Does Bankruptcy Clear Tax Debt?

Some debtors can eliminate tax debts by filing bankruptcy Chapter 13 or Chapter 7, but it’s important to know what tax debts are eligible for discharge. It’s also critical to remember that you should never assume that you’ll be able to discharge your tax debts, so it’s best to avoid missing payments to the IRS when possible.

In order to discharge your tax debt, the debt must be at least three years old, and it has to be income tax debt. You also need to have filed a tax return for the debt at least two years before declaring bankruptcy. Additionally, the IRS needs to have recorded the debt at least 240 days before you file for bankruptcy.

Although Chapter 13 is the most common filing method for individuals to overcome tax debts, some can benefit from filing Chapter 7. With Chapter 7, a court-appointed bankruptcy trustee liquidates your non-exempt assets in order to pay back your creditors, including the IRS, and you receive a discharge on eligible debts once the liquidation process concludes.

If you have non-exempt assets that you’re wishing to keep or don’t pass the Chapter 7 means test, you’ll need to file through Chapter 13. Chapter 13 can make your non-dischargeable tax debts more manageable.

How Chapter 13 Bankruptcy Can Help with Your Tax Debts

Before filing for Chapter 13 bankruptcy, you’ll need to find out how much you owe the IRS. You need to contact the IRS and have them review your tax returns, and you need to ensure that you’re up to date with your tax filings. The IRS should provide you with your tax records, so you’ll know the age of your debts and whether you failed to file in a previous tax year. You’ll need to file your missing tax returns in order to declare bankruptcy.

Learning how much you owe and the age of your debt is an important first step in overcoming your back taxes. From there, you can determine whether you should go ahead and file for Chapter 13 or wait to increase your likelihood of discharging some of your debts. You’re required to pay back all tax amounts that are less than three years old, but if you have income tax debt that’s older than three years, you may only need to pay back 10% or none at all. However, if a tax lien is placed against you, then what was once a dischargeable tax debt is once again a debt that must get pain in a Chapter 13 plan. Some debtors choose to wait before filing in order for their existing tax debts to age to at least three years. That said, there’s a great deal of nuance in bankruptcy law, so you should consider contacting a Chapter 13 bankruptcy attorney to help you determine when to file.

Chapter 13 Bankruptcy Tax Debt Relief

When you file for Chapter 13, you present a three-to-five-year repayment plan to the bankruptcy court. This repayment plan pools your existing debts in order to pay back creditors, including the IRS. Those filing for Chapter 13 usually don’t pay off the entirety of their debts, but they can break down a sizable amount and discharge eligible tax debts.

Your repayment plan will depend on your financial situation as well as your other debts. Repayment plans are supposed to be realistic, and the amount you’ll need to pay for each installment will depend on your income, expenses, disposable income, and assets.

Because your repayment plan is largely based on your disposable income, you’ll need to avoid excessive spending that could jeopardize your ability to make on-time payments.

Once you complete your Chapter 13 repayment plan, you can discharge eligible tax debts as well as unpaid interest and penalties. Many Chapter 13 filers end up having to only pay back a portion of their tax debts to the IRS, and some are able to avoid paying back the IRS entirely.

Completing a Chapter 13 repayment plan doesn’t necessarily mean that you’ll be able to pay back the entirety of your tax debts, but you’ll likely be able to greatly reduce what you owe.

Contact an Indianapolis Bankruptcy Attorney

If you are considering filing for bankruptcy or are struggling with back taxes, consider contacting a bankruptcy attorney. For legal assistance in Indianapolis and surrounding counties, contact the lawyers at Sawin & Shea, LLC. You can request to schedule a FREE case consultation online or by calling our office at 317-759-1483.

The post Chapter 13 Bankruptcy and Tax Debt appeared first on Indianapolis Bankruptcy Attorneys of Sawin & Shea.

You should only file for successive bankruptcies if truly necessary and with the full intention of following through on the process. When it comes to how long you have to wait in between filing, it’s less about the time limit and more about whether the previous debt was discharged or not. Typically, if you file too soon after a prior debt was wiped out, you may not be eligible to have your debt fully discharged in the successive bankruptcy case.

The time limits described below are based on a previous debt being discharged. If you did not receive a discharge of your debt in an earlier filing, you do not have to adhere to time limits and can file again whenever you need to. However, if your debt was previously discharged, while there is no limit to how many times you can file, you will have to wait a certain period of time before filing again.

Filing Again After Chapter 7 Bankruptcy

If you plan to file again after previously filing a Chapter 7 bankruptcy the following time limits apply. Keep in mind that waiting periods are only required if a previous debt was discharged. If you do not wait the required period before filing, your discharge will be denied.

Filing Successive Chapter 7 Bankruptcy Cases

If you first filed a Chapter 7 bankruptcy and are looking to file another Chapter 7, you need to wait at least eight years from the filing date of your previous case. Again, if you attempt to file within fewer than eight years, your debt will not be discharged, and you will be legally obligated to pay all of it back.

Filing Chapter 13 After a Chapter 7 Bankruptcy

If you wish to file a Chapter 13 case after first filing Chapter 7, the court only requires you to wait four years from the filing date of the prior Chapter 7 to discharge eligible. This shorter period is likely because most individuals who file Chapter 13 will still have to pay some debts back through a payment plan rather than having it entirely discharged. We can, however, use a Chapter 13 filing within the 4-year period of time to protect a person from collection actions, including repossessions, foreclosures, and wage garnishments. It is a stopgap measure as ultimately there is not a discharge at the end of a plan. However, it can give you an opportunity to reorganize under the court’s protection and make plans on how to ultimately deal with the debts.

Filing Again After Chapter 13 Bankruptcy

If you file a Chapter 13 bankruptcy first, the time limits will be less than if you had filed a Chapter 7 case first. This is often because debts do not always get fully discharged in Chapter 13 cases but instead become subject to a payment plan.

Filing Successive Chapter 13 Bankruptcy Cases

If you file two Chapter 13 bankruptcy cases in a row, you will only have to wait two years between filing dates if your debts were previously discharged to discharge eligible. If your debts were not discharged in the first case, you can likely file again much sooner than the two years and be eligible for a discharge the second time you file.

Filing Chapter 7 After a Chapter 13 Bankruptcy

Receiving a discharge in a Chapter 13 case first means you will have to wait at least six years from the prior filing date before being eligible for a discharge through a Chapter 7 bankruptcy. However, if you pay back all or most of your debt through a payment plan in a Chapter 13 case, you will not have to wait the six-year period before filing for Chapter 7.

What if My First Case Was Dismissed?

As previously mentioned, the waiting periods typically only apply if a case was processed, and your debts were discharged. If your first bankruptcy case was dismissed entirely, you could file again immediately after the dismissal. However, there could be a small 180-day waiting period if the following situations apply:

• You voluntarily dismissed the case yourself
• You failed to obey a court order
• You failed to appear in court for the case

What if Discharge Was Denied in My First Case?

If you are applying for bankruptcy to have the same debts discharged that were denied a discharge in the first case, you likely won’t be eligible to discharge unsecured debts that were or could have been listed in Chapter 7. Your only option to deal with those debts in bankruptcy is to file a Chapter 13.

How Sawin & Shea, LLC Can Help

Filing for bankruptcy is a stressful and challenging process that can require the help of a professional lawyer to ensure everything is done properly. This first time you file is tedious enough, let alone attempting to file a second time. However, we also understand how crippling debt can be, and filing for successive bankruptcies may be your only chance of getting any relief.

At Sawin & Shea, we believe in providing compassionate and understanding representation to all of our clients and are determined to help you achieve the best possible outcome. Our attorneys are highly experienced in bankruptcy cases and are here to help you through the process every step of the way. If you have any questions about filing for bankruptcy, whether it is your first, second, or even third time, contact us at 317-759-1483 or send us an email for a free consultation.

The post How Often Can I File for Bankruptcy? appeared first on Indianapolis Bankruptcy Attorneys of Sawin & Shea.

With credit card debt specifically, debtors often wonder how the process works and how it will affect their ability to still use current cards or open new ones in the future. We’ll walk you through some helpful information on filing for bankruptcy with credit card debt below, but if you’re ever unsure, working with an experienced bankruptcy attorney can help. They have years of experience helping those struggling with debt navigate the complicated legal process and get back on their feet.

What Happens to My Credit Card Debt When I File For Bankruptcy?

When you file for bankruptcy, you will be required to list all of your debts, including all of your credit cards. Once filed, your bankruptcy stops all collection actions against you. Ultimately, bankruptcies result in a discharge. This discharge stops any future collection of dischargeable debts. Credit cards, in almost every case, are dischargeable debts.

In Chapter 7 bankruptcy, most or even all of your unsecured debt will get discharged, including your credit card debt. However, in return for discharging your debts, you must give over your non-exempt property to a bankruptcy trustee. The funds from the sale of that property will be used to pay your creditors. Most Chapter 7 cases, however, are “no-asset cases” which means that the debtor in bankruptcy keeps everything in which they have an ownership interest.

In Chapter 13 bankruptcy, your debts are not discharged upfront. Instead, you will be required to pay what the law says you can afford to pay back your creditors through a repayment plan. The plans typically last around 3 to 5 years. A Chapter 13 is available to those that do not or can not qualify for a Chapter 7. It is also used to help debtors get caught up on things they are behind on, but that they would like to keep such as houses or cars. Credit cards, like most unsecured debts, get paid a partial amount in Chapter 13 and the debtor is then discharged of any further liability on the debt at the end of a plan

Exceptions to Discharging Credit Card Debt in Bankruptcy

While most debts do get wiped out after filing for bankruptcy, there are some exceptions. For example, if you are filing for Chapter 7 bankruptcy and your monthly income is more than your state’s median income, and it is believed that you can pay at least 25% of the debt, a discharge through chapter 7 will not be allowed. In this case, you will need to file a Chapter 13 bankruptcy instead, where a plan will be worked out for you to pay the amount the law requires you to pay before receiving a discharge on the balance.

Another reason some of your debt may not get discharged is if the creditor files an adversary proceeding because they believe that the charges made were an attempt to commit fraud. For example, if you charged more than $725 in luxury goods to a credit card within 90 days of filing for bankruptcy, your intent is presumed to be fraudulent. Additionally, if you took out a cash advance with any of your creditors worth more than $1000 within 70 days of filing, this will also be seen as an act of fraud. As a result, these debts may be considered non-dischargeable, and you may have a responsibility to pay them after your bankruptcy.

Building Credit After Bankruptcy

All of your credit cards, with the exception of some company cards, will be canceled and thus unusable during and after your bankruptcy.

While many individuals fear that their credit score and having just gone through bankruptcy will hinder them from getting any new loans or opening any new credit cards for a while, this is often not the case. Lots of creditors are willing to give debtors a chance, even after they’ve just come out of bankruptcy. Even if your credit is bad, if you have sufficient income, you will likely still be able to open new accounts and start rebuilding your credit shortly after your bankruptcy is over or, if you are in Chapter 13, during the life of the plan.

How Sawin & Shea, LLC Can Help

At Sawin & Shea, we believe in providing compassionate and understanding representation to those struggling with debt and looking to file for bankruptcy. Being buried under overwhelming amounts of debt can be debilitating, and the last thing you need is to add more stress to the situation by worrying about your bankruptcy case. Our attorneys have experience in bankruptcy cases and can help walk you through the process every step of the way. We can even offer guidance after your bankruptcy case has ended.

Contact us at 317-759-1483 or send us an email for a free consultation today!

The post Credit Card Debt and Bankruptcy appeared first on Indianapolis Bankruptcy Attorneys of Sawin & Shea.

As most of the information out there talks about joint property and debts being affected, many individuals think they can just transfer property to their spouse’s name to solve the issue. Unfortunately, it’s not so simple. In most cases, a judge will reverse the transfer, especially if it is apparent that it was done to evade creditors. If you are unsure of what you can and can’t do and what will happen when you file, you can reach out to an experienced bankruptcy attorney for help. They can guide you through the process to work towards the best possible outcome for you and your family.

What Happens to Our Property When I File for Bankruptcy?

Before we jump specifically into what happens when you transfer property, let’s first clarify the ways that property can be affected. In most situations, your bankruptcy will not affect property that is owned separately by your spouse. However, anything jointly owned is not necessarily safe, and how it is treated will depend on whether you live in a common-law or community property state.

Common-Law Property

Indiana is a common law property state, not community property. This means that any property your spouse owns separately in their name usually is not at risk. However, any property owned jointly is considered part of your bankruptcy estate. If you do not have enough exemptions to cover these assets, they can be taken and liquidated in a Chapter 7 bankruptcy. If the property is taken, the trustee responsible for selling the property to pay your creditors will pay your spouse the value of their interest in the property. In Chapter 13 bankruptcy, non-exempt interest in joint property affects the percentage of debt that you pay back to unsecured creditors and there is no liquidation of the property.

What Happens to Property Transfers When I File for Bankruptcy?

Even though common law property states do not typically include your spouse’s separately owned property in the bankruptcy estate, there are some situations when their property can still be affected. Property transfers, for example, are still susceptible to being reversed and taken.

Transfers Can Be Reversed

Large item transfers, such as a car, a house, a sizeable financial account, or any other significant property, are at risk of being reversed in a bankruptcy case by a judge. This is because when transfers like this occur, judges know that it is done to avoid the property being taken by creditors. Transfers made right before you file for bankruptcy will seem particularly suspicious, but even transfers made 2 to 4 years previously still have a high chance of being reversed.

Most people do not plan to file for bankruptcy years in advance. However, on the off chance that you do think it might be something you’ll have to do, you can transfer the property four years or more ahead of time, and it may reduce the likelihood of a reversal. In the rare case where a judge still attempts to reverse a transfer made four or more years previously, it may be necessary to work with an attorney to fight the reversal of the property. Even before you make a transfer, speaking with an attorney is wise. These situations are very complex, and you can easily lose your property entirely if you are not careful.

What About Non-Traditional Transfers?

Non-traditional transfers are situations that might not seem like a blatant transfer of ownership on an asset but may still be considered a transfer and reversed in the case of bankruptcy. For example, if you and your spouse receive joint-funds but invest in a property your spouse owns separately, a judge might still view that as a transfer. Or, perhaps you sell a property that was owned jointly and then buy a new property in your spouse’s name only—that can be viewed as a transfer as well. Even if these “transfers” were done without the intention of evading creditors and were decisions made before you were even considering bankruptcy, they might still be seen as assets and included in the bankruptcy estate.

How Sawin & Shea LLC Can Help

Filing for bankruptcy is a stressful and challenging process. We understand how devastating losing property to creditors can be in these cases. At Sawin & Shea, we believe in providing compassionate and understanding representation to all of our clients and are determined to help you achieve the best possible outcome. Our attorneys specialize in bankruptcy cases and are here to help you through the process every step of the way.

Contact us at 317-759-1483 or send us an email for a free consultation today!

The post Can I Put My Property in My Spouse’s Name and File for Bankruptcy? appeared first on Indianapolis Bankruptcy Attorneys of Sawin & Shea.

Old Age and Survivors Insurance (OASI) provides benefits to qualified workers and their family members. It paid benefits to an average of 55 million beneficiaries each month in the fiscal year 2020.

OASI benefits were free from overpayment 99.80% of the time in 2019. This sounds encouraging unless you are one of the 440,000 people that it happened to.

The Supplemental Security Income (SSI) provides financial support to aged, blind, and disabled adults and children who have limited income and resources. It paid an average of 8 million beneficiaries each month in 2020.

SSI benefits were free from overpayments only 91.87% of the time. Therefore, these overpayments affected 650,400 recipients.

Reasons you may have been overpaid by the SSA:

• Your income is more than you estimated.
• Your living situation has changed.
• Your marital status has changed.
• You have more resources than the allowable limit.
• You are no longer disabled and continue to receive benefits.
• You do not report a change to the SSA (on time or at all) as required.
• The SSA incorrectly figures your benefits because of incorrect or incomplete information.

In 2020, the SSA recovered $3,809,475,353 of overpayments.

The normal procedure when you have been overpaid by the Social Security Administration:

1. You will receive a notice explaining the situation and requesting the overpayment be repaid within 30 days.

2. If you are still receiving payments and are not able to repay the entire amount, you will be presented with several options:

• • The SSA could withhold the overpayment at the rate of the lesser of 10 percent or the entire monthly payment– you can contact them and negotiate an amount that you can afford each month.
  • If you are not still receiving payments, you can send a check, or use a debit card, credit card, or your bank account. You can also contact the SSA and work out a monthly payment plan that you can afford.

 3. If you don’t repay the money, the SSA has the following options to recover it from you:

• • They can deduct it from your federal income tax refund.
  • They can deduct it from your wages.
  • They can take it from future SSI or Social Security benefits.
  • In addition, the SSA will report the delinquency to credit bureaus.

4. If you disagree that you have been overpaid, you must file Form SSA-561 within 60 days explaining.

5. If you don’t necessarily dispute the amount, but don’t feel that you should have to pay the money back, you must file Form SSA-632 within 60 days to request a waiver. You will have to prove both:

• • That the overpayment wasn’t your fault
  • Paying it back would cause you financial hardship or would be unfair for some other reason. You may have to submit proof of your income, as well as bills to show that all of your income is used for your monthly expenses and that it would be a hardship for you to repay.

What Happens If You Are Filing For Bankruptcy and Owe A Repayment To The SSA?

Like all debts in bankruptcy, an automatic stay is put into place upon filing (the creditors have to leave you alone) for at least a period of time. Here is some good news: This debt will be discharged like your other unsecured debts in Chapter 7 Bankruptcy and can be treated like your other unsecured debts (added to your pro-rata payment schedule, then discharged at the end) in Chapter 13 Bankruptcy.

What’s the catch? Well, you can’t have committed fraud. That means that you can’t have knowingly received the overpayment and said nothing. The SSA would have to be able to prove that you knew or should have known that you were being overpaid. If this were the case, they could file a complaint called an adversary proceeding to attempt to have the Court declare the debt not discharged at the end of your bankruptcy.

The whole issue is complicated and riddled with labyrinthine laws, precedents, and procedures. An experienced bankruptcy attorney will be able to help you navigate the shoals of bankruptcy, including any issues you may have due to an overpayment by the Social Security Administration.

You may also be interested in reading our blog: Will I Lose My Social Security Benefits if I File For Bankruptcy?

At Sawin & Shea, LLC, we understand that hiring an attorney to help you file bankruptcy is scary. We are committed to providing compassionate and non-judgmental representation to all of our clients. Our attorneys have helped thousands of people just like you get the fresh start they deserve. We are here to help.

Schedule a free consultation with an attorney today at (317) 759-1483 to review your personal situation.

The post Can Social Security Overpayments be Discharged in Bankruptcy? appeared first on Indianapolis Bankruptcy Attorneys of Sawin & Shea.

If you are contemplating bankruptcy proceedings, you likely want to know how it will affect your income, current credit score, assets, savings, retirement, employment, and much more.

One question that may deter people from pursuing bankruptcy is this: does this mean that my spending is going to be monitored?

The Short Answer: In General, Your Spending Will Generally NOT Be Monitored After Discharge

Here is a piece of good news: you are not going to have your spending monitored forever just because you chose bankruptcy.

Too many people avoid filing for bankruptcy because they are anxious about having their spending habits micro-managed. Unfortunately, it is a common myth that the court is going to monitor your spending habits once you file. This is unfortunate because there are people who could really benefit from bankruptcy and avoid it because they are worried about someone second-guessing all of their spending decisions.

That said, the trustee does have access to information about your spending. So what does that mean for you? What is a trustee looking for when they review your spending?

What Spending Can Be Reviewed?

The two parties who will definitely look over your spending records, including your bank and credit statements are your attorney and the court-appointed trustee.

These individuals have the authority to look for proof of fraud or misconduct in your spending history. However, they are not interested in minor details like how much you spent on lunch or whether or not you bought a bottle of wine with your groceries.

If it’s not evidence of something illegal, excessive–or something that would disqualify you from filing for bankruptcy–then your spending habits really aren’t of much interest to them. However, spending on luxury goods or services, leisure travel/vacations, or excessive cash withdrawals a short time before filing can lead to scrutiny of your bankruptcy case. In some cases, the Court could deny your discharge in bankruptcy due to bad faith if a determination is made that your spending caused harm to your creditors.

The other thing that they are looking for is any funds that could be used to repay your creditors. A big mistake is trying to hide funds from your attorney or trustee, because these funds will be discovered, and the act of hiding can jeopardize your bankruptcy proceedings.

How Far Back Can They Look?

There is a “lookback period” that determines how far back your attorney, and the trustee can look at your records. The point of looking back is to figure out if there have been any suspicious funds transfers or luxury purchases.

In general, the look-back period is 90 days. For paying friends and family money that you owe them, the lookback period is one year. Basically, the court wants to ensure that you didn’t spend a whole bunch of money right before filing for bankruptcy on things that are not reasonably necessary.

They also want to ensure that you are not trying to pay back loans to a friend or family member while clearing debts to other creditors through bankruptcy.

Bankruptcy Means Addressing Debt, Not Monitoring Your Spending

The ins and outs of bankruptcy are complicated and time-consuming. Spending time micromanaging or judging your spending habits simply isn’t a good use of time for a bankruptcy professional.

If you are hesitating to file for bankruptcy because you’re worried that someone might judge your habits, it may be helpful to remember that bankruptcy professionals deal with people in all kinds of situations. Bankruptcy can be the result of poor spending habits, but it can also be caused by medical debt and unexpected life circumstances.

Get Compassionate Help from Sawin & Shea

Having a compassionate and respectful attorney at your side through your bankruptcy process is so important. We know that hiring a bankruptcy attorney is an intimidating and sometimes scary prospect. But we are committed to providing non-judgmental representation to all of our clients.

We are not here to monitor or judge your spending. We just want to help you get out of debt and back on your feet!

Still Have Questions?

If you still have questions about filing for bankruptcy and what your attorney and the court-appointed trustee might look for in your spending history, please don’t hesitate to reach out to our team here at Sawin & Shea. We offer a free video consultation, which may be the first step to clearing your debts and starting fresh.

Sawin & Shea — Indianapolis Bankruptcy Attorneys

Filing for bankruptcy is not the end. It’s the beginning of a new financial life for you. The Indiana bankruptcy attorneys at Sawin & Shea can help you get rid of overwhelming debt and advise you on life after bankruptcy. We are here for you during this life-changing process.

Please do not hesitate to call us today at (317) 759-1483 or send an email for a free consultation. We are ready to help.

The post If I File for Bankruptcy, Will My Spending Be Monitored? appeared first on Indianapolis Bankruptcy Attorneys of Sawin & Shea.

The average student loan borrower is close to $40,000 in debt, with the country as a whole having an accumulated student loan debt of $1.73 trillion. While to some, that might seem like a reasonable amount to owe back, the issue comes when we look at the cost of living, and the wages graduates are paid in comparison.

Years ago, the cost of attending university was only around 16% of the average household income, making it a manageable amount of debt to pay off. Today, however, student loans are nearly 35% of the median household income. And unfortunately, graduates are often not paid enough to afford both their loan payments and the ever-increasing cost of living, resulting in today’s overwhelming student loan debt crisis.

Luckily, there is a potential light on the horizon for those suffering under the heavy burden of student debt. This year, a new bipartisan bill was introduced that would allow borrowers to discharge student loans through bankruptcy.

What is the New Bipartisan Bankruptcy Reform Bill?

The new bill, called the “FRESH START Through Bankruptcy Act of 2021”, was introduced in August by the chair of the Senate Judiciary Committee and Senator John Cornyn (R-TX). The main point of the bill states that those struggling with federal student loans would now be able to have the loans discharged through bankruptcy. However, the discharge is not immediate. According to the Bill proposed in the Senate, the loans will only become eligible ten years after the first loan payment was or is due. There is still a long way to go before this Bill is passed into law, but we are hopeful that it will happen.

If the Bill passes, even with the ten-year waiting period, this is a major plus for those with federal student loans. Unfortunately, the bill only applies to federal loans, and private student loans are still a significant issue for millions of Americans. Private student loans will retain the same undue hardship option for discharge that is already available.

Discharging Student Loans Through Bankruptcy

Previously, student loans were only eligible for discharge if you could prove that paying back the loan was causing undue hardship. Of course, “undue hardship” is somewhat abstract as hardship for one individual can be different than the hardships for another. Nevertheless, that was the previous requirement for having your loans discharged. And as you can imagine, proving to a judge that you are experiencing such hardship is quite the challenge.

With this new reform bill, proving undue hardship is not required to have your federal loans discharged. Those with private student loans, however, will still have to prove that it is hopeless that they will ever repay if they wish to have the loan discharged. Often, in these cases, it is highly beneficial to work with a bankruptcy attorney. They have extensive experience working with individuals suffering from student loan debt and can guide you through the process of convincing the court of your hardship.

Who Qualifies Now for Student Loan Forgiveness?

As far as we know, under the new reform bill, anyone with federal student loans is eligible to have them discharged after the ten-year period from when the first payment was/is due. However, President Biden has enacted some form of student loan cancellation since taking office to begin the process of relieving the burden of the $1.73 trillion student loan debt.

There are two constituencies for being eligible for the current federal student loan cancellation that Biden is enacting:

1. Total and permanent disability: Borrowers must have a permanent disability that prevents them from earning an income.
2.  Borrower defense to repayment: Allows borrowers to cancel their student loans if they were misled or defrauded by the college they attended.

How Sawin & Shea LLC Can Help

At Sawin & Shea LLC, we understand the debilitating burden of trying to manage student loan debt, as well as how scary it can be to consider filing for bankruptcy. Our team has years of experience helping those suffering from unmanageable debt. We believe in providing compassionate and understanding representation to all of our clients. Our attorneys specialize in bankruptcy cases and are here to help you through the process every step of the way.

Contact us at 317-759-1483 or send us an email for a free consultation today!

The post Bankruptcy Reform Bill and Student Loans appeared first on Indianapolis Bankruptcy Attorneys of Sawin & Shea.

Bankruptcy isn’t rare in the Hoosier state; Indiana has the 7th highest percentage of bankruptcies in the United States, based on population: 22,748 in 2019, or 3.38 per every 1,000 people.

If you file for Chapter 13 Bankruptcy in Indiana, you will still be obliged to pay something toward your debts; it’s just that you will be given a payment plan that reduces your unsecured debts based upon your ability to pay, that puts you on a manageable schedule, and that holds your creditors at bay while you work on making achievable payments.

Taking that into account, we’ll focus on Chapter 7 Bankruptcy.

Some debts are definitely dischargeable:

• Medical bills: This is a lifesaver because ⅔ of the people who file for bankruptcy cite medical issues as the main reason. That’s 530,000 families per year in the United States.
• Credit card debts: Although credit card debt dropped in 2020 (possibly because of Covid and the fact that people were staying at home), the average household credit card debt is $5,315. Although credit card debts and late fees can be discharged during bankruptcy, that doesn’t mean that you can rack up new debts after you file.
• If you use a credit card to buy more than $725.00 of luxury goods (that is anything not actually considered to be a necessity) within 90 days of filing for bankruptcy or if you used the credit card to pay for non-dischargeable debts (like child support), this debt may not be discharged if the creditor files an adversary proceeding to have the court declare the debt non-dischargeable.
• Cash advances (on your credit card) that total more than $1,000.00 within 70 days of filing for bankruptcy.
• Overdue utility bills: These will be discharged and furthermore, utility companies will not be able to shut off your service after you have filed for bankruptcy. Make sure that you list this debt with your other obligations when you file. You will have to prove that you can pay future bills in order to keep the utilities; there are complicated rules attached to this, so an experienced bankruptcy attorney will be a huge asset.
• Civil court judgments (not counting anything that was based on fraud).
• Rent that is past due: This doesn’t mean that you can’t be evicted. It simply means that any rent that is owed from before you filed bankruptcy will be discharged.
• Personal loans: Although your family or friends who helped you out will not be thrilled to hear this, these are discharged.
• “Payday” type loans
• Collection agency bills
• Dishonored checks (unless they were based on fraud)

Some debts are definitely not dischargeable:

• Child support: This is considered to be a priority debt and will not be discharged. The positive here is that if your other debts are discharged, you may be likely to have enough money to pay this required debt.
• Alimony payments: if the domestic support obligation (DSO) owed to a former spouse is for maintenance, it will not be discharged.
• Debts arising from willful and reckless acts, embezzlement, fraud, or larceny
• HOA fees: if you surrender your house, your homeowners’ association fees will be discharged up until the time you filed for bankruptcy. If you keep your house, these debts will not be discharged, and you will have to pay them.
• Most back taxes: Tax debt assessed within 240 days before you file your bankruptcy case is not discharged. If the tax debt is at least three years old, it may qualify for a discharge. This includes both back taxes owed to the Internal Revenue Service (IRS) and to the Indiana Department of Revenue. But the debts must be at least three years old at the point you file for bankruptcy.
• Court fines, including restitution ordered in a criminal matter
• Any debts you did not list when you filed for bankruptcy unless the creditor learns of your bankruptcy case. (These are called unscheduled debts.)
• Student loans. There are some exceptions to this. To discharge a loan taken for an educational purpose, you’ll need to file a certain kind of lawsuit known as an adversary proceeding or adversary suit. This is a way of proving that it is an undue hardship for you to continue paying on your loan and it will be impossible to pay it back in the future. This is a complex lawsuit that can be expensive, so seek legal guidance from a bankruptcy attorney before taking this path.

Filing for bankruptcy can be a chance for an almost clean slate, but not a perfectly clean slate. Consult an experienced bankruptcy attorney to make sure that it is the right choice for you, and if so, to help you navigate the myriad Indiana bankruptcy laws.

At Sawin & Shea, we understand that hiring an attorney to help you file bankruptcy is scary. We are committed to providing compassionate and non-judgmental representation to all of our clients. Our attorneys have helped thousands of people just like you get the fresh start they deserve. We are here to help.

Speak to an attorney today at (317) 759-1483 or contact us online.

The post Debts That Can’t Be Discharged During Bankruptcy appeared first on Indianapolis Bankruptcy Attorneys of Sawin & Shea.

Debt counseling (also called credit counseling) is required before you can declare bankruptcy. There is a pre-filing counseling and pre-discharge counseling.

What is pre-filing counseling?

Before you can file for Chapter 7 or Chapter 13 bankruptcy, you need to do pre-filing counseling. Your bankruptcy attorney can recommend approved agencies that can handle the session and provide the needed certification.

This one-hour course is taught by a nonprofit credit counseling agency and teaches you about the process of declaring bankruptcy — the advantages and disadvantages. It also talks about using repayment plans instead of declaring bankruptcy. The class will teach you about:

• Using debt management tools
• Making informal repayment plans with creditors
• Learning personal budgeting education

What is pre-discharge counseling?

Pre-discharge counseling is your last step in finalizing your bankruptcy. This two-hour course (also called “the second course”) is required before you receive your bankruptcy discharge (the court order that forgives your qualifying debt).

The basic premise for this course is to give you the tools to stay out of debt and manage your finances effectively in the future. Some of the topics that are covered in this class include:

• Understanding your credit score and using credit carefully
• Creating and managing a personal budget
• Learning how to save money/cut expenses

After completing both the pre-filing counseling and pre-discharge counseling, you will receive a certificate that you need to submit to the court to finalize your bankruptcy. Most agencies provide these to your attorney directly.

How do I start the counseling process?

Both types of counseling are available through a nonprofit credit counseling agency that is approved by the Department of Justice. You want to make sure you use an agency approved by the court jurisdiction where your case is filed.

Almost all counseling sessions are over the phone or online, making it easy to have access to an approved agency. Make sure to have your financial information ready when you go for counseling — pull together a basic list of your expenses, debts, and income.

Do I have to pay for it?

You will need to pay for the counseling. The average cost is $15 to $50 per course. Some agencies charge less for online sessions, and many of them will waive fees if you meet criteria specified by the Office of the United States Trustee.

Sawin & Shea – Indianapolis Bankruptcy Attorneys

These two counseling sessions are just two steps in getting out of debt and finding a better financial future. The Indiana bankruptcy attorneys at Sawin & Shea LLC can help you walk through the nuances of the bankruptcy process and advise you on life after bankruptcy.  We are here for you during this life-changing process. Please do not hesitate to call us today at 317-759-1483 or send an email for a free consultation. We are ready to help.

The post Do You Have to Get Debt Counseling Before Bankruptcy? appeared first on Indianapolis Bankruptcy Attorneys of Sawin & Shea.

But certain debts just refuse to die. They rise from the dead and come back to haunt you again, even after they’ve already dropped off your credit report.

This is called zombie debt. It comes from debt collectors and purchasers who try to twist the rules in their favor convince you to pay.

The FDCPA Doesn’t Always Stop Zombie Debt

The U.S. Fair Debt Collection Practices Act (FDCPA) protects people from creditor harassment and is quite specific about what creditors can and cannot do to recover debts. Among other things, they can’t threaten you, lie to you, misrepresent who they are, or mislead you about the amount of money you owe.

However, debt collectors sometimes try a tactic that’s technically within the rules but feels shady. It is a way of “resetting the clock” on the deadline they have to recover money from old debts.

Each time you incur a debt, a clock starts ticking and the creditor has a limited time to collect on the debt. If they fail to do so and the deadline passes, the creditor cannot sue you to collect the debt. If they cannot sue you, it is next to impossible for them to make you pay it.

The average person doesn’t always realize this. So if an old debt reappears and a debt collector starts calling, you might be tempted to pay it out of fear and frustration.

Don’t Panic. Don’t Pay. Call Your Attorney.

When zombie debt returns, it’s often due to debts being sold – and sometimes re-sold, and re-sold – to companies that buy these debts for pennies on the dollar. They’re playing a financial game, betting that they’ll get you to pay.

They’re gambling on a little-known aspect of the law that says the clock restarts when the debtor makes a payment. All they need is a single payment from you. In fact, they may try to pressure you to make a “good faith” payment of just $1 to prove you’re doing the right thing.

If you do it, you’ve given the debt collector something very valuable. Now they have the right to pester you for years to come, and it’s all within the law.

So if someone is hassling you about a very old debt, contact your bankruptcy attorney before signing anything or making any payments. Ask for their name and contact information, then hang up the phone and call Sawin & Shea.

Zombie Debt is Often an Idle Threat

A zombie debt collector might say they’re going to sue you, place a lien on your property, or garnish your wages. But if it’s an extremely old debt, those things are unlikely to happen.

You should know that most zombie debt doesn’t result in further action against you unless you pay on it. A Washington Post investigation found that debt collectors bring in “tens of billions of dollars” simply by confusing people into paying old bills that have passed the legal deadline for collection.

Remember, it’s expensive for debt collectors to do much more than call and email you. They probably don’t want the hassle or cost of legal action, especially if you have a good lawyer. Zombie debt collectors are betting on your sense of fear and are really just trying to scare you.

Instead of panicking and paying them, use legal knowledge to your advantage. Contact your bankruptcy attorney at Sawin & Shea to discuss a smart strategy for resolving zombie debt once and for all.

Sawin & Shea—Indianapolis Bankruptcy Attorneys

Filing for bankruptcy is not the end. It’s the beginning of a new financial life for you. The Indiana bankruptcy attorneys at Sawin & Shea can help you get rid of overwhelming debt and advise you on life after bankruptcy. We are here for you during this life-changing process.

Please do not hesitate to call us today at (317) 759-1483 or send an email for a free consultation. We are ready to help.

The post What is Zombie Debt? appeared first on Indianapolis Bankruptcy Attorneys of Sawin & Shea.