Exemptions are very important. One of the crucial considerations in bankruptcy is whether all of your assets are “exempt,” or protected by the law from your creditors. If all your assets are exempt, then you can keep everything that you own if you file a Chapter 7 “straight bankruptcy.” Whether your assets are exempt also affects how much you would pay to your creditors and how long you would do so if you file a Chapter 13 “adjustment of debts” case. This consideration can also greatly influence which of these two options are better for you.
In Oregon, banks have traditionally chosen to non-judicially foreclose on homes after a period of default on the mortgage payments (non-judicial foreclosures can be quicker and less costly than judicial foreclosures). There is no law that requires the bank to foreclose within a certain period of time. Indeed sometimes many months or years pass before the bank gets around to beginning the foreclosure process.
When someone files a chapter 7 bankruptcy, all liabilities and assets (including the approximate quick liquidation value of the assets) are included in the bankruptcy petition. The liabilities listed include everything, including non-dischargeable debt (among other things, certain taxes are not dischargeable, student loans are generally non-dischargeable, child/spousal support is not dischargeable).
Student loans are a huge issue for many people. Unfortunately, under current law it is almost impossible to discharge student loans in a bankruptcy case. The general rule is that student loans are not dischargeable unless you can prove an “undue hardship.” Often courts will require that the debtor is essentially mentally and/or physically disabled and unable to earn an income before they will allow a discharge of student loans in a bankruptcy. But if a debtor is disabled, most student loan lenders have an internal procedure (non-bankruptcy) for obtaining a discharge of the student loans.
I often get the question of whether or not there is a certain amount of debt that somebody needs to have before they can file a bankruptcy. The answer is that there is no minimum amount of debt that is required to file a bankruptcy.
This morning I received a voice mail message from a former chapter 7 client. She received her discharge in August 2012. In her voicemail, she stated that a collection agency was calling her to collect on a credit card that was part of the bankruptcy. I immediately called the collection agency and explained to them that they are violating federal law by trying to collect on a debt that was discharged in a bankruptcy.
The bankruptcy statutes are designed to give honest debtors a fresh start. They are not designed to allow individuals to discharge debts that they never intended on paying in the first place. Most debtors are honest people that have come on some challenges (loss of job, medical condition, etc.).
When someone files a bankruptcy there are different exemption amounts for different assets. The exemption amount for a residence, also known as the homestead exemption, is $40,000 for single filers and $50,000 if the debtors are married, jointly own the property, and it is a joint filing.
The Advantages of Filing Bankruptcy BEFORE You Get Hit with an Income Tax Lien Adam M. Weiner Bankruptcy Layer, Attorney, Tax LienBankruptcy treats creditors with collateral much better than those without. This is especially true if one of your creditors is the IRS or the Oregon Department of Revenue. The difference is that with them YOU have some control about whether these taxing authorities have collateral or don’t.
Are Creditors Right When They Say You Can’t Write Off Their Debt in Bankruptcy? Most debts ARE written off in bankruptcy. Most creditors or collectors who try to persuade you to pay a debt on the threat that it can’t be written off in bankruptcy are likely either ignorant or dishonest. Adam M. Weiner Bankruptcy Layer, Attorney, Write off DebtThis blog is not about secured debts—those with collateral like a mortgage or vehicle loan. It’s not about the relatively short list of special debts which are not written off regardless whether the creditor complains or not—child and spousal support, most student loans, many taxes. Instead this is about regular debts that would be written off unless the creditor objected.