As April 15 draws closer, I am getting quite a few phone calls and emails from people who are considering filing Chapter 7 bankruptcy but are worried that they may lose their income tax refund if they do.

Most of these people are depending on their income tax refund for necessary living expenses or are planning to use it to catch up on mortgage payments or car payments. Some are even wanting to use their income tax refund to pay their bankruptcy attorney’s fees and filing fees.

The answer to this question depends on the specific facts of your situation and where you file your case. The exemption laws that are available to protect an income tax refund vary dramatically from state to state.

Like everything else in bankruptcy, it is very important that you be completely open and honest with your bankruptcy lawyer about your income tax refund. I ask every client of mine whether or not they have filed their tax return and whether or not they have already received or are expecting an income tax refund.

In Oklahoma, if you file your bankruptcy case AFTER you get your income tax refund, and you spent your refund on exempt property, then your worries are over. It’s not an issue.

It would be all right to spend the tax refund on things such as food, clothing, household goods, home and vehicle repairs, catching up on your house payments, and contributing to retirement accounts.

But you could spend your tax refund in such a way as to create a problem.

For example, if you used the tax refund to repay a relative money you owed them, or to pay off one of your credit cards, that’s considered a “preferential transfer” where one creditor was treated more favorable than the others. And when that happens, the Chapter 7 trustee can force your relative or the credit card company turn over that money.

However, if you file your bankruptcy case BEFORE you get your income tax refund, you must disclose the tax refund in your bankruptcy documents as an asset.

And in Oklahoma, except for any portion of the tax refund that is attributable to the earned income credit, the tax refund is a non-exempt asset which means that it can be taken by the Chapter 7 trustee to be paid to your unsecured creditors.

Whether or not the Chapter 7 trustee will take an income tax refund usually depends on two things: 1) how large the refund is, and 2) what percentage of your unsecured debts would be paid by the refund. If the total amount is small and the percentage paid back would be insignificant, the trustee is likely to abandon the tax refund and allow you to keep it.

If you filed a joint tax return with your spouse, but only one of you filed bankruptcy, your tax refund will be prorated according to the ratios of you and your spouse’s incomes and the trustee would only be able to take the refund belong to the spouse who has filed bankruptcy.

If you file your bankruptcy after January 1, but before you received your refund, the Chapter 7 trustee can take your share of the entire refund.

If you file your bankruptcy petition before January 1, the Chapter 7 trustee may take a pro-rata portion of the refund attributable to the months before you filed your bankruptcy case.

For example, if you file bankruptcy on September 30, nine months of the year (January – September) is considered pre-petition (before the bankruptcy case is filed) and three months of the year (October – December) is considered post-petition (after the bankruptcy case is filed). In this example, the Trustee can take 75% of your refund, while you get to keep the other 25%.

Lastly, future tax refunds beyond the year in which you file your bankruptcy petition are not subject to being taken by the Chapter 7 trustee.

If you are considering filing bankruptcy but are worried about losing your income tax refund, contact me today to schedule a FREE initial consultation. Just fill out the Contact Dan form on the far right side of the page and click the Submit button and I’ll get back with you as quickly as I can. Or just pick up the phone and give me a call at 918-615-8260. I’ll answer all of your questions in plain English so that you’ll have the information you need to make the decisions that will help you the most.

There’s a lot of confusion concerning exactly how long a bankruptcy filing can legally stay on a person’s credit report.

Ask that question and you’re sure to get quite a few different answers. Some will say ten years. Others will say ten years for a Chapter 7 and seven years for a Chapter 13.

The law is actually very clear on this particular issue. The Fair Credit Reporting Act (“FCRA”) directs credit reporting agencies to remove bankruptcy case information from all consumer reports ten years after the date of entry of the “order for relief.” See 15 USC 1681c(a)(1).

The FCRA doesn’t distinguish between Chapter 7 and Chapter 13. However, many credit counselors cite an “unofficial policy” of the three largest credit reporting bureaus (Equifax, Experian, and TransUnion) to remove chapter 13 filing information from your credit report after seven years.

There’s also confusion over when the FCRA’s ten year time period begins. Some say the information must be removed ten years after the date of the discharge. However, the United States Bankruptcy Code states that the order for relief date is the date the bankruptcy petition was filed, so the ten year period must is measured from the bankruptcy filing date, not the discharge date. See 11 USC 301.

Therefore, information about your bankruptcy must be removed from your credit report no later than ten years after the date you filed bankruptcy. For example, if you filed bankruptcy on January 1, 2010, the bankruptcy must be removed from your credit report no later than December 31, 2019.

Recently I’ve had several clients call and tell me that they just realized that they had forgotten to include a creditor in their bankruptcy.

This doesn’t happen often as I spend a lot of time reminding my clients that they must be extremely thorough in making sure that they have listed each and every one of their creditors. And we take steps to ensure that we’re not forgetting any creditors such as obtaining the client’s credit reports.

But occasionally even the most organized client forgets a creditor. Then what do you do?

Well, it depends on where you filed your bankruptcy case and what kind of bankruptcy case you filed.

If your case is a no-asset Chapter 7 bankruptcy, meaning that none of your property will be taken and liquidated and the proceeds paid to your unsecured creditors, some bankruptcy courts require you to amend your bankruptcy schedules and give notice to the added creditor in order to have the debt officially discharged. If your case has already been discharged and closed, then you would have to file a Motion to Reopen you case and then amend your bankruptcy schedules and give notice to the added creditor. And be aware that there are court costs associated with filing amended schedules ($26.00) and motions to reopen cases ($260.00).

In one of the federal bankruptcy districts in which I practice, Judge Dana L. Rasure held in In re Cerrudo, 214 B.R. 500 (Bankr. N.D. Okl. 1997) that an unlisted debt that would otherwise be dischargeable is discharged without further action by the debtor if the case was a Chapter 7 in which no assets were distributed. In the Cerrudo case, Judge Rasure denied the debtor’s Motion to Reopen finding that unscheduled debts are not excepted from discharge by virtue of 11 USC Section 523(a)(3) unless the debt would be non-dischargeable under one of the intentional tort exceptions contained in Section 523(a)(2), (4), or (6) and that pursuant to Section 727(b), an unscheduled debt in a no-asset chapter 7 case is discharged unless the debt could have been found to be non-dischargeable under the intentional tort exceptions if the creditor had been given an opportunity to timely seek such relief.

The above rules apply only in a no-asset Chapter 7 bankruptcy. If your case is a Chapter 13 case or a Chapter 7 case where assets were liquidated and made available to unsecured creditors, then a creditor who was left out was harmed by not being included in the case and therefore not being able to receive funds that were available to unsecured creditors. And therefore, that unlisted debt would survive the bankruptcy and the debtor would still be liable for the money owed that particular creditor.

If you realize that you have forgotten to list a creditor in your bankruptcy, contact your bankruptcy attorney as soon as possible for advice regarding your specific situation.

This BAPCPA Man cartoon is posted by the Oklahoma Bankruptcy Lawyer Blog with the express permission of the creators of BAPCPA Man:

For more information on the differences between Chapter 7 bankruptcy and Chapter 13 bankruptcy, read these previous blogs posts that I’ve written:

• What is Chapter 7 bankruptcy in Oklahoma?
• What is Chapter 13 bankruptcy in Oklahoma?
• What is the difference between Chapter 7 and Chapter 13 bankruptcy?

If you’re considering filing bankruptcy but aren’t sure which type of bankruptcy would be best for your specific situation, contact me today to schedule a FREE initial telephone consultation. Just fill out the Contact Dan form on the far right side of the page and click the Submit button and I’ll get back with you as quickly as I can. Or just give me a call at 918-615-8260. I’ll answer all of your questions in plain English so that you can make a wise decision regarding which type of bankruptcy would be the most help to you.

If you’re behind in paying your bills, a debt collector is probably calling you.

If a debt collector contacts you about a past-due bill, you may want to talk to them at least once to see if you can resolve the matter.

Then if you decide that you don’t want the debt collector to contact you again, tell them – in writing – to stop contacting you.

Write the debt collector a letter in which you advise that they are no longer to contact you regarding the debt. Make a copy of your letter. Send the original by certified mail, and pay for a “return receipt” so you’ll be able to document when the collector received your letter.

Sending such a letter to a debt collector you owe money to does not get rid of the debt, but it should stop the contact.

Once the debt collector receives your letter, they may not contact you again, except in two instances:

1. to tell you there will be no further contact, or
2. to tell you that they or the creditor intend to take a specific action, like filing a lawsuit. The creditor or the debt collector still can sue you to collect the debt.

If an attorney is representing you about the debt, the debt collector must contact the attorney, rather than you.

If you don’t have an attorney, a debt collector may contact other people – but only to find out your address, your home phone number, and where you work. Debt collectors usually are prohibited from contacting third parties more than once. Other than to obtain this location information about you, a debt collector generally is not permitted to discuss your debt with anyone other than you or your attorney.

If you’re stressed out because debt collectors are filling your mailbox with collection letters and are calling you non-stop from morning ’til evening, fill out the “Contact Dan” form on the right side of this page and tell me about your situation. Or just pick up the phone and give me a call. I’ll be happy to listen to you explain your financial situation to me, and then I’ll share with you how filing bankruptcy would affect your specific situation. If you’re like most of the good people I work with, filing bankruptcy will stop the debt collectors, greatly reduce your stress and restore your peace-of-mind.

Yes. However, if the caller is a third-party debt collector attempting to collect a debt owed to another individual or company, then the Fair Debt Collection Practices Act (FDCPA) applies and the bill collector must stop calling once you tell him/her that your employer does not allow you to receive collection calls at work.

If the caller is trying collect it’s own overdue account, then the FDCPA does not apply.

If debt collectors are driving you crazy and you’re wondering how bankruptcy may be able to help, I’d be happy to answer your questions. Just fill out the Contact Dan form on the right side of this page, click on the Submit button, and I’ll get back with you as soon as I can. Or just pick up the phone and give me a call at 918-615-8260. I look forward to hearing from you.

It’s against federal law for a bill collector who works for a collection agency (as opposed to working in the collections department of the creditor itself) to call you at an unreasonable time.

The Fair Debt Collection Practices Act says that before 8 a.m. or after 9 p.m. are considered unreasonable times, but other hours may be unreasonable too, such as daytime hours for a person who works nights.

If debt collectors are driving you crazy and you’re wondering how bankruptcy might help, I’d be happy to talk with you and answer your questions. Just fill out the Contact Dan form on the right side of this page, click on the Submit button, and I’ll get back with you as soon as I can. Or just pick up the phone and give me a call at 918-615-8260. I look forward to hearing from you.

Yesterday a man asked me if there was a minimum amount of debt that he must owe in order for him to be allowed to file bankruptcy.

Apparently someone had advised him that he didn’t owe enough money in order to file bankruptcy. He was told that the bankruptcy judge would probably dismiss his case because   he didn’t really have enough debt to justify filing bankruptcy.

The fact of the matter is that the U. S. Bankruptcy Code does not require a minimum amount of debt in order to file bankruptcy.

The decision to file bankruptcy should not be made simply based on the amount of debt owed because debt is relative. What may be a small amount of debt to one person can be an overwhelming amount to another.

The decision to file bankruptcy should be made after determining whether or not there are realistic options available to pay off the debt in the short term by:

• increasing income through a second job,
• reducing discretionary expenses,
• selling assets, or
• a monetary gift from family or friends.

If there is no realistic way to get out of debt, then bankruptcy may very well be the best option to deal with what for some may seem like a small amount of debt. All the more so if a person has been sued by a creditor and is facing the garnishment of his wages or bank account which would have severe consequences on the debtor’s ability to provide for himself and his family.

If you’re struggling with debt problems, contact me today to schedule a FREE initial consultation. Just fill out the Contact Dan form on the far right side of the page and click the Submit button and I’ll get back with you as quickly as I can. I would count it a privilege to be able to visit with you in a relaxed and confidential environment where I’ll answer all of your questions in plain English and give you the straight scoop on the pros and cons of bankruptcy as related to your specific situation.

Usually the answer is yes. But there are many factors that affect whether or not a person filing bankruptcy can keep their car or truck including how much your vehicle is worth, how much you owe on the vehicle and how far behind you are on the payments at the time you file for Chapter 7 bankruptcy.

Let me begin by talking to the people who have a loan and are making payments for their vehicle. You have three (3) choices:

First, you can surrender or give back the car.

You need to be honest with yourself and ask if it is in your financial best interest to keep your car or truck.

• Can you really afford the vehicle?
• Will your financial situation make it difficult for you to make the payments each month?
• Do you have equity in the vehicle or are you upside down owing more than the vehicle is worth?

If you can’t afford the payments, or you owe significantly more than your vehicle is worth, Chapter 7 bankruptcy will allow you to surrender or give back your vehicle and walk away without owing another penny. That can be a good deal for many people who are in a bind regarding their car or truck. Then you get something to drive that you can really afford. It may be just a “beater” but that’s OK if it will get you back and forth to where you need to go until you can save up for something better.

Second, you can redeem the car.

Redemption is the process of buying your car back from the bank/credit union/finance company for the fair market value of the car. Did you get that? Buying back for what the vehicle is really worth as opposed to what you owe for it. If you are substantially upside down, redemption can be a terrific deal.

However, redemption requires a lump sum payment and most people filing bankruptcy don’t have a large amount of cash just sitting around. But maybe a family member or friend could loan you the money. Or you can check with companies that specializes in financing vehicle redemptions such as  722 Redemption Funding. These companies charge high interest rates but it can still be a good deal since you would be significantly reducing the principal owed on the vehicle. If you are considering obtaining financing for a redemption, you should investigate the terms before filing for bankruptcy to make sure that you meet the qualifications for a redemption loan.

Third, you can reaffirm the car loan.

Reaffirmation is the renewal of a loan between a lender and a borrower. This means that if you sign a Reaffirmation Agreement, the bankruptcy will not discharge or wipe-out the vehicle loan. You would still owe that money to your vehicle lender and should you not be able to pay in the future, your lender would be able to pursue all legal methods of collecting that debt.

In order to reaffirm your car loan, you will need to be current on the car. And your budget must reflect that you have the ability to make the car payment without it being a financial hardship.

If you lease your vehicle:

If you are current on your lease payments, then you may assume the lease and continue with your contract if you choose. If the lease payments are too high, then you may wish to reject the lease and turn the car back into the dealership.

If you don’t owe money on your vehicle:

If you own your car or truck outright, meaning there is no loan on the vehicle, then in Oklahoma, you can keep the vehicle with no problem if it is worth $7,500.00 or less. Each bankruptcy debtor is allowed a $7,500.00 exemption for a motor vehicle so if a husband and wife file bankruptcy together, they can stack or combine their exemptions and protect a single vehicle worth up to $15,000.00. If the vehicle is worth more than the allowed exemption amount, then you would owe the difference. If you were unable to pay the Chapter 7 trustee the difference, then the trustee could take your vehicle, sell it at auction, and give you back $7,500.00/$15,000.00.

Each bankruptcy case is different, so the decision whether to keep or return a vehicle must be made on a case-by-case basis.

If you’re struggling with debt problems and would like to know more about how bankruptcy may be able to help you, contact Dan Nunley today by completing the “Contact Dan” form on the right side of this page. I’ll get back in touch with you as soon as I can to schedule a FREE initial telephone consultation. I would count it a privilege to be able to visit with you in a relaxed and confidential environment where I’ll answer all of your questions in plain English and give you the straight scoop on the pros and cons of bankruptcy as related to your specific situation.

There are many differences between Chapter 7 and Chapter 13 bankruptcy. Chapter 7 is much less expensive than Chapter 13. Chapter 7 is much shorter in duration than Chapter 13. But most importantly, these two different types of bankruptcy were designed to deal with different types of debt problems.

Chapter 7 bankruptcy allows a person to wipe out debt and obtain a fresh start in just a few months. Chapter 7 bankruptcy will wipe out unsecured debts such as credit cards, medical bills and payday loans.

Chapter 7 will also allow you to surrender a home or vehicle or other financed purchase and walk away without owing another penny. The entire Chapter 7 process usually takes about 4 months from the time you file until the end of your case.

Chapter 13 bankruptcy is a repayment plan that lasts from 3 to 5 years. Chapter 13 is a form of debt consolidation where you pay back secured debts, usually in full, and pay cents on the dollar on your unsecured debts. Your bankruptcy lawyer creates a Chapter 13 plan which requires you to make a monthly payment to the Chapter 13 Trustee who then pays your different creditors.

A great benefit of Chapter 13 is that it will stop the foreclosure of your home or the repossession of your car and allow you to cure any delinquency and catch up your payments over the length of the Chapter 13 plan.

If you’re struggling with debt problems and would like to know more about the different types of bankruptcy and which would be best for your specific situation, contact me today to schedule a FREE initial consultation. Just fill out the Contact Dan form on the far right side of the page and click the Submit button and I’ll get back with you as quickly as I can. I would count it a privilege to be able to visit with you in a relaxed and confidential environment where I’ll answer all of your questions in plain English and give you the straight scoop on the pros and cons of bankruptcy as related to your specific situation.