrower to miss scheduled mortgage payments for a specific period (usually between 4-12 months). This allows a borrower to avoid a potential foreclosure for missing mortgage payments and repay those missed payments at the conclusion of the forbearance period. In compliance with the CARES Act, government-sponsored mortgage loans qualify for forbearance plans.
Filing for Bankruptcy: What You Need to Know
While the thought of filing for bankruptcy can be scary and intimidating for most people, it’s a way to get a fresh start for businesses and individuals facing overwhelming debt. If you are getting harassed by bill collectors, using credit cards to pay for your necessities, and you are unsure of how much debt you actually owe, you probably need to rethink your financial situation.
Filing for bankruptcy basically means that you have found yourself in a position that will take many years to repay in full the debts that you owe. Bankruptcy laws were created to provide people with a chance to start over. Whether you have made bad financial decisions or have had bad luck, you deserve a second chance.
What is Bankruptcy?
Bankruptcy is a court proceeding where a judge and trustee review the assets and liabilities of businesses and individuals who are unable to pay their bills and then deny or approve the discharge of those debts so the debtor is no longer legally obliged to pay them. However, the bankruptcy process has been streamlined so that very few bankruptcy filers ever actually go to court.
Chapter 7 Post Discharge Steps to Take to Rebuild Credit
1). If you surrendered your vehicle and are unable to purchase a cash car or use a friend or family member’s vehicle then you will need to purchase a vehicle. We advise our clients to start looking at traditional dealerships. Try to avoid tote the note lot places. Most major dealerships can work with a Debtor post discharge to get a vehicle financed. If you do not require a vehicle move on to step two. If you can put off purchase of a vehicle for about one-year you should get a decent interest rate from any dealer presuming you follow step 2.
2). Obtain a credit card. If possible, this should be a normal credit account, not a secured card. Most of our clients find that the major banks will issue them a credit card with a small limit immediately upon completion of a Chapter 7. Pick something that you spend your money on each month – i.e. gas, groceries, utilities — pay the card off each month prior to the due date, and never have more than 30% of the credit limit outstanding at any one time. If you need to pay the credit card more often than monthly to keep from hitting the 30% we recommend that you do so. If a Debtor follows the above for approximately 1 year after the case is discharged then that Debtor would likely qualify for a reasonable auto loan less than 10% interest.
8 Bankruptcy Myths You Should Stop Believing
1). Bankruptcy will haunt me forever – NOT TRUE
Chapter 7– A bankruptcy filing appears on a credit report for 10 years from the filing of a bankruptcy petition. Despite the reporting on your credit report your access to credit will come back very quickly, especially if you take some easy steps post discharge (See our blog post about steps to take post discharge to rebuild your credit).
When a Chapter 7 Case is filed your name and address are public record and notice is sent to the credit bureaus about the case filing. Car creditors especially will use this information to send you advertisements to purchase a vehicle the instant a case is filed. Our firm recommends that, if possible, you avoid purchasing a vehicle for about one year after a bankruptcy discharge. Instead you should focus on obtaining a credit card. Many of the major credit card companies will issue you a credit card with a small limit the instant a Bankruptcy is discharged.
If a Discharged Chapter 7 Debtor uses this credit line responsibly (never more than 30% of Credit Limit used, pay off in full end of the month) for approximately 1 year after their discharge, most Discharged Chapter 7 Debtors will qualify for a vehicle loan at a decent interest rate — less than 10%.