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When should you file for bankruptcy?

Posted on Monday, January 31st, 2022 at 2:02 pm    

If you are considering filing for bankruptcy, there are some timing considerations you need to understand before you can determine if you should wait to file, or if this is an urgent situation that requires you to move fast.

Reasons to Move Fast

  1. Home foreclosure. Filing for bankruptcy can stop a foreclosure and give you more time to repay your past-due mortgage balance through Chapter 13. Such a cure may be possible even after the foreclosure, if the sale process has not been completed.
  2. Auto repossession. If your vehicle is being repossessed, filing for bankruptcy can help you keep your vehicle, save money on your vehicle loan balance, and reduce your interest rate.
  3. Avoid garnishments, eviction, execution sale, or utility shut-off. Most people’s finances cannot survive garnishment. An immediate filing may be the only way to stop a state court proceeding, put an end to garnishments, stop an eviction or execution sale, or stop utility shut-off.

Reasons to Wait

  1. Judgment Proof.  If you are currently “judgment-proof”, meaning you have no property in your name and no paycheck coming to you, there may be little advantage to filing at a time when the creditor’s attempts to collect will not result in the loss of your property or income.
  2. Domiciliary requirements. The timing of the bankruptcy may affect which state’s exemption law you are entitled to use based on the place you are currently living. If you have recently moved, you may still be required to file in your previous state or use that state’s exemptions. This could make your bankruptcy case more complicated or difficult to manage depending on where you have moved and in some situations, this may be the best option for you. A bankruptcy attorney may suggest waiting a certain period of time to file to allow you to do so in your new state of residence.

When you work with our law firm, you can count on receiving the legal representation necessary to answer these questions in more detail and others that you might have while considering filing for bankruptcy. We are here to help you get a fresh financial start.

Kentucky’s Covington division opened the door for people filing bankruptcy petitions to make payments on their bankruptcies

Posted on Friday, February 26th, 2021 at 9:04 am    

A recent opinion from Judge Wise in the Eastern District of Kentucky’s Covington division has opened the door for people filing bankruptcy petitions to make payments on their bankruptcies. You can read the full text of the opinion here.

So how do payment plans work? First, let’s talk about the difference between Chapter 7 and Chapter 13 bankruptcy. If you have a Chapter 13 bankruptcy, Lawrence & Associates Accident and Injury Lawyers, LLC already gives you a payment plan. You’re required to pay your court filing fee and the cost of pulling your credit report up front. Court fees change occasionally, but this has been less than $400 for years now. Attorney fees are paid as part of your monthly payment to the bankruptcy trustee, and each monthly payment is the same. So in Chapter 13 bankruptcies, you automatically have a payment plan.

Chapter 7 bankruptcies are different because you don’t make any payment to the Trustee. On top of that, if you still owe your bankruptcy attorney money when you file the bankruptcy, then you just declared bankruptcy on your attorney too. Your attorney isn’t allowed to collect. This means that all Chapter 7 bankruptcy attorneys used to be required to collect their entire fee up front. If they didn’t, they were stuck with whatever money they’d accepted on the front end. Judge Wise’s opinion is important because it upends the old way of doing things and provides a blueprint that allows Chapter 7 bankruptcy filers to file without having to get all the money up front.

The most important thing to realize if you intend to have a payment plan on a Chapter 7 bankruptcy is that you are going to agree to separate different parts of the bankruptcy that ordinarily go together. Although there’s probably more than one correct way to do this, Lawrence & Associates Accident and Injury Lawyers, LLC divides the services up like this:

Before Filing Contract After Filing Contract
Consultation Preparing and Filing All Bankruptcy Schedules
Preparing and Filing a Bankruptcy Petition Preparing and Filing the Means Test and All Other Required Bankruptcy Documents
Preparing and Filing a List of Creditors Gathering and Providing Necessary Documents to the US Trustee and Chapter 7 Trustee
Preparing and Filing an Application to Pay the Filing Fee in Installments Attending Court with You
Reaffirming Debts with Secured Creditors
Making Installment Payments on the Filing Fee

If you don’t have a payment plan and choose to pay the entire attorney fee, court costs, and credit report fee up front, then both columns are completely covered by that payment. But if you choose to have a payment plan you’ll sign a contract that covers just the items in the first column for as little as $300 in attorney fees. That gets your bankruptcy filed and gets the automatic stay in place to stop your creditors from garnishing you. But if you don’t also do all of the things in the second column, your case will be dismissed! You aren’t required to use the same law firm to complete the things in the second column; in fact, you aren’t required to use a lawyer at all! But you should be aware that some of the things in the second column must be done within as little as seven days after filing your bankruptcy, so you’ll have limited time to educate yourself if you decide to go it alone.

If you decided to retain Lawrence & Associates Accident and Injury Lawyers, LLC to complete the items in the second column, you’ll have a second meeting with your attorney and sign a second contract that covers those items. That second contract is accompanied by a form that allows us to take a deduction from your bank account once each month for 12 months. There’s no money owed on the second contract other than the monthly deduction. Having a payment plan is slightly more expensive than paying everything up front, because the law firm must keep the case open for longer and because the firm runs a risk of not getting paid over time. But payment plans give hard working people the opportunity to get a fresh start without dodging garnishments and law suits while they try to save up enough to file.

We can set up a payment plan for any Chapter 7 bankruptcy we file in Kentucky. Unfortunately, Ohio courts have not allowed this option yet, so we are not able to set up payment plans for Ohio bankruptcies. If you think a Chapter 7 payment plan is right for you, give Lawrence & Associates Accident and Injury Lawyers, LLC a call!

Kentucky Moratorium on Eviction Hearings to Expire July 25, 2020

Posted on Friday, June 5th, 2020 at 3:09 pm    

As many unemployed homeowners and renters know, there has been a moratorium against filing foreclosure or eviction cases in court since the start of the COVID-19 pandemic lockdown. However, that prohibition is starting to end. Because Lawrence & Associates Accident and Injury Lawyers, LLC practices bankruptcy law in Kentucky and helps save about one hundred homes every year, we’ve been paying careful attention to the Kentucky court system to see how they are handling foreclosures and evictions. The Kentucky Supreme Court issued an order that partially reopened courthouses starting June 1, 2020. Buried in this order are directions to the Kentucky state courts on how to process foreclosure and eviction lawsuits. Knowing what the state courts are allowed to do is critical to saving your home or apartment.

How the Kentucky Supreme Court Order Affects Renters

It’s important to know that Kentucky is still under a “state of emergency” due to COVID-19 and that there is no set date that this will end. However, the Governor could end the state of emergency at any time, and we don’t know how much notice we’ll get when that happens. Governor Beshear could make an announcement that the state of emergency will end in a day, a week, or a month. The Kentucky Supreme Court order says that all evictions can resume when the state of emergency ends or on July 25, 2020, whichever comes first. Some evictions can begin before then, but generally only if they are on commercial property or if the eviction is for some reason other than non-payment of rent. The order goes on to say that “…nothing in this Order shall be interpreted to suspend or otherwise excuse an individual’s duty to pay rent….” In other words, if you aren’t paying rent now then you’re living on borrowed time. The backlog of unpaid rent is piling up, and you have a maximum of seven weeks before that bill comes due.

How the Kentucky Supreme Court Order Affects Homeowners

If you own your home and are behind on mortgage payments, the situation is even more dire. The order allows judicial sales to begin again, effective immediately. A judicial sale is when a mortgage company gets a foreclosure judgment against you and the Master Commissioner sells your house to the highest bidder. The day of the judicial sale, the buyer is allowed to enter the house and change any locks on the doors. The judicial sale is a point of no return. Northern Kentucky counties – particularly Boone County, Kenton County, and Campbell County – have already put out scheduling orders for when hearings will be held to schedule the Master Commissioner’s sale. Lawrence & Associates Accident and Injury Lawyers, LLC has one client whose hearing is as early as June 11, 2020. While the amount of time depends on the county you live in, it does seem like homeowners who are several months behind on a mortgage have even less than the seven weeks that renters have to get caught up or find another way to save their homes.

What Does Bankruptcy Do to Save Your Home?

For homeowners, this answer is easy. If you’re behind on your mortgage and you can’t catch up, you file a Chapter 13 bankruptcy. The rules in Chapter 13 are simple. You have to make your regular, monthly mortgage payment directly to the mortgage company beginning when the next payment is due after the bankruptcy is filed. (So for example, if you pay on the first of every month and you file bankruptcy on June 15, you’d need to start regular monthly mortgage payments again on July 1.) The total unpaid arrearage on the mortgage goes into the bankruptcy and your monthly bankruptcy payment will pay it off in full. The mortgage company can’t charge interest on the arrearage in the bankruptcy, but they get to charge any late fees or attorneys fees that were applied before the bankruptcy was filed. Your normal interest rate applies to the rest of the mortgage. You can file this bankruptcy at any time before the Master Commissioner’s sale, but once that sale happens the bankruptcy can’t save the home anymore. But whatever you do, don’t wait until right before the sale happens. You have to come up with several hundred dollars and quite a few documents to file, and the average client takes around a month to get everything together. Even if you are faster than average, you might not find an attorney willing to turn it around for you in just a day or so. That kind of speed can lead to mistakes, and many of us have other clients already scheduled to file.

For renters, the answer is a little more complicated. Your safest bet is to file the bankruptcy before the eviction is ever filed in court. If you do that, you’ll still have to get caught up on your rent while the bankruptcy is in progress, but you are guaranteed the opportunity to do so. The landlord cannot file an eviction while the bankruptcy is proceeding. But if the landlord files the eviction in court first, the landlord has a unique power to negotiate an agreement over the rent arrearage rather than having an agreement forced on the landlord by the bankruptcy court. If you wait to file bankruptcy until after an eviction is already filed in court, the bankruptcy will stop the eviction action temporarily. But it’s not a given that the bankruptcy will automatically save you from eviction. Landlords have a lot more rights in bankruptcies than most other creditors. This means Kentucky renters who are behind on their rent should not wait until July 25, 2020 or the end of Kentucky state of emergency before they file bankruptcy! Beating the landlord to court is the surest way to make sure you aren’t out on the street once the state of emergency expires.

If you have more questions about evictions or foreclosures, or just about how bankruptcy works in general, don’t hesitate to call Lawrence & Associates Accident and Injury Lawyers, LLC at (513) 351-5997. Our attorney consultations are free, confidential, and can be done by phone or video. We’re Working Hard for the Working Class, and the COVID-19 pandemic can’t change that. Good luck out there!


Posted on Tuesday, April 28th, 2020 at 1:47 pm    

The short answer is, “No, you’ll almost certainly get to keep the money if you have a good attorney.” After all, that’s what we do – find the loopholes and use them to your benefit. The long answer is a little more complex. First, the CARES Act makes it clear that the stimulus check can’t be counted toward income in a bankruptcy. Therefore, if you’re an existing Chapter 13 client, the Chapter 13 Trustee can’t demand that you turn the money over. The Eastern District of Kentucky Trustee says so in her blog. Because the CARES stimulus check is not a part of your income, it can’t prevent you from filing a Chapter 7. Further, it can’t increase your disposable monthly income (DMI), which is one of the factors that sets your Chapter 13 payment.

The bigger problem is that nothing in the CARES Act says the stimulus payment can’t be property of the bankruptcy estate. It doesn’t say it can be, either. Instead, it’s silent. The “bankruptcy estate” is made up of all your assets on the date you file, include payments you expect to get shortly after filing even if you haven’t gotten them yet. If you filed bankruptcy before March 27, 2020, you don’t have a problem. You can’t expect to get a payment because of a law that didn’t exist yet. But if you filed on that date or after, that’s where things get troubling. The U.S. Trustee Program has explicitly told Trustees that “Regardless of whether the rebate is property of the estate, the United States Trustee expects that it is highly unlikely that the trustee would administer the payment after consideration of all relevant circumstances….” The word “administer” in that sentence means “take the payment away from the person filing bankruptcy”. That’s a strong statement and the underlining is in the original document. But it doesn’t outright prohibit a Trustee from taking the cash and some Trustees are more aggressive than others. Therefore, your best bet to keep the money is to make sure you exempt it. In most states and for those in which federal exemptions apply, that means using your precious Wildcard Exemption, which is used for everything from the cash you have in the bank to your second car. Artfully using the rest of your exemptions to keep as much Wildcard available as possible is essential, and that’s often where great attorneys are separated from those that shouldn’t be dabbling in bankruptcy law.

If you’re a DIY bankruptcy filer – which I don’t recommend – the actual language of the portion of the CARES Act that lays the foundation for all this is printed below. If you have other questions or know someone that needs to file bankruptcy right now, our doors are (virtually) open and we’re getting things filed quickly using Zoom, Google Duo, and the old fashioned fax and telephone. Good luck out there!



(a) Small Business Debtor Reorganization.—

(1) IN GENERAL.—Section 1182(1) of title 11, United States Code, is amended to read as follows:

“(1) DEBTOR.—The term ‘debtor’—

“(A) subject to subparagraph (B), means a person engaged in commercial or business activities (including any affiliate of such person that is also a debtor under this title and excluding a person whose primary activity is the business of owning single asset real estate) that has aggregate noncontingent liquidated secured and unsecured debts as of the date of the filing of the petition or the date of the order for relief in an amount not more than $7,500,000 (excluding debts owed to 1 or more affiliates or insiders) not less than 50 percent of which arose from the commercial or business activities of the debtor; and

“(B) does not include—

“(i) any member of a group of affiliated debtors that has aggregate noncontingent liquidated secured and unsecured debts in an amount greater than $7,500,000 (excluding debt owed to 1 or more affiliates or insiders);

“(ii) any debtor that is a corporation subject to the reporting requirements under section 13 or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m, 78o(d)); or

“(iii) any debtor that is an affiliate of an issuer, as defined in section 3 of the Securities Exchange Act of 1934 (15 U.S.C. 78c).”.

What Does a Bankruptcy Attorney Do in the Eastern District of Kentucky?

Posted on Tuesday, March 20th, 2018 at 2:35 pm    

Hiring a bankruptcy attorney can be expensive. Although Lawrence & Associates Accident and Injury Lawyers, LLC doesn’t charge any upfront fees for a Chapter 13 bankruptcy, many other Northern Kentucky* law firms charge up to two thousand dollars before the bankruptcy is filed. All law firms charge the court’s filing fees and any costs related to credit counseling or credit reports up front, and these expenses generally run in the range of $350, depending on the number of people filing bankruptcy. And Chapter 7 bankruptcies always have fees that must be paid up front, before the bankruptcy is filed. For Lawrence & Associates Accident and Injury Lawyers, LLC, a Chapter 7’s fees and costs are generally around $1,350 depending on the number of people filing bankruptcy. (This includes the court’s filing fee and the cost of pulling a credit report.) Again, other Greater Cincinnati law firms charge a wide range of fees that can go as high as $3,000. Other kinds of bankruptcy can be even more expensive.

So what does the bankruptcy attorney do to justify these fees? When you are shopping between local law firms and deciding who you should hire, how can you compare what services are being offered to know whether your hundreds or thousands of dollars are being wisely spent? We’ve recently written articles that give potential clients tips about how to choose an attorney based on reviews, history with the bar association, membership in attorney organizations, and the attorney’s actions at the consultation. This article will discuss the various, generally reoccurring parts of a bankruptcy attorney’s job to give some insight as to how attorneys earn their keep.

Pre-Filing Work – Gathering Documents and Filling out Schedules

I often tell my clients that 90% of bankruptcy work is preparing things to be filed correctly. If a bankruptcy is well prepared, it leads to far easier hearings and often a quicker resolution for the client. If a bankruptcy is poorly prepared, it can lead to seizure of the client’s assets, failure to discharge some debts, or even allegations of bankruptcy fraud. Attorneys earn their fee before the bankruptcy is even filed, even if that is not where the majority of their time is spent.

There is a long list of documents that Lawrence & Associates Accident and Injury Lawyers, LLC’ clients are asked to gather before the bankruptcy is filed. Many of these documents are inaccessible to anyone but the client, or getting a copy of the document would take far longer for the attorney than it would for the client. They include copies of:

  • Driver’s License and Social Security Card
  • Credit Counseling Course Certificate
  • List of Creditors Not on the Credit Report
  • Six Months’ Bank Statements
  • Six Months’ Proof of Income for the Household
  • Recorded Deed, Mortgage, and PVA Value for any Real Property
  • Certificate or Memorandum of Title for any Vehicles
  • Proof of Insurance for any Vehicles
  • Two Years’ Tax Returns
  • Life Insurance Policies
  • Divorce, Child Support, or Child Custody Orders/Agreements

Each of these documents plays an important role in preparing for the bankruptcy. Each must be provided to the Trustee within seven days after the bankruptcy is filed, so it is crucial that the attorney gather them ahead of time. It is important for the attorney to not only review these documents and use them to prepare the bankruptcy forms and schedules, but also to understand how the information within them can affect the bankruptcy filing. The bankruptcy rules are formed by Section 11 of the United States Code, and those rules fit together to form the best bankruptcy possible for our client. Knowing how to fit the rules together is often like trying to make a puzzle when you know you have all the pieces, but don’t know what the eventual picture should look like. Again, this is where the attorney earns his or her keep!

At Lawrence & Associates Accident and Injury Lawyers, LLC, we recently joined the 21st Century and set up a portal for our clients to use when submitting paperwork and other information about their bankruptcy. Many attorneys still have clients schedule one or more appointments during business hours to come into the office to provide this paperwork and information. We decided that, since most of our clients are working and struggling to make ends meet, it was harmful to ask them to take time out of their workday for a function that could be performed outside normal business hours if it was done online. For clients who are not comfortable using the online portal, we still schedule face-to-face appointments in the office. In addition, we are willing to do consultations either over-the-phone or face-to-face.

After the bankruptcy paperwork is prepared, all bankruptcy attorneys must have a face-to-face appointment to sign all the bankruptcy documents and file them with the court. This meeting is mandated by the bankruptcy rules. During this meeting, the bankruptcy attorney should fully explain what is in all the documents, what will happen after the bankruptcy is filed, and what effect they expect the bankruptcy to have on your assets, debts, and credit score. Expect this meeting to take from one to three hours, depending on the complexity of the bankruptcy.

The 341 Creditors’ Hearing, the Confirmation Hearing, and other Court Hearings

All bankruptcies have at least one hearing, called a 341 hearing or creditors’ hearing, and this is often the most nerve wracking part for the client. However, it is nothing to worry about if the bankruptcy has been well-prepared! These hearings are typically scheduled for a ten to fifteen minute period of time, and a month’s notice is given prior to the hearing so everyone can take off work. At the hearing, the client will be placed under oath, but all the questions are generally simple confirmations of the client’s asset and debt situation – “Is it true the 2013 Camry is the only car you own?” – or canned questions that are asked of everyone regardless of their situation – “Have you lived in Kentucky for the last two years?” It is common at these hearings for the Trustee to tell the attorney that he or she would like to see more documentation, or would like to see a change in the bankruptcy filing. Such requests are generally easy to accomplish, and have a minor effect (or even no effect) on the bankruptcy itself. It is the attorney’s job to comply with the Trustee’s requests.

Chapter 13 bankruptcies also have confirmation hearings, but it is very rare that a client would have to attend one of those. In fact, in Northern Kentucky it is very rare for the confirmation hearing to have to occur at all! Generally, good communication between the attorney and the Trustee eliminates the need for this hearing.

Finally, there may be many more hearings for a bankruptcy depending on whether additional issues arise. Such hearings are uncommon in Chapter 7 bankruptcies, but common in Chapter 13 bankruptcies. Such hearings may arise when creditors object to confirmation or discharge, when our client has to object to a creditor’s fraudulent proof of claim, or when our client needs to temporarily suspend plan payments. It is the bankruptcy attorney’s duty to represent the client at all such hearings, even if they occur months or years after the fee is paid. Particularly for Chapter 13 clients, several years may go by between hearings. Chapter 13 clients should never worry about being charged by their attorney for calling with simple questions about their bankruptcy payment.

In all hearings, it is wise to have an experienced bankruptcy attorney who files a lot of claims. Knowing the bankruptcy rules is one part of successfully navigating bankruptcy hearings, but knowing the Trustee is just as important! Chapter 7 and Chapter 13 Trustees have their own viewpoints on what is reasonable and what is not, on how laws should be interpreted, and on what is best practice in bankruptcy cases. By knowing the Trustee’s proclivities, the attorney can simplify and speed up the bankruptcy, and can often maximize the amount of income the client can keep (in a Chapter 13) or the number of assets the client can keep (in a Chapter 7).

If you have any other questions about what a bankruptcy attorney should be doing for you, please call our Fort Mitchell, Kentucky office at 859-371-5997. We are one of the largest bankruptcy filers in Northern Kentucky and we have helped over 3,000 clients. We’re Working Hard for the Working Class, and we want to help you!

*Northern Kentucky includes the following counties: Boone, Kenton, Campbell, Gallatin, Grant, Pendleton, Bracken, Mason, and Robertson. Each of these counties reports to the federal court in Covington.

Medical Bills and Bankruptcy: Can filing a bankruptcy affect my medical bills?

Posted on Wednesday, March 14th, 2018 at 11:29 am    

The following post is part of our Law Student Blog Writing Project, and is authored by Jennifer Tressler, who is pursuing her Juris Doctorate at The Ohio State University Moritz College of Law.

Seeing medical bills pile up is one of the most stressful and overwhelming experiences a family can go through, particularly when being able to pay for them seems to be a far-off dream unable to be reached in this lifetime. Sometimes, the only thing that seems feasible is declaring bankruptcy. If this sounds like you, do not worry! You are not alone.

Although courts do not require individuals declaring bankruptcy to disclose their reasons for doing so, research shows us that medical bills are the single largest cause of personal bankruptcy, accounting for between fifty and sixty-two percent of all personal bankruptcy filings. This is unsurprising when considering that medical bills often come on suddenly, can be unexpected, and are often very large amounts of money that insurance does not always cover. [Ed. Note: In Northern Kentucky, most medical treatment is provided by St. Elizabeth hospital or one of its subsidiaries. The article below applies to St. Elizabeth and all its subsidiaries, regardless of whether St. Elizabeth has filed a lawsuit against you!]

When filing for bankruptcy, a consumer’s debt is separated into multiple categories. This is because only certain debts can be eliminated through bankruptcy. Fortunately, medical debt is one of them! During bankruptcy, medical debt is considered general, unsecured debt, just like credit cards. This means that medical bills receive no priority treatment during bankruptcy and are able to be wiped out during bankruptcy filing. Depending on what type of bankruptcy a consumer qualifies for and which type of bankruptcy is in his or her best interests, he or she may be able to eliminate financial obligations for medical bills through filing for either Chapter 7 or Chapter 13 bankruptcy.

Chapter 7 bankruptcy is more common than Chapter 13. If a consumer qualifies for Chapter 7 bankruptcy, medical bills, along with all other general, unsecured debt, will be eliminated. There is no limit to the amount of medical debt that can be discharged in Chapter 7 bankruptcy. Any medical bills paid for by credit card will also be discharged. However, in order to qualify for a Chapter 7 bankruptcy, a consumer’s disposable income must be low enough to pass a means test.

The means test is intended to disqualify people with too high of income levels from filing for Chapter 7 bankruptcy. The test calculates whether or not a consumer has the means to pay back a portion of what is owed to creditors. It compares a consumer’s average monthly income for the six months prior to filing for bankruptcy against the median income of the state the consume is domiciled in while factoring in the consumer’s expenses as well as the national and local standards for living expenses. The test takes this information and determines whether a consumer has any disposable income left over with which to pay creditors.

A simple way to determine if you pass the means test is to figure out if your income is above or below your state’s median income for households which are the same size as your own. If your average income for the six months prior to filing for bankruptcy was below the median, you automatically pass the means test and qualify for Chapter 7 bankruptcy and do not need to fill out the rest of the means test. If your average income for the six months prior to filing for bankruptcy was above the median, you do not automatically pass the means test. However, this does not mean you have failed; it simply means you must complete the rest of the test, which requires more information about your expenses.

When filling out the means test, you are required to use IRS standard expense figures (which can be found here) for Northern Kentucky for certain living expenses, even if your actual expenses are higher than the allowed standards. However, actual expense figures are allowed for other expenses such as mortgage, car payments, taxes, health insurance, and child care. Speaking to an attorney can help you figure out the best way to determine if you can pass the means test.

If you do not pass the means test, you cannot file for Chapter 7 bankruptcy. You still may be able to file for a Chapter 13 bankruptcy, which is more complicated than a Chapter 7, but this means that you will likely have to pay back a portion of your debts.

In Chapter 13 bankruptcy, medical bills are categorized with other general, unsecured debts in a consumer’s repayment plan. The amount a consumer must pay general, unsecured creditors depends on income, expenses, and nonexempt assets. Each creditor receives a proportional (“pro rata”) portion of the total amount going towards the debts in the repayment plan. However, consumers can possibly have debt that is too high for a Chapter 13 bankruptcy.

Unsecured debt does not have property or other assets serving as collateral for its payment. Most consumer debt is unsecured. Chapter 13 bankruptcy is only available for consumers who have less than $394,725 total in unsecured debts, though this number changes periodically. Unfortunately, many of the people with debt higher than this cap are people with substantial medical bills. In addition to the unsecured debt limit, consumers must also not have secured debt (debt which has property attached to it as collateral) above $1,184,200 as of April 2016. This most commonly includes mortgages. More often, consumers do not meet the secured debt limit rather than the unsecured debt limit.

Chapter 13 bankruptcy is an option that allows consumers to retain property that they would otherwise lose in a Chapter 7 bankruptcy. What debts are repaid, how much is paid each month, and what happens to debts at the end of a three to five year period is all laid out in a Chapter 13 repayment plan. Though the process of filing for bankruptcy may seem overwhelming, it can help to relieve some of the debt that individuals are struggling to keep up with from harsh medical bills and lack of insurance.

If you are overwhelmed by mounting debt and tired of receiving harassing phone calls from creditors, contact Lawrence & Associates Accident and Injury Lawyers, LLC today. We’ve helped hundreds of people overwhelmed with mountains of medical bills, and we can help you obtain that fresh start that you deserve! Call today for a free consultation at (859)371.5997. We’re Working Hard for the Working Class, and we want to help you!

New Bankruptcy Rules

Posted on Wednesday, March 7th, 2018 at 10:37 am    

On December 1, 2017, a series of new Federal and EDKY bankruptcy rules went into effect. Most of these changes are procedural and will not have a direct impact on a clients’ eligibility or decision to file one chapter of bankruptcy over another. However, these changes must be carefully considered and implemented by counsel to ensure clients’ plans are confirmable and successful.

The changes will be applicable to all cases filed on or after December 1, 2017 but shall also be applied to pending cases where appropriate. While vague, the governing rule means that most likely, none of the amended rules regarding deadlines will apply to cases filed prior to December 1, 2017, but the use of new forms and service of process should be implemented into any case immediately.

The new rules that will have the largest impact on greatest number of debtors include:

Rule 3002: The Bar Date

The bar date for non-governmental units, including secured and unsecured creditors, is now reduced to 70 days from the date of the petition. Debtors’ counsel has a duty to ensure that secured proofs of claim are filed in order to protect their secured assets and therefore this much shorter deadline should be monitored closely.

Rule 3007: Objection of Claims

Under the new rules, Debtors’ counsel must follow substantially different guidelines in order to object to a filed claim. The Objection itself must be accompanied by a Notice of Objection to Claim which conforms to Official Form 420B. The objection must be mailed to the person and address listed on the proof of claim.

Rule 3012: Valuation of Claims

Requests for valuation of secured claims may be made by motion, in a claim objection, or in a Chapter 13 plan unless the creditor is a governmental unit. If the creditor is a governmental unit, the request for valuation can only be made by motion following the bar date or claim or through a claim objection. To comply with this Rule, Debtor’s counsel must careful monitor claims and the new, shorter bar date. If any claim is valued in the plan and the creditor fails to file an objection, confirmation will make such valuation binding. Most importantly, Rule 3012 now requires such creditors to be served in such a manner under Rule 7004; this applies to service of the Chapter 13 plan, a Motion for valuation, or a claim objection requesting valuation.

Form 3015-4(b): Adequate Protection

Previously, Adequate Protection payments could be established through the Chapter 13 Plan. Now, a Debtor must file and serve and order for adequate protection with the plan using Local Form 3015-4(b). However, filing an Agreed Order with a creditor after the initial filing can also serve this purpose.

New Local Forms:

There are now established Local Forms (Local Forms 4001-3-1 and 4001-3-2) for a motion and order to obtain credit to purchase a vehicle post-confirmation.

Additionally, avoidance of judicial and non-PMSI liens can now be accomplished through the Chapter 13 plan or by Motion. Local Forms 4003-2(a) and 4003-2(c) are orders that can be recorded with the county clerk to conveniently compel the release of such liens.

The December 1, 2017 changes to the Bankruptcy code, and specifically, Chapter 13 procedures, require debtors’ counsel to careful monitor filed claims and shorter timelines. With the correct routines and procedures put in place in everyday practice, these changes can be implemented easily and prove extremely beneficial to consumer debtors.

Discharging Student Loan Debt Through Bankruptcy – Choosing Your Path Forward in the Northern Kentucky Bankruptcy System

Posted on Tuesday, February 27th, 2018 at 11:13 am    

The following post is part of our Law Student Blog Writing Project, and is authored by Thomas Rovito, who is pursuing his Juris Doctorate at the Ohio State University.

One of the few things more frightening than end of term finals for students is crushing loan debt after undertaking an educational degree. But fear not. There are several bankruptcy discharge options for federal student loans, which may be altered by the type of bankruptcy, such as Chapter 7 or Chapter 13, or if the student has a specific level of disability.

Fortunately, there are several sources available online for free that can serve as guides on this topic. For instance, the Federal Student Aid Office of the U.S. Department of Education provides information on both loan forgiveness, cancellation, and discharge, as well as what happens to your federal student loan if you file for bankruptcy. Third-party legal websites, such as FindLaw, LegalZoom, and Nolo have various summaries on this topic. In addition, popular newspapers on finance, such as Forbes and NerdWallet, and education, like U.S. News & World Report, occasionally run articles on this topic. In addition, Lawrence & Associates Accident and Injury Lawyers, LLC has a proven track record on successfully resolving student loan debt legal issues for clients.

It is important at the forefront to look at the underlying statistics behind student loan debt discharge through bankruptcy for a realistic assessment. According to empirical research from the American Bankruptcy Law Journal, while “only 0.1 percent of student loan debtors who have filed for bankruptcy attempt to discharge their student loans,” the sample recorded in the journal also noted 39 percent discharged some of their student loan debt. But what legal mechanisms create these underlying statistics?

The first decision is whether to file bankruptcy under Chapter 7 (Liquidation) or Chapter 13 (Reorganization). As most government funded or guaranteed educational loans are non-dischargeable upon filing for bankruptcy, this status places an additional onus on the debtor to commence an adversary proceeding against the loan holder in bankruptcy court. See 11 U.S.C. § 523(a)(8).

The standard to discharge a debt is to display “undue hardship” before the bankruptcy court under the Brunner test. See Brunner v. New York State Higher Educ. Servs. Corp., 831 F.2d 395 (2d Cir. 1987). This test, which has been accepted by most circuit courts, analyzes the facts of the case under the totality of the circumstances through three prongs: first, that payments on the student loan debt would cause the debtor to fall below a minimal standard of living, second, that persistent special circumstances prevent the debtor from paying off the loan, and third, that the debtor made good faith efforts to pay off the loan before filing for bankruptcy. As this test is relatively elastic, the outcome of the analysis will depend on the particular bankruptcy judge hearing the case and the underlying facts presented by debtor. If the bankruptcy court issues a discharge for the student loan debt, the discharge may be either partial or total; the court also has the authority to modify the interest rate for the student loan. If the bankruptcy court refuses to issue a discharge, the debtor may try to switch to a different repayment plan more consistent with the revenue and expenditures of the debtor.

One persistent special circumstance that materially impacts the bankruptcy discharge is a total and permanent disability discharge (TPD). TPD applies to William D. Ford Federal Direct Loans, Federal Family Education Loan Program Loans, and Federal Perkins Loan Program Loans. A debtor may prove disability to the U.S. Department of Education in one of three ways: veterans may submit paperwork from the U.S. Department of Veterans Affairs articulating unemployability from a service-related disability, recipients of Social Security Disability Insurance or Supplemental Security Income may submit paperwork from the Social Security Administration, or the debtor’s physician can submit paperwork that attests that the debtor is totally and permanently disabled. To view the TPD certification process, please consult https://www.disabilitydischarge.com/. If the U.S. Department of Education (through the Nelnet Total and Permanent Disability Servicer) finds a TPD, then they will instruct the loan collector to cease collection activities and return any payments after the finding of disability; on the other hand, if the U.S. Department of education does not find a TPD, then they will allow the loan collect to resume collection activities.

In the event a debtor obtains a TPD discharge, then they can no longer qualify for a Direct Loan, Perkins Loan, or TEACH Grant, unless the debtor “obtain[s] a certification from a physician that you are able to engage in substantial gainful activity,” and the debtor fills out a form “acknowledging that the new loan or TEACH Grant service obligation cannot be discharged in the future on the basis of any injury or illness present at the time the new loan or TEACH Grant is made, unless your condition substantially deteriorates so that you are again totally and permanently disabled.”

In addition, if the debtor was granted a TPD discharge through the filing of Social Security Administration paperwork or by the debtor’s physician (rather than through the U.S. Department of Veterans Affairs), the debtor will be subject to a three year monitoring period from the U.S. Department of Education, in which the former debtor must respond to inquiries from the U.S. Department of Education or provide notice to the U.S. Department of Education regarding earning thresholds, changes in address, and changes in status. If the former debtor fails to comply with these monitoring requirements, the debtor’s former student loan may be subject to reinstatement.

However, going through the TPD discharge process without also receiving a bankruptcy discharge on a student loan debt can raise tax implications. The U.S. Department of Education will send notice of any discharge of more than $600.00 to the Internal Revenue Service. The U.S. Department of Education will then send an IRS Form 1099-C to the former debtor recording the total amount of the discharge, which is considered as income for federal taxes (and for some states). However, the student loan bankruptcy process will not raise secondary taxation concerns, since a bankrupt debt cannot result in taxation for the forgiveness of a loan. By definition, bankrupt debts are not forgiven.

Thus, bankruptcy through Chapter 7 or Chapter 13 provides one possible avenue for discharging student loan debt through an adversary proceeding in which the bankruptcy court will likely apply the totality of the circumstances. In addition, a finding of Total and Permanent Disability also provides another avenue for student loan debt relief. It is also important to consider non-bankruptcy alternatives for student loan debt relief, such as repayment options, deferments, forbearance, forgiveness, cancellation, consolidation, or rehabilitation, which may preserve the debtor’s credit rating.

For more information, consult one of the experienced attorneys at Lawrence & Associates Accident and Injury Lawyers, LLC when choosing your path forward on discharging student loan debt. We’re Working Hard for the Working Class, and we want to help you!

How Are Kentucky Bankruptcy Trustees Paid, and How Does That Affect My Bankruptcy?

Posted on Thursday, February 22nd, 2018 at 2:38 pm    

Bankruptcy Trustees come in several flavors. The Covington Division of Kentucky’s federal bankruptcy courts alone have three Chapter 7 bankruptcy trustees, one Chapter 13 bankruptcy trustee, a United States Trustee, and occasional special trustees that might be appointed to oversee especially complex cases or cases in which other trustees might have a conflict of interest. Covington’s bankruptcy court covers all of Northern Kentucky*, but does not cover Cincinnati, Ohio, or the counties around Lexington or Louisville. There are a lot of bankruptcy trustees out there!

For this article’s purposes, we are concerned only with the Chapter 7 and Chapter 13 bankruptcy trustees in the Covington Division. Knowing how these trustees are paid, and how they are incentivized, can greatly affect whether you decide to file a Chapter 7 or a Chapter 13 bankruptcy.

Chapter 7 Trustees Get Paid Either Very Little, or a Whole Lot

When a Chapter 7 filed, the Covington Division charges a $335.00 fee as of January 2018. All Northern Kentucky based Chapter 7 Trustees make a flat fee of $75.00 from that filing fee. Chapter 7 bankruptcies are divided into two kinds of cases: “no asset” bankruptcies, and “asset” bankruptcies. In a no asset Chapter 7 bankruptcy, the debtor’s personal property is protected by property exemptions that protect those assets from seizure by the Trustee. This means the debtor’s property is safe, and the Trustee is stuck with only a $75.00 fee for all his or her work.

Chapter 7 bankruptcies with assets are where the question of fees gets interesting. While the filing fee and the flat fee described above remain the same, the Trustee can also get paid a percentage of any assets seized from the debtor. Hearing about assets getting seized sounds scary, but remember that a good bankruptcy attorney will be able to tell you before you file that no assets will get seized. The Trustee’s allowed compensation on seized assets is set forth in federal law, and the Trustee is paid in a stair step method as follows:

  • The Trustee is paid 25% up to the first $5,000;
  • The Trustee is then paid 10% on any amount in excess of $5,000 but not in excess of $50,000;
  • The Trustee is then paid 5% on any amount in excess of $50,000 but not in excess of $1,000,000, and;
  • The Trustee is then paid “reasonable compensation” not to exceed 3% on any amount in excess of $1,000,000.

Let’s assume the debtor in a Chapter 7 bankruptcy has two cars, but can only protect one using the property exemptions. The Trustee will take possession of the other car, and sell it. If the car sells for $20,000.00, the Trustee will get paid 25% of the first $5,000.00 (which is $1,250.00), and then 10% of the next $15,000.00 (which is $1,500.00). That adds up to $2,750.00 of fee for the Trustee, and the remainder of the car’s sale price goes to the bankruptcy’s unsecured creditors.

Notice that the fee schedule for Chapter 7 Trustees has no maximum on the amount that a Trustee can earn. Therefore, anyone with a large, seize-able asset might wind up paying a Chapter 7 Trustee very richly indeed. The types of things that can be considered a seize-able asset might surprise you. We’ve written before about how a personal injury lawsuit can be considered a bankruptcy’s asset, and how a large verdict or settlement designed to compensate a badly injured person can wind up being partially drained by the Trustee’s fee. Chapter 7 Trustees used to be held to a “reasonableness standard” – i.e. any fee they take had to be reasonable, even if the fee schedule mathematically produced a higher result. However, at least Covington based Chapter 7 Trustee has argued that he should no longer be required to take only reasonable fees. If that view holds out, a Trustee’s fees could run into the tens or hundreds of thousands of dollars.

For most people reading this article, a Chapter 7 bankruptcy will cost $335.00 in fees, and that is it. The Trustee will be paid out of that. But make sure – absolutely sure – that your attorney has confirmed no assets can be seized, or you could wind up paying the Trustee a lot of extra money out of your own pocket.

Chapter 13 Trustees Are Paid Out of the Monthly Payments into the Bankruptcy

Chapter 13 Trustees are also paid according to federal law, and unlike Chapter 7 Trustees, their fees are far more consistent. Every Chapter 13 bankruptcy is an “asset” bankruptcy, because the main reasons people file Chapter 13 bankruptcies is to stop foreclosures, stop repossessions, or because they have high income. Therefore, you don’t see the wide variation in fees earned that you see for Chapter 7 Trustees.

A Chapter 13 Trustee’s fee is a percentage on all payments made into the Chapter 13 plan, and that percentage is set by the U.S. Attorney General’s office. The Trustee cannot deviate from that percentage, and is therefore incentivized to make sure the payments into the plan are the maximum allowed by law. Conversely, a good Chapter 13 bankruptcy attorney will attempt to make a Chapter 13 plan payment the minimum required by law.

The Chapter 13 Trustee for the Covington division of Kentucky’s bankruptcy courts is the Chapter 13 Trustee for the entire eastern half of the state. As of January 2018, that Trustee is will only approve Chapter 13 plans if the plan payments calculate an 8% payment to the Trustee on all payments into the plan. While we cannot say for certain that the Trustee actually takes the 8% fee, that is the best guideline we have as to the percentage taken by the Trustee.

Therefore, if a Chapter 13 Plan requires 36 months of payments in the amount of $400.00 each month, that is a total of $14,400.00 in payments over three years. Of that $14,400.00, we can expect the Chapter 13 Trustee to take a fee of about $1,152.00, with the remainder going to various creditors. Again, the amount of the monthly plan payment is subject to a lot of factors, and a good attorney often finds it necessary to look at everything from your mortgages to your credit card statements to find the exact amount. But once that amount is set, so too is the Chapter 13 Trustee’s fee.

If you have any other questions about this topic, please call our Fort Mitchell, Kentucky office at 859-371-5997. We are one of the largest bankruptcy filers in Northern Kentucky and we have helped over 3,000 clients. We’re Working Hard for the Working Class, and we want to help you!

*Northern Kentucky includes the following counties: Boone, Kenton, Campbell, Gallatin, Grant, Pendleton, Bracken, Mason, and Robertson. Each of these counties reports to the federal court in Covington.

The Law Is on Your Side! Legal Recourse for Creditor Harassment After Filing for Bankruptcy in Kentucky

Posted on Tuesday, February 13th, 2018 at 11:48 am    

The following post is part of our Law Student Blog Writing Project, and is authored by Thomas Rovito, who is pursuing his Juris Doctorate at the Ohio State University.

The bankruptcy process is designed to provide debtors with relief from their creditors through a structured legal process. As such, the law provides recourse for debtors from creditor harassment upon petitioning for bankruptcy. Some frequently asked questions regarding creditor harassment and the bankruptcy legal process, which this blog post will answer in turn, include:

  • Why do creditors have to stop harassing me?
  • What is an automatic stay?
  • What happens if a creditor does not obey automatic stay?
  • What is an adversary action?
  • When does a discharging junction kick in?

First, creditors may never illegally harass debtors. The Fair Debt Collection Practices Act (FDCPA), enforced by the Federal Trade Commission (FTC), the Consumer Financial Protection Bureau (CFPB) and the debtor’s State Attorney General’s Office, provides baseline protections for all debtors from illegal creditor harassment. The FDCPA defines illegal creditor harassment as “any conduct the natural consequence of which is to harass, oppress, or abuse any person in connection with the collection of a debt,” such as threats of violence, obscene language, publishing a list of debtors, advertising the sale of a debt to coerce payment, engaging in repeated telephone conversations with the intent to annoy, abuse, or harass, and placing telephone calls without revealing the creditor’s identity under 15 U.S.C. § 1692d. In addition, creditors are prohibited from using “any false, deceptive, or misleading representation or means in connection with the collection of any debt” under 15 U.S.C. § 1692e, and from using “unfair or unconscionable means to collect or attempt to collect any debt” under 15 U.S.C. § 1692f. Therefore, the FDCPA provides a baseline of protections for debtors.

Second, once a debtor files for bankruptcy, the debtor is entitled to expanded protections from creditors through an automatic stay. An automatic stay is “[a]n injunction that automatically stops lawsuits, foreclosures, garnishments, and all collection activity against the debtor the moment a bankruptcy petition is filed.” See 11 U.S.C. § 362. This section specifically includes “any act to collect, assess, or recover a claim against the debtor” in 11 U.S.C. § 362(a)(6). Thus, the automatic stay provides a raised level of protection after a debtor files for bankruptcy.

Third, a creditor may face legal recourse if the creditor does not obey an automatic stay after receiving notice upon the filing of bankruptcy. If a creditor willfully violates a provision of a stay, then the creditor may be liable for actual damages, costs, attorney’s fees, and “in appropriate circumstances,” even large-sum punitive damages through 11 U.S.C. § 362(k)(1). In addition, the bankruptcy court is empowered to impose contempt sanctions against the creditor under 11 U.S.C. § 105(a). In the Covington division of the Eastern District of Kentucky Bankruptcy court system, creditors have been sanctioned (i.e. fined) steeply for violating the automatic stay. Ultimately, bankruptcy law provides potent legal recourses to deter creditors from violating an automatic stay.

Fourth, an adversary action, or proceeding, is a “lawsuit arising in or related to a bankruptcy case that is commenced by filing a complaint with the court.” An illustrative, but not exclusive, list of adversary proceedings is included in Fed. R. Bankr. P. 7001. An adversary proceeding is relevant here, because once a creditor obtains notice of the debtor’s bankruptcy petition, the creditor may file a complaint to object to the discharge of a debt, which triggers the adversary proceeding. A discharge may be denied under 11 U.S.C. 727(a) for a host of reasons, such as:

[A] failure to provide requested tax documents; failure to complete a course on personal financial management; transfer or concealment of property with intent to hinder, delay, or defraud creditors; destruction or concealment of books or records; perjury and other fraudulent acts; failure to account for the loss of assets; violation of a court order or an earlier discharge in an earlier case commenced within certain time frames . . . before the date the petition was filed.

If the adversary proceeding results in trial, the objecting party has the burden of proof. Thus, a creditor may challenge the discharge of a debt through an adversary action spun-off from the bankruptcy process.

Fifth, a discharging junction triggers differently for Chapter 7 (Liquidation) Bankruptcy or Chapter 13 (Adjustment of Debts of an Individual with Regular Income) Bankruptcy. In a Chapter 7 Bankruptcy case, “the court usually grants the discharge promptly on expiration of the time fixed for filing a complaint objecting to discharge and the time fixed for filing a motion to dismiss the case for substantial abuse (60 days following the first date set for the 341 meeting).” This often happens in about 120 days after the debtor files the initial petition for bankruptcy. On the other hand, a Chapter 13 Bankruptcy discharge occurs “as soon as practicable after the debtor completes all payments under the plan,” which may take three to five years. But what if a creditor pesters a debtor in a collection effort for a discharged debt? The debtor may “file a motion with the court, reporting the action and asking that the case be reopened to address the matter,” which courts “often” grant, because the discharge “constitutes a permanent statutory injunction prohibiting creditors from taking any action, including the filing of a lawsuit, designed to collect a discharged debt.” If the creditor violated this injunction, it may be subject to civil contempt resulting in a fine. Ultimately, the legal system provides recourse from creditor harassment after the close of bankruptcy proceedings.

Last Updated : February 20, 2019
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