The Florida Bankruptcy Law Blog

Chapter 13 Wage Deduction Order For Defense Industry Employees

Chapter 13 plans have a very high completion rate when debtors agree to pay using a wage deduction order. Payment is more likely when deducted from your paycheck as opposed to having to discipline yourself to give the Chapter 13 payment priority over other household expenses. 

Many debtors are reluctant to use payroll deduction because they do not want their employer to know about their bankruptcy. Particularly, I have had several clients who were working for companies with military defense contracts. These bankruptcy debtors had various degrees of security clearance and were afraid they would lose their clearance and job if the employer knew about the bankruptcy. 

Bankruptcy's Effect Upon Government Security Clearance And Job

People working for the U.S. government in sensitive positions are frequently concerned that filing bankruptcy will jeopardize their government security clearance. I have not heard from any of my own bankruptcy clients that their bankruptcy caused them to lose their government jobs or security status. I recently read a comprehensive article on this question written by Louisiana bankruptcy attorney Kevin Gipson. Concerned goverment workers should refer to this article. 

Repayments Of Retirement Plan Loans As Means Test Expense

Many bankruptcy debtor have borrowed money from their retirement plans in an attempt to pay their monthly debt obligations and avoid bankruptcy. The retirement loans require repayment within a certain time in order to avoid income taxation including penalties. When those debtors do file bankruptcy they often suggest that their required loan repayments to their retirement plan be considered as necessary expenses when they calculate their means test eligibility. 

Florida bankruptcy courts allow Chapter 7 debtors to deduct from income all expenses which are reasonably necessary for the support and maintenance of the debtor and family. Payments to the debtor’s own retirement accounts are essentially payments to the debtor himself. Courts have stated that payments or contributions to financial account for the debtor’s own future benefit are not reasonably necessary for the maintenance and support of the debtor and dependants. 

Therefore, if you have borrowed money from your retirement to avoid bankruptcy you cannot deduct loan repayments in your qualification for a subsequent Chapter 7. Although it is morally laudable to use all your financial resources to pay your debts and avoid bankruptcy, my general advice to debtors is that they neither spend nor borrow retirement money to pay their unsecured creditors unless you are sure that using retirement money will solve your debt problems.  

Redressing Debt Collection Abuses In Bankruptcy Court

Some people file bankruptcy mainly to end what they consider to be harassment by debt collectors. Enthusiastic and aggressive bill collectors often use collection tactics that violate protections afforded debtors by the federal Fair Debt Collection Practices Act. Sometimes a bankruptcy will tell their bankruptcy attorney about repeated overly aggressive and illegal debt collection actions which helped drive the client to consider filing bankruptcy. I have been asked several times whether my clients can sue creditors for unfair debt collection as part of their Chapte7  bankruptcy action. 

I have never instituted a FDCPA complaint as part of a Chapter 7 case. For one, I think any recovery for pre-filing collection violations would go to the Chapter 7 trustee to be distributed among creditors. Second, even if my clients recover part of their claim- for example if the recovery was more than enough to pay all their creditors- few of my clients are able and willing to incur the added expense of the lawsuit. 

A trustee could sue a creditor on a debtor’s behalf to assert a pre-filing FDCPA claim. Based on court decisions I’ve seen this type of suit would be considered a “non-core” proceeding because the cause of action did not arise under the Bankruptcy Code, but instead, is based upon non-bankruptcy statutes. Non-core cases could have an effect on the bankruptcy case, but they can also exist outside of bankruptcy.

A bankruptcy court can hear and decide a non-core FDCPA claim because they are related to the bankruptcy case. But, the bankruptcy court cannot enter the final judgment without the parties’ consent in advance. Absent consent, the bankruptcy court’s findings and legal conclusions would constitute a recommendation to the federal district court which would have jurisdiction to enter judgment. 

FICO Chief Talks About Credit After Bankruptcy

People considering bankruptcy are usually concerned about bankruptcy’s effect upon their credit score and what they need to do in order to rehabilitate their credit. I saw an interesting article in  Yahoo Finance about an interview with Mr. Mark Greene, the CEO of Fair Isaac & Co., the managers of your FICO score. 

Mr. Greene says that a bankruptcy or a foreclosure will reduce your credit score by 150 points, and that it takes up to seven years to restore your credit score. There is a common understanding that bankruptcy stays on your credit report for seven years. The fact that your credit report includes a prior bankruptcy filing, and that it takes up to seven years to fix your credit does not mean that you will not have good credit for seven years; it means that some people do not restore their credit score until the bankruptcy report is removed at the end of seven years.

I have had many clients who report that they have rehabilitated their credit three or four years after filing bankruptcy. Post-bankruptcy credit depends upon how well you do financially after bankruptcy and whether you follow the several good-credit practices Mr. Greene discusses in the Yahoo article. 
This article makes interesting reading whether or not you consider yourself a bankruptcy candidate. 

Bankruptcy Treatment Of Personal Injury Claims

The following is a guest post by New Jersey attorney Emily Kreifels of Console & Hollawell P.C. in Marlton, New Jersey

I’m always saddened when a client who has been seriously injured faces financial issues in addition to health issues. Unfortunately, health and money problems frequently go hand in hand. In addition to dealing with mounting medical bills you may not be able to work. If you don’t work you don’t get paid, or you get paid a small portion of your previous earnings through disability insurance. In situations like these, your debt may grow until it far outweighs your assets. You may no longer be able to keep up with your bills. When financial problems become severe, you may need to file bankruptcy.

If you’ve filed a personal injury lawsuit but also need to file bankruptcy, you may wonder how this will impact your case. You may be under the erroneous impression that filing bankruptcy means that you lose every cent and possession you own. What you might not know is that there are certain “exemptions,” or property you are allowed to keep.

Depending upon your situation, you may be able to protect your lawsuit, or at least a portion of it. Depending upon the laws in your state, personal injury compensation may be exempt up to a certain amount. For example, in New Jersey, personal injury compensation is exempt up to $17,425. You may receive additional personal injury revenue if in compensation for future earnings. Workers compensation benefits and death revenues for a person you depended upon may also be exempt.

When you file bankruptcy all of your assets, including your personal injury suit, become property of your bankruptcy estate. In order to claim an exemption, you must first list the asset. If the asset is not disclosed, you can’t exempt it.

There are a few other good reasons to include your personal injury case in your list of assets. First of all, it’s illegal not to. Second, if you fail to disclose your personal injury case in your bankruptcy filing, you can bet the insurance company’s attorney will try to get your case dismissed.

Chances are, your bankruptcy attorney and your personal injury attorney will be two different individuals. In order to ensure the best outcome for both your bankruptcy and your personal injury suit, make sure that both attorneys are aware of the other situation. You can recover from both bankruptcy and injury, but it helps to have the right legal guidance. For more information on how to protect your personal injury claim during bankruptcy, contact a New Jersey accident lawyer (link to http://www.consoleandhollawell.com/new-jersey/accident-injury-lawyers today.