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chapter 7 bankruptcy

Chapter 7 Bankruptcy Myths Debunked: Part 2

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chapter 7 bankruptcy

One of our most popular blogs is entitled “The Top Chapter 7 Bankruptcy Myths: Debunked!” And as you might expect, we have mixed feelings about this.

On the one hand, we are pleased that more people are getting the FACTS they need to ultimately make a safe, informed decision on whether pursuing chapter 7 bankruptcy is in their best long-term financial interest. Obviously, we are not suggesting that people should make this major decision based solely on our (or any) blog post! However, we are gratified and inspired to see that people are relying on it as part of their research process.

Yet on the other hand, the popularity reveals a problem that we have seen get much worse over the decades due to the ease at which information is shared via the web: many people, including those who are well-meaning and legitimately trying to help, are either partly or wholly misinformed about how chapter 7 bankruptcy works — and how it does not. Sometimes, this ignorance is the result of not staying updated on changes to bankruptcy laws. But other times, this ignorance is, well, just plain ignorant! That is, the so-called facts being shared were wrong in the past, are wrong today, and will be wrong in the future.

Of course, while we are disappointed — and sometimes dismayed — by the sheer volume of bad chapter 7 bankruptcy-related “advice” floating on the web (or in workplaces around water coolers, chatting with neighbors over the backyard fence, and so on), our drive to educate and empower people is far stronger. To that end, here is part 2 of our series on debunking chapter 7 bankruptcy myths:

Myth 5: All states have the same bankruptcy laws and processes.

Fact: Different states have various rules, and assuming what applies in one state is automatically going to apply in another can be — and often is — a catastrophic error. For example, people in Florida who file for bankruptcy cannot lose their house. However, this is not necessarily the case in Pennsylvania.

Furthermore, some people are unaware that there are two sets of bankruptcy laws: federal and state. There are critical differences between them, and they do not focus on the same issues.

Myth 6: You should “strategically plan” your bankruptcy by maxing out your credit cards just prior to filing.

Fact: This is such an astonishingly massive mistake, that it is difficult to know where to begin!

If you follow this horrifically bad advice, then the first thing that will happen is your bankruptcy filing will be dismissed — which means the financial hole that you expected to start getting out of will only get deeper, and you will not be able to file again for at least 180 days. And if you think this is the worst of it, think again.

This is because borrowing money (which is essentially what using a credit card entails) with the intention to avoid paying the lender is not just unethical: it is fraudulent. This means there is a very good chance — assume 100% here — that your case will be handed over to for criminal prosecution.

Now, does this mean that filling up your car with a tank of gas a few days before you file for bankruptcy will be used as evidence of your intention to defraud the credit card company? No. As long as the expense is valid, reasonable, justifiable and passes the “common sense test,” then you will be fine. After all, gas is not a luxury, and neither are groceries. But buying a brand new iPhone or heading out for a weekend excursion to Las Vegas prior to a bankruptcy filing is sure to raise some suspicion, and warrant closer examination.

Myth 7: If you file for bankruptcy, you might as well put up a billboard because everyone will find out.

Fact: This myth is largely driven by companies and consultants that do not want people to file for chapter 7 bankruptcy, because it means they will lose a customer.

The truth is that unless you are famous or have a high-profile job, most people are not going to find out that you have filed for bankruptcy, and frankly, they have no interest in finding out. Bankruptcy is not a criminal matter — it is an administrative one. Close to a million people and businesses in the U.S. file for bankruptcy each year. It is hardly “breaking news.”

As we have described previously, those will definitely know about the filing (because they will be specifically notified) include:

  • Each creditor listed in your filing.
  • The three main credit bureaus: Equifax, TransUnion and Experian.
  • Anyone who is jointly liable for debts per your filing.
  • Plaintiffs in any current or future civil lawsuit.

In addition, the following people might (or might not) know:

  • Defendants in a civil lawsuit — unlike plaintiffs they will not automatically be informed about the bankruptcy filing, but they could find out on their own.
  • Your current employer if wage garnishment activity had started, and would therefore cease per the filing.
  • Any future employers, landlords or lenders if you are asked questions about a past bankruptcy, or if you give them permission to access your credit score (a chapter 7 filing will remain on your score for 7 years.)

Learn More

Filing for bankruptcy is a major decision that you should only make based on FACTS — not MYTHS. To learn more, contact the Law Office of Charles H. Huber today. We have been helping individuals file consumer bankruptcy cases for more than three decades. Our experience is your advantage!

What are the Consequences of Forgetting to List a Creditor in Your Chapter 7 Bankruptcy Filing?

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bankruptcyThe defining feature of a bankruptcy filing — regardless of the chapter under which is filed — is one word: structure. And obviously, ensuring that all of the rules and processes are meticulously followed is essential (and there are many, many such rules and processes).

Yet, with this being said, mistakes can and do happen — such as forgetting to list a creditor in a chapter 7 bankruptcy filing. There are several reasons why this may happen, but often the most common cause is when a debtor is simply overwhelmed by the sheer number of bills and creditors. For example, some people with serious heath conditions may get a dozen medical bills for a single hospital visit, since each doctor — and even the hospital itself — can bill separately.

Can You Get Garnished Wages Back After Filing for Bankruptcy?

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Bankruptcy 2While in itself it is not (and should not) be the primary reason why you should file for bankruptcy — since this determination must ultimately be based on a comprehensive analysis of what is in your best long-term financial interest — the fact remains that one of the biggest advantages of filing is that all collection action against you must stop immediately. This includes all calls, letters and emails from creditors (or collection agencies on their behalf), and very importantly, it also means that wage garnishments musts cease and you may be entitled to recover all or some of these funds. We discuss this further. First, let us look at how wage garnishment works, and what happens if and when you file for bankruptcy.

How Wage Garnishment Works

Unless your debt in question is a student loan, taxes or child support, generally creditors cannot garnish your wages without first filing a lawsuit in court and securing a money judgement. If such a judgement is obtained, it is forwarded to your employer, who is then legally obligated to claw back a portion of wages for each pay period and remit it to the creditor.

Note that employers have no discretion in this regard and cannot deviate from the instructions laid out in the judgement, regardless of how much they may sympathize with your financial situation (i.e. you may be indebted because of massive medical bills, an acrimonious divorce, emergency repair bills to your home, etc.).

What Happens When You File for Chapter 7 Bankruptcy

If and when you file for chapter 7 bankruptcy, you will automatically and instantly be protected by what the court refers to as an automatic stay. This essentially bars creditors from taking any collection action during your bankruptcy case proceedings.

The court will inform your employer (along with all other listed creditors) about the bankruptcy filing and automatic stay and will instruct that all collection action — including wage garnishment — cease. Since this process is can take a few weeks, you can if you wish send a copy of the bankruptcy filing to your employer to expedite things. Any wages that were clawed back after the date the automatic stay came into effect will be released to you.

Recovering Garnished Wages

It may also be possible to recover garnished wages that were clawed back within 90 days prior to the bankruptcy filing/automatic stay. The amount in question must be more than $600, you must have enough exemptions to cover the funds, and the court-appointed Bankruptcy Trustee must not attempt to avoid the transfer.

If all of these apply, then you may be entitled to file a lawsuit against the garnishing creditor (i.e. your employer) as part of an adversary proceeding. Being represented by an experienced bankruptcy attorney is essential here. Many people attempt to represent themselves (“Pro Se”) and realize very quickly that it is a much more complex process than they realized. The courts also have very little tolerance (read: none) for litigants who do not file the correct paperwork or are ignorant of laws, proceedings and protocols.

Learn More

If your wages are currently being garnished, and you want to learn more about the process of filing for bankruptcy — potentially recovering some or all of these clawed back funds — contact the Law Office of Charles H. Huber today.

How Will Filing for Chapter 7 Bankruptcy Impact Your Job Search & Career?

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Bankruptcy Button in Flat Design with Long Shadows on Turquoise Background.-728159-editedIf you are considering or have been advised to file for Chapter 7 bankruptcy protection, then you are already aware — or are currently in the process of researching — the long-term consequences and implications of this decision. This article focuses on a key aspect of your future that may be affected: your job search and career.

What is Chapter 7 Bankruptcy?

Chapter 7 bankruptcy (a.k.a. “liquidation bankruptcy”) is the most common bankruptcy filing type in the country. If your petition is successful, the court will appoint a Bankruptcy Trustee to liquidate 100 percent of your non-exempt assets and use the sale proceeds to pay creditors an agreed upon amount. What’s more, the moment you file a petition, all creditors must seize contacting you in any manner, and all collection activity must stop as well. Under certain conditions, you may also be entitled to recover any wage garnishments that took place in the 90 days immediately prior to the bankruptcy filing.

Impact on Your Job Search/Career

It is not possible to predict how, and if so to what extent, filing for chapter 7 bankruptcy will impact your job search or overall career path. With this being said, there are some facts that can be definitively stated:  

  • No employer in either the public of private sector may terminate your employment because you filed for bankruptcy. 
  • No employer in either the public or private sector can discriminate against you in any way, explicitly or implicitly, because you filed for bankruptcy. This can include, but is not limited to, reducing your salary, denying you a promotion that you would have otherwise obtained, demoting you to a lower position (even if there is no reduction in salary or benefits), or taking away certain responsibilities or tasks (e.g. making bank deposits, auditing expenses, etc.).
  • No public sector agency can automatically deny your job application because you filed for bankruptcy.
  • An employer in the private sector may reject your job application if a credit check reveals a past bankruptcy, and that fact is material to the tasks/activities of the job.

Additional Insights

Here are some additional job search and career-related insights to keep in mind as you contemplate filing for chapter 7 bankruptcy:

  • The older your bankruptcy filing, the less likely it will be perceived as a deal-breaker by a prospective employer.
  • It is unlikely that your current employer will find out about your bankruptcy filing (through this might be discovered by your boss if the payroll department receives a notification to cease any wage garnishment action that a creditor launched prior to your filing).
  • Being proactive with a prospective employer and explaining the context of your bankruptcy filing (e.g. acrimonious divorce, massive medical/caregiver bills, emergency home repairs after a disaster etc.) can turn this into a non-issue. Being in debt is certainly not illegal or immoral.

A Final Word

One of the most important things to keep in mind — and also one of the most inspiring — is that rather than being an albatross around your neck that repels current and future employers, filing for bankruptcy can actually increase your employability, because it means you are not sinking in debt.

Indeed, most employers are much more concerned about current/prospective employees who are in deep debt, because it means they may have to secure additional employment (i.e. get a second job, which most employers frown upon and some even forbid). Employers may also be concerned that a deeply indebted employee might be more vulnerable to theft, corruption, fraud or bribery.

Learn More

To learn more about the details and implications of filing for chapter 7 bankruptcy, including how it might affect various areas of your life — including but not limited to your job search and career — contact the Law Office of Charles H. Huber today.

Will Filing for Bankruptcy Eliminate Your Medical Debt?

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bankruptcy The problem of excessive and unsustainable medical debt in the U.S. isn’t actually a problem: it’s a full-blown epidemic. A study by the Centers for Disease Control and Prevention (CDC) found that 1 in 3 Americans are burdened by medical bills. And research by NerdWallet Health revealed that medical debt has now earned the dubious distinction of being the number one cause of bankruptcy filings in the nation.

If you’re anxiously watching medical bills pile up — and feeling the heat from increasingly aggressive hospital, doctor and healthcare network collection tactics — then filing for bankruptcy might be a viable option. This is because medical bills are viewed by the courts as general unsecured debts. This is not the case with some other debts, such as child support, alimony, restitution due to a criminal conviction, or student loans. These will remain on the books even after filing for bankruptcy (some people may be able to get relief from their student loan debts if they can demonstrate financial hardship, but that is part of a separate filing).