Utah Bankruptcy Clinic Wins Court Approval For Payment of Student Loans in Chapter 13.

Last week before Utah bankruptcy Judge Mosier, and again this week before Utah bankruptcy Judge Marker, I was able to successfully argue that my chapter 13 clients should be permitted to pay off their student loans through their bankruptcy repayment plans.  Why is this a big deal?  Because historically, the bankruptcy judges and trustees have been very reluctant to allow student loans to be paid through bankruptcy payments plans.  The judges and trustees want people with student loans to put their loans into deferment while they are in a chapter 13, so that all the extra money can go to unsecured creditors like credit cards, medical bills, and payday loans.  The problem is, the interest on student loans continues to compound even while it is in deferment so that when you emerge from bankruptcy you've got a nasty surprise of increased student loan debt.  In the two student loan cases I had confirmed in the last two weeks, my clients will emerge from bankruptcy with their student loans paid and their unsecured debts discharged!  A good result and hopefully a new trend that will be allowed here in the Utah district.

Chapter 13 Filings Going Through the Roof in Utah and Across the Country.

Today I attended a seminar given by Kevin Anderson, the chapter 13 trustee for the district of Utah.  He was giving us bankruptcy lawyers an update on some changes to the local bankruptcy rules and forms.  During the meeting he showed a chart that demonstrates a dramatic rise in the number of chapter 13 cases that are being filed.  The reason he showed this chart to us was, in part, so that we would have more patience in dealing with his office and the bankruptcy court's staff while everyone adjusts to the demands upon the system cause by all these filings.  He speculated that the high unemployment rate and ongoing recession caused so many filings, but I think there may be other factors at work.  Increasingly, bankruptcy lawyers are pushing for their clients to file chapter 13 instead of chapter 7 and this trend may be part of the reason more people entering bankruptcy are choosing chapter 13 instead of 7.  Chapter 13 does require you to pay back a (usually very small) portion of your debts over a 3 to 5 year repayment plan, but in a chapter 13 you don't have to worry about a chapter 7 trustee trying to take your non-exempt assets.  I know in my own practice I will recommend a chapter 13 in a heartbeat if I am even remotely worried about my client losing an asset.  It's just not worth the unpleasant tangling with a chapter 7 trustee if there is a risk of property loss.

Telephone Harassment From "Mystery" Creditor May be a Scam.

Over the last few months an alarming number of my clients have reported an unusually belligerent creditor calling them on the phone to demand payment for debts.  Telephone harassment by creditors isn't all that unusual, but in this case there are some common features to the call that suggest it is part of a fraudulent pattern designed to scare you into coughing up some money to someone you don't owe!  The biggest tipoff is that the caller does not care that you have filed for bankruptcy and have a bankruptcy case number.  Any legitimate creditor based in the United States knows that a debtor who has filed bankruptcy is fully protected and cannot be harassed or even spoken to.  To disregard the protection of bankruptcy puts the creditor in grave risk of huge sanctions; no real creditor would knowingly do so.  Also, the creditor will not identify which debt they are calling about.  Instead, they will say something like, "You owe $3,500 for an Internet loan.  I will accept $500 right now as payment in full."  My clients tell the caller they do not have any Internet loans and ask for the date and the website of the loan, but the caller will angrily say he does not have to provide that information.  Huh?  Usually these calls devolve into shouting matches with the caller angrily listing all of the consequences he will rain down on my client if they don't give him a credit card or other immediate form of payment.  He will say things like he is sending in the federal marshals to take you to jail and other nonsense that is totally impossible but also very scary.  Clearly, this technique is working to scare some people into giving him the cash.   Remember: once you file bankruptcy you are completely protected from this kind of stuff, so don't give in to it.  Contact your lawyer if it happens to you.

What to Expect at the Meeting of Creditors

Everyone who files bankruptcy must attend a meeting of creditors.  When I explain this necessity to my clients, some of them are understandably nervous about what to expect at such a meeting.  Not to worry, the meeting of creditors is no big deal if you have some idea what it's about.  First of all, "meeting of creditors" is something of a misnomer as very rarely do any creditors show up.  Instead, the people who are present are usually you (and your spouse if a joint filing), your attorney, maybe another ten or so people who are also filing bankruptcy and their attorneys, and finally the trustee.  The meeting is held in an office rather than a courtroom.  There is no judge present (the trustee is not a judge-just a court-appointed lawyer who has the job of making sure the paperwork is in order).  The trustee will call off the names of everyone who is scheduled to appear, give a little introductory statement about how he is going to conduct the meeting, and then call the first case.  When your case is called, you and your attorney go and sit near the trustee at a desk.  The first thing you do is hand over your picture ID, proof of SSN, last paycheck you received, and a bank statement showing what was in your account on the date you filed.  Some trustees want some additional documents but your attorney will go over that with you before hand.  Then the trustee will ask you a handful of very simple questions like, "State your name and your address.  Did you read and sign the bankruptcy papers your lawyer prepared?  Does it list all of your assets and debts?  Do you need to make changes?"  That's usually it.  Occasionally the the trustee will question you about a particular debt or piece of property.  The questioning on average lasts less than three minutes and you're done.  See, nothing to worry about!

Putting a Pay Day Loan into Bankruptcy.

As the economy continues to sputter and money remains tight for everyone, even creditors seem to be feeling the pinch.  Some of these creditors who are short of cash are resorting to lying about whether the debt you owe them can be put into bankruptcy.  Pay day lenders seem to be the main culprit in this area.  When my clients tell a pay day lender who keeps calling to collect that they are going to file bankruptcy, the pay day loan rep will say, "You can't put our loan in bankruptcy!"  Some pay day lenders will even make you sign a document when you get the loan where you promise not to put that loan in bankruptcy.  Don't worry about those tactics.  It's not true; it's just a ruse designed to get you to pay them.  Pay day loans, like medical bills and credit cards, are all considered unsecured debts that are easily discharged in a bankruptcy.    The only exception would be if you obtained the pay day loan during the period of time right before you filed bankruptcy.  If that's the case, talk to your lawyer about whether your pay day loan can be discharged in your bankruptcy.