Chapter 7 Bankruptcy

Posted on May 17, 2012 by rellis5020

Chapter 7 bankruptcy conjures up images of lengthy court proceedings and difficulties that follow you for years. That couldn’t be more untrue. In fact, filing for Chapter 7 in Maine can be a fairly simple and painless process. That’s not to say it’s something you should enter into lightly, though.

Chapter 7 Bankruptcy is called a “liquidation” bankruptcy. People in Maine file for Chapter 7 bankruptcy because they simply can’t pay their bills, and are looking for a legal and ethical way to end their debt problems. The purpose of filing a Chapter 7 case is to obtain a discharge of your existing debts – nothing more, and nothing less.

When you file for Chapter 7 bankruptcy you can wipe out debt from:

•Credit cards
•Store cards
•Personal loans
•Checking account overdrafts
•Medical and dental bills
•Certain tax obligations
•Social Security and unemployment overpayments
Under Chapter 7 a trustee takes possession of your property that is not considered “exempt.” Common property types that you can keep when you file for Chapter 7 bankruptcy in Maine are:

•Bank accounts with a total value of up to $800 Joint
•Automobiles with equity of up to $5,000
•A home you live in with equity of up to $95,000 Joint
•Household goods and furnishings
•Clothing and jewelry with a value of up to $1500 Joint
•Pension plans, IRAs, 401k, 403b, and other employer-sponsored retirements accounts
Unfortunately, not every debt can be wiped out. Debts that are not wiped out include:

•Most taxes
•Debts obtained through frad or deceptions
•Child support and alimony payments
•Court-ordered fines and criminal restitution
•Student loans
•Debts for personal injuries caused by driving while intoxicated
The fact is, filing for bankruptcy in Maine doesn’t need to be scary or result in the loss of your belongings. With over one million bankruptcy cases filed each year it’s impossible for the process to be the end of the world. If it were, don’t you think you would have seen front page stories in the newspaper detailing the lives of people who have already gone through the process?

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Student Loan Payment and Forgiveness Programs

Posted on October 27, 2011 by rellis5020

Article was published by IBRinfo.org

Yesterday the Obama Administration announced important and timely new steps to help struggling student loan borrowers. We applaud the Administration’s steps to make more federal loan borrowers aware of Income-Based Repayment and to provide additional repayment relief for up to 1.6 million current students, including a lower monthly payment cap and loan forgiveness after 20 rather than 25 years of responsible payments.

IBR has already helped nearly half a million borrowers lower their payments and avoid default, but many more borrowers are struggling to keep up with their payments in these tough economic times and could benefit from IBR and the proposed Pay-as-You-Earn option. 

By encouraging more borrowers to convert their bank-based federal student loans to more cost-effective Direct Loans, the changes announced today will also help more people qualify for Public Service Loan Forgiveness. Those working for a public or nonprofit employer could see their remaining debt forgiven after just 10 years of payments. Borrowers with bank-based federal loans must already convert them to Direct Loans for their payments to qualify for Public Service Loan Forgiveness.  

The Administration took two additional steps to help students and families decide where to go to college and how to pay for it.  The new model financial aid disclosure form, or draft “shopping sheet,” is designed to make it easier to compare the real cost of different college options.  The new Student Debt Repayment Assistant will help current borrowers with both federal and private student loans, as well as those about to enter repayment, better understand their options.

With these changes on the way, it’s more important than ever to make sure that the millions of borrowers who could benefit from IBR know it’s out there. With the class of 2011 about to face their first student loan payments, there’s no time to waste.

IBR has been available to borrowers since July 2009. For more about how IBR and Public Service Loan Forgiveness work and how to apply, see our consumer website: www.IBRinfo.org.

For more on the Obama Administration announcement, please visit the White House website.

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New Means Test Figures Effective November 1st, 2011

Posted on October 24, 2011 by rellis5020

The bankruptcy means test is an objective standard of weighing whether a debtor qualifies for bankruptcy under Chapter 7. Old bankruptcy law often made it relatively easy for filers to meet the criteria since bankruptcy courts used considerable discretion in determining eligibility. However, Congress passed the Bankruptcy Protection Act of 2005 to counteract the effects of lenient and inconsistent standards. As a result, most filers must now pass the bankruptcy means test to qualify for Chapter 7 bankruptcy.

Debtors Eligible to Bypass the Means Test

The bankruptcy means test does not apply to disabled veterans that incurred debt while on active duty or while serving in homeland defense activities. This exclusion applies as long as the veteran’s disability rating is at least 30 percent and more than half of the debt was acquired during active military duty or during service for homeland defense. Despite income and expenses, the veteran may file for Chapter 7.

If a filer’s debts came mostly from operating a business, the bankruptcy means test is inapplicable and the debtor may file for bankruptcy under Chapter 7.

The Means Test: Step 1

The first part the means test compares the debtor’s average monthly income for the six months before filing for bankruptcy with their state’s median family income. If a debtor’s income is less than or equal to the state median, they can file for Chapter 7. There is still a chance that, even if a debtor passes the median income test, a bankruptcy trustee may later determine that the debtor has enough income after paying allowable expenses to repay creditors in a Chapter 13 repayment plan. The bankruptcy court will convert the Chapter 7 bankruptcy to a Chapter 13 bankruptcy if it agrees with the trustee.

The income calculation should include the following sources:

  • wages, salary, tips, bonuses, overtime, and commissions
  • gross income from a business, profession, or a farm
  • interest, dividends, and royalties
  • rental and  real property income
  • regular child support or spousal support
  • unemployment compensation
  • pension and retirement income
  • workers’ compensation
  • annuity payments
  • state disability insurance

Income excluded from the calculation includes tax refunds, Social Security retirement benefits, Social Security Disability Insurance, Supplemental Security Income, and Temporary Assistance for Needy Families.

The Means Test: Step 2

If the debtor makes more than their state’s median income, it is necessary to complete the second part of the means test to determine eligibility. If after deducting all allowed expenses — actual and standardized expenses — the debtor’s disposable income is enough to pay some portion of unsecured debt in a Chapter 13 repayment plan, then the debtor does not qualify for Chapter 7.

Explain Your Special Circumstances If You Fail the Means Test

A debtor that does not pass the bankruptcy means test may choose to file for Chapter 7 anyway. In all likelihood, a motion will be made to dismiss the case or convert it to a Chapter 13 bankruptcy. The debtor can defend the motion by establishing the presence of “special circumstances,” such as recent unemployment, unusually high rent, or a serious medical condition. To demonstrate the special circumstance, the debtor must provide documentation for the requested expense or adjustment to their income and must explain the necessity of the adjustment or expense. If the bankruptcy court allows the expense or adjustment and the debtor passes the means test, then the debtor will win the motion.

File for Chapter 13 Bankruptcy If You Fail the Means Test

A debtor that fails the means test may file for Chapter 13 bankruptcy. Chapter 13 places a filer’s debt in a five-year repayment plan. The plan must include the repayment of mandatory debts, such as priority debts and secured debts, and a portion of debts owed to nonpriority, unsecured creditors.

Effective November 1st, 2011, the State of Maine means test figures are:

Household Size:   

1 Earner                            $40,532

2 People                            $51,738

3 People                            $60,195

4 People                            $74,738    

* Add $7,500 for each individual in excess of 4.                       

 

 

 

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Chapter 13 – Mortgage Principal Paydown Plan

Posted on October 13, 2011 by rellis5020

Members of NACBA’s Legislative Committee traveled to Washington last week for meetings regarding the Principal Paydown Plan and other bankruptcy-related issues. 

Now that the debt ceiling crisis and the August legislative recess are past us, Congress and the Administration are re-focusing on the reality that we and our clients live with every day – unemployment and the foreclosure crisis. 

How the Principal Paydown Plan Could Help You!
What problem would the Principal Paydown Plan address?  Right now millions of homes are at risk of foreclosure because homeowners are behind on their mortgage payments.  The homeowners cannot refinance their mortgages because their home values have decreased in recent years.  Studies show that the biggest contributing factor to people abandoning their homes is if the home value is less than the current mortgage balance.  When homes are abandoned or foreclosed, that decreases the values of other nearby properties.  Many communities in our country are currently caught in this vicious cycle of dropping home values causing foreclosures & foreclosures causing home values to drop.

NACBA* has a proposal (the “Principal Paydown Plan”) to reduce mortgage balances and help increase home values, but we need your help in order to put it into effect.  Below is a brief summary of the plan and what you can do to help us get the
word out.

What is the Principal Paydown Plan?
The Principal Paydown Plan would give bankruptcy judges the ability to force a loan modification of certain Chapter 13 bankruptcy debtors’ first mortgages.  For example, if your home value is less than the current balance of the first mortgage, the loan would be modified as follows:

  • All of your missed payments would be added to your current balance, and you would be current on your mortgage. 
  • Your mortgage interest rate would be reduced to 0% for five years.  This means that every dollar you pay would go straight to paying off your mortgage.  For five years, your mortgage company would not be collecting any interest from you.  This would pay off the balance of your mortgage much faster than it is currently. 
  • There would be a federal judge overseeing and enforcing the modification.  No more endless applications or being denied for no good reason.  There would be rules that the mortgage companies would be forced to follow.  The modification would be part of your bankruptcy plan, so your attorney would do the work of preparing it with you.
  • At the end of the five year 0% interest period, your mortgage would be recalculated at a fixed interest rate (the current market rate) over the next 25 years.  You would not have to worry about having a variable rate mortgage explode when interest rates eventually increase in the coming years.

How would this affect me if the Principal Paydown Plan is adopted by the federal government?

If you’re in a Chapter 13 bankruptcy and you own your residence, the Principal Paydown Plan could help you

  • become current on your mortgage
  • reduce your mortgage payments
  • gain substantial equity in your home over five years
  • go from a variable interest rate to a fixed interest rate
  • eliminate balloon payments (larger payments due at the end of the mortgage’s term)
  • stabilize your neighborhood’s home values

If you do not own a home, the Principal Paydown Plan would still help you as a taxpayer by reducing the federal government’s foreclosure losses that are being passed on to the taxpayers. It would help your community by slowing or stopping the decreasing home values.

Is the Principal Paydown Plan in effect now?
No, it is not.  The federal Bankruptcy Code does not allow a home loan modification like this, unless the mortgage lender agrees to it.  Since the federal government is the lender in more than half of the mortgages in the country, if the federal government agrees to the Principal Paydown Plan, a large number of homes would be included in this plan.  Your home lender may be the federal government and you might not even know it!  But, we need the federal government to agree to this plan in order to put it into effect.

What can I do to help?
Currently the NACBA is petitioning the Obama Administration to review and respond to this plan.  The NACBA has been in discussion with several government agencies, but still needs the federal government to agree to it. Please sign their petition at the website below.  It only takes a few minutes to sign (you will need to set up a whitehouse.gov account, but it only asks for your name, zip code, and an e-mail address to send a confirmation e-mail to).

Sign the petition at: http://wh.gov/g8d
Anyone can sign the petition, so please ask your family and friends for their support and their signatures.  Thank you.
*NACBA is the National Association of Consumer Bankruptcy Attorneys.

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Hello world!

Posted on October 12, 2011 by rellis5020

Welcome to McCue Law Offices, LLC!  We are excited to begin being able to educate you on our areas of practice and hopefully provide (over time) some extensive information on these areas of the law.  We want to be a resource to our community and of course offer outstanding service when it is needed.  Thanks for stopping by and visit often!

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