Debt Resolution Fridays – June 26, 2020

Each week, bankruptcy attorney Elizabeth Domenico spends time educating the community about their debt resolution options.

Debt Resolution Fridays is dedicated answering your debt questions. See what Coloradans asked on June 26, 2020. (A transcript of the event is available below.)

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Good morning and welcome to Debt Resolution Fridays. I’m your host attorney Elizabeth Dominico, with Robinson and Henry. And for the last few weeks we have had these live presentations so that we can answer people’s questions regarding bankruptcy and debt in general. And I’ve got a list of questions here today from people who have already asked those prior to this launch today. And I wanna just remind you that you can tune in live. You can also look on our website as well as Vimeo as well as I believe Facebook after these events if you want to look at them after, if you’re not able to join us live here today. We also have the ability for you to preregister on our website robandhen.wpengine.com so that you can submit questions prior if you don’t have the ability to tune in, or if maybe you tried before and we didn’t get your question answered. So we take about 15 to 20 minutes each week on Fridays to discuss those pressing topics and see if we can get you guys some answers. So I’m gonna jump right in.

I pay child support and spousal maintenance. Is my ex notified if I file for bankruptcy?

The first question I received asked if someone pays child support and maintenance, if their ex spouse would be notified if they file for bankruptcy. So when you are obligated to pay a domestic support obligation which would be child support, maintenance or any kind of alimony, you do have to list that creditor in the bankruptcy, that wouldn’t mean that they do get notice of your bankruptcy filing. In some instances, if you have concerns about safety, there can be various tools that the court will allow to protect your identity protective order, you can have motions to seal filed. So everybody’s different but by and large, if there aren’t those types of issues with your ex, they would be made aware of your bankruptcy they get notice and ability to look at all your pleadings, they are considered a creditor, the trustee would notify them, they have to ask your ex certain questions to make sure you’re in compliance with your support order, or what the terms of those are and verified that they are actually a domestic support obligation holder.

Do you have to list all debts in a bankruptcy?

All right, next question is, do you have to list all of your debts in bankruptcy? Well, of this question is come up most often when I file. A lot of it is in context of people wanting to try to keep credit cards that maybe have a low balance or they have good standing and they have points. You do have to list any debt that you owe on the date of filing, whether you intend to try to keep it and repay it or not. So one question I often get is, well, I wanna continue paying on my car, or I wanna continue paying on my mortgage, I’m not gonna include those in bankruptcy. One thing you have to be aware of is the way the asset is treated, like the car or the house versus the debt owed against it, the mortgage or car loan. You may be able to exempt and protect the properties such that it’s not an asset of the estate, but you would have to list the corresponding debt associated with it. You’d have to list the mortgage as a creditor, and you’d have to list the car loan as a creditor, just like you would list any credit card, medical bills, student loans, even if you intend to repay them or have to do such as taxes or pay on your mortgage or your car loan after you file. All the creditors get noticed. They then will close out the billing on your credit report unless you execute what we call a reaffirmation agreement, which takes that debt out of bankruptcy and basically is a promise for you to repay that loan outside of the bankruptcy. We typically don’t recommend those reaffirmation agreements on credit cards. Think of it as a true fresh start, anybody you owe money to, you’ll be able to get credit reestablished. So why try to continue to pay them when you don’t have to. In some instances, people have concerns about medical debt. So the one thing I will say is, hospitals and large treating facilities cannot deny you service just by virtue of filing bankruptcy. You do have that not be the same with your primary care physicians or smaller treating physicians. They can turn you away if you are not in good standing with them. So the only real type of debt I say maybe you wanna continue to try to pay after you file is one that you owe to a physician you wanna have still treat you. And most clients I’ve had happen to say their physician is willing to work with them after filing, even though they legally can discharge that debt. Final note on that is family members and friends. If you owe a family member or a friend, and it’s not something that was a gift and they are expecting payment back to you, you do also need to list them that you owe that debt too, because the law’s clear and the trustee even asks you when you go to your court date if you’ve listed all of the property you own and all of the debt you owe. So you do wanna be upfront and honest and talking to an attorney or rather resolution specialist will be able to tell you maybe some of the smaller ones or things that you have a lot of points on we can work out where we pay someone that before filing, and then it’s not an issue and perhaps you keep it. But by and large, I have found that most creditors even if you’re in good standing with them when you file, they will at some point in the future see you file bankruptcy and most likely close your line of credit, even if you’re a current anyway due to their guidelines for lending.

What if I co-signed on a car with my adult child. Do they get to keep the car if I file for bankruptcy? They’re the one making the payments.

All right, next question. What if a cosigner on a car is my adult child? Do they get to keep the car if I file for bankruptcy they’re the one making payments? Very common issue that comes up. Most people have either joint debt in some fashion with the spouse or maybe they’ve helped someone else like a family member or friend out or vice versa. This particular question asks about if the other person is the one who owns the vehicle, makes payments and maintains it that the person filing bankruptcy is the one who is not making those payments, what happens to the codebtor? So, the long and short of it is, is that if they continue to make the payments, they should be fine. Now, there’s always a possibility that when someone files bankruptcy, that that codebtor, as we call them, has a negative reporting on their credit. It is not supposed to happen that way. But it can sometimes happen. If it does occur, then they have to go to state court to seek to have that undone because that’s a violation of the Fair Credit Reporting Act. They cannot detrimentally impact their credit score by virtue of someone else filing the bankruptcy as long as the payments are continuing to be made. So you really wanna watch that if you have a non-filing codebtor in the bankruptcy. They wanna continue to make the payments, they also probably want to pull their credit report about six months after your bankruptcy case is filed, so you can monitor and make sure they aren’t having a negative impact on their credit, or that it’s reporting that they filed bankruptcy even though they didn’t.

Does your employer find out about your bankruptcy if you file a chapter 13?

Next question asks, does your employer find out about your bankruptcy if you file a Chapter 13? Any creditor if you owe them money will get noticed. So if you owe a debt to your employer, for example, I have a lot of people who work for banks or the large corporations and they file bankruptcy. If the credit card or maybe they owe alone as a payday loan to their employer, they would be notified of bankruptcy if they’re owed money. The other way they might be notified is if there’s an act of garnishment. Then the employer would be notified because we need to notify the payroll department to be able to stop that garnishment. Unless you specifically maybe have one of those two circumstances unless your employer runs a background check and they run a credit report or they specifically ask you to disclose that. There’s no general blanket policy in bankruptcy that your creditors, anyone other than your creditors get notified, specifically your employer. So all depends on your specific circumstance. So a lot of times the ones we generally see who do have a reporting requirement, are people in the financial industry, insurance brokers, people who have series seven or series nine license, people in law enforcement and people in the military or have a security clearance. Now this goes into another question was asked a few weeks ago is if filing bankruptcy will have an adverse impact if you do have any kind of those security clearance or government clearances? And the answer is typically no. As long as you’re upfront about disclosing that information, there’s typically work arounds. I’ve never personally had anyone be fired or detrimentally impacted just because they file bankruptcy. But I can’t say for 100% certainty that it couldn’t happen. But the best thing to do is be upfront and honest. But unless you have one of those other circumstances, where you either have to tell your employer or you have that garnishment there’s no reason that they directly get notified just because you file any bankruptcy, let alone chapter 13.

What qualifies someone for an emergency bankruptcy filing, and how quickly can it be filed?

All right, Jack in Colorado asks, what qualifies someone for an emergency bankruptcy filing and how quickly can it be filed? So you may have read about the ability to file bankruptcy without having all of the paperwork actually ready. We call this a bare bones filing or a deficient filing. There are some circumstances where you just can’t meet with an attorney or possibly come up with this or something on the data’s file, especially in the date of foreclosure coming up or repossession, or possibly even wage garnishment. Those are typically the instances where we see those emergency filings happen the most. So, the minimum things you need to have in order to file an emergency filing or you have to have a credit counseling course completed before you file, which is a requirement in any case. You also have to have a list of all your creditors so pulling a credit report and making sure all of your secured creditors, priority creditors and unsecured creditors are listed. And then you also have to file the bare bones of your voluntary petition, which is your name, your address, your social security number, what chapter you’re filing, if you had any prior bankruptcies, so those are the bare minimum. How long that takes to get filed is gonna be a function of if you hire an attorney, what fees they charge to pay upfront before they’ll do that. And qualification isn’t really just set to an emergency filing qualification for a particular type of bankruptcy, it depends on your income and your assets and potentially prior filings and that’s why having an attorney and going through those scenarios as to which chapter chapter seven versus chapter 13 is the best for you would be important to know so that whichever emergency or deficient chapter you need to file, you make sure you’re in the correct one.

How do creditors find out about the automatic stay on your debt? How do they know to stop calling?

All right, someone asks how do creditors find out about the automatic stay on your debt? how do they know to stop calling? So when you file a bankruptcy, you list all of your creditors in your bankruptcy petition. That gets electronically filed with the court and then the court mails out a notice of the bankruptcy filing and the procedures for certain deadlines and participation via that mailing. Now if you have a garnishment, you will probably want to notify your payroll department right away. You also probably wanna notify the court and the attorney who represents the creditor that is garnishing you because if you try to wait for the court to mail them notice you could potentially have quite a period of time that that garnishment continues. The other thing you actively, proactively need to do is also notify the public trustee if you have a foreclosure being set because you don’t have the ability for the court to call them or send them direct notice other than that mailing. You or your attorney need to make sure they get that notice of filing right away. There’s a certificate with the seal that you can print out that lets those creditors know. Additionally, you can always call or let creditors know in writing if they are giving you a hard time before you believe they get noticed from the court. So if anyone calls you, make sure you have your case number prepared to give to them and say, I file bankruptcy, here’s my case number. You’re on actual notice of the filing, but you should also be receiving mailed notice. Now, in reality, a lot of creditors sell debt, send it to collections, so the creditor who you gave notice to originally may not forward on that information to anyone else. So if you do get a collection, call or notice or update after you file, it may be good to have a letter written with that notification of bankruptcy filing. So you can say, I put you on actual notice, or add them to your petition as an amended notice creditor, and that way the court knows that they got it and they can’t later come back and say, “Oh, well, you didn’t include me “in the bankruptcy.” I didn’t get actual notice.

What happens to your income tax refund if you file for bankruptcy?

Okay, someone asks what happens to your income tax refund if you file for bankruptcy. So in chapter seven, one of the largest assets around tax season that the trustee looks at collecting for potentially distributing to your creditors are tax refunds. The tax refunds federal and state do have some protection if you get to claim an earned income credit or an additional child tax credit on your federal taxes, and I believe the additional child tax credit on your state taxes, you can exempt that portion of your tax refund. Any other portion of that tax refund due to business depreciation loss, due to a credit or grant, due to the interest payments on your mortgage, due to just your normal wage withholding. The trustee can ask for a percentage of that, depending upon when you file. So for example, if this year you filed your bankruptcy let’s say June of 2020, and you’re expected to get a large tax refund, the trustee can hold that case open until next year in April or July whenever you’re looking at getting that refund for the 2020 tax year, and then they’d be entitled to six twelves of that refund or 50% of whatever wasn’t protected. Everything’s a case by case basis. So if you usually get large tax refunds, it might be appropriate to look at hiring an attorney so they can guide you on when to file or when to protect it. Now, if you’ve already for that time frame, if you file your bankruptcy in 2019 then you still may be having the trustee looking for recovery. Now if you were to be owed a tax refund for the 2019 tax year and you file in 2020, and you’ve already received and spent your refund appropriately. The trustee can’t ask for it. Now if you do things like pay back a family member or friend, or use that money on large luxury items or to pay other creditors back who are what we call an insider or even as a preference payment, the trustee may be able to take that money back from the creditors or force you to pay it back over if it was paid improperly. So that’s why it’s always important to speak to an attorney ’cause in chapter sevens at least, the tax refunds can be one of the single largest assets that the trustee asks for turnover. Now on a chapter 13, typically the trustees don’t ask for turnover of tax refunds. Sometimes they do in individual cases. If you are owed a tax refund when your bankruptcy is filed in a chapter 13. You have to list it as an asset and then we have to do what’s called reconcile it and you have to pay the amount they would otherwise be owed in a chapter seven to the benefit of your creditors in a chapter 13 bankruptcy. but typically it’s not a yearly turnover or accounting of that tax refund when you’re in a chapter 13 bankruptcy which can run you the three to five years. Sometimes the trustee asks for it as a settlement in a case, sometimes they don’t, but by and large, not as a blanket policy.

What happens if I can’t pay my mortgage after filing chapter 13? What should I do?

Okay, what happens if I can’t pay my mortgage after filing chapter 13? What should I do? So a new rule that came out in Colorado is that if you fall behind on a mortgage payment while you’re in a chapter 13 bankruptcy, the creditor can seek to have your entire bankruptcy dismissed. And if you come to the end of your plan and you’re not current, they can actually bar you from discharging any and all of your debts. If you fall behind on your chapter 13 mortgage while you’re in that, you need to contact your attorney directly if you have one. If you don’t, then you need to reach out to the mortgage company and see what options you have right away. Sometimes they will offer you the ability to do a loan modification, sometimes dismissing the case and looking at refiling is appropriate depending upon the circumstances, but you really have to be careful because there are time limits, and the imposition of the automatic stay might not go into place. So it’s really important in general, when you have a chapter 13, that you should be having an attorney, you really cannot do it on your own. I’ve seen very few people succeed. And so if you do have an attorney, that’s where we come in, you need to communicate any type of financial hardship once your chapter 13 bankruptcy is filed if you run into that, because the chapter 13 is premised upon you having income to make both your trustee payments and then all of your normal everyday living expenses, especially your mortgage in that chapter 13 bankruptcy.

What happens if my bank (mortgage) won’t go along with the repayment plan? How often does that happen?

Okay, another question kind of on the same vein is what happens if my bank mortgage lender won’t go along with the repayment plan? How often does that happen? The only time that your mortgage lender can object to your chapter 13 plan is one, if you weren’t current on your mortgage before the case was filed, and your chapter 13 plan does not propose to pay them correct the arrears, they will object to your plan stating exactly how much you owe, they’ll have to file a proof of claim showing what they believe you owe. And then from there, if you believe you owe it, you have to amend your plan and provide for that. They also could object to say you don’t have the correct amount of your payment listed in your plan or maybe you don’t have the correct date of your post petition payments occurring. Other than that, if you are not altering their rights and proposing to make both the pre and post petition payments. They won’t have a basis for objecting to your plan. How often does it happen that they object? Well, again, it depends on the circumstances if you’re current or not, before you file the bankruptcy, and if you when you file the plan, treat them appropriately with the correct information in there.

How does the bankruptcy court verify income if you’re out of work?

All right, how does the bankruptcy court verify income if you’re out of work? I haven’t worked in four months. Well, you sign all of your paperwork under penalty of perjury. If you’re in a chapter seven where you’re below the median income, the fact that you don’t have income isn’t going to matter. Now, if you’re in a chapter 13 where the premise is, you’re having to make payment back towards debt based upon your income minus expenses. If you don’t have income, you cannot file the chapter 13 bankruptcy. If you’ve filed but then lose your job. That’s a different issue. You may have to look at converting or find another source of income fairly quickly to supplement what you lost. Now, if you haven’t filed and you’ve already been out of work for a month, certainly a chapter 13 would not be an option for you even starting out, you may have to look at just doing a chapter seven, depends on your circumstances. A lot of people right now are in the situation where they may not even be able to file a chapter seven because they have too much equity in their home.

And that’s why we say we’re a debt resolution attorney, not just bankruptcy. Sometimes due to the recent pandemic, we don’t have the ability to currently fund a chapter 13 plan to protect equity or try to save a home. So we have to try to come up with other alternatives, which is why we offer those consultations to go over what your best options are. Maybe bankruptcy is not even an option. So we have to talk about other things. Maybe it is but you still want to look at the other options. So give us a call. Our number is 303-688-0944 and we’ll be able to help you and guide you through these types of questions. But for now, we’re also still going to entertain them live on these Friday chats for as long as you guys feel the need to ask these questions and get that information. Again, I’m attorney Elizabeth Dominico. This has been Debt Resolution Friday. You can find us on the web robandhen.wpengine.com. We also have our Facebook page and you can call again for that assessment if you need to discuss your debt. Thanks, you guys have a great rest of your day and enjoy your weekend.