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Bankruptcy and Medical Debt

Posted by: Kevin Ahrenholz

People often call me and ask whether there is something called a “medical bankruptcy.” Although that term does not exist in the bankruptcy code, there is something that helps people eliminate and manage their medical debt. It is called a Chapter 7 bankruptcy. Medical debt can be discharged, or eliminated, through a Chapter 7 bankruptcy proceeding, which typically takes about four months to complete through the bankruptcy court. A Chapter 13 bankruptcy can also help manage medical debt, although it generally takes three to five years to successfully complete a Chapter 13 bankruptcy plan. It is much like a court-ordered debt management plan, and is quite different than a Chapter 7. For more information about filing a Chapter 7 bankruptcy, or a Chapter 13 bankruptcy in Iowa for the purpose of dealing with your medical debt, or any debt for that matter, be sure to contact Attorney Kevin Ahrenholz.

The IRS is a Creditor Like Any Other Business Owed Money

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The Internal Revenue Service (IRS) may seize a tax refund at any time. Sometimes this is done in error.

Filing bankruptcy does not stop the IRS from collecting tax refunds before the process is started. What many people do not realize is that if the bankruptcy trustee is the one behind the seizure of a tax refund, the refund will not be forthcoming. It will be used to pay creditors. On the other hand, if the bankruptcy trustee did not seize the tax refund, the seizure can be corrected.

When it comes to bankruptcy, the courts view the IRS as a creditor, just like any other bank, credit institution, or company that is owed money. If the IRS moves to seize someone’s tax refund, they must advise the individual of their actions, and include the reason for doing so. For example, if the reason is to pay back taxes written off in bankruptcy, contact your lawyer, the bankruptcy trustee and the IRS promptly. You will need to provide proof your bankruptcy has been discharged to correct this error and get your tax refund back.

Why call the trustee? They have a great deal of latitude to file motions to seize funds and redirect the money to pay creditors. Letting the trustee know the IRS seized a tax refund may trigger the legal process to have that money returned. Provided the trustee is able to demonstrate the IRS acted illegally to seize the refund in the first place, the motion should result in the money being returned.

There are instances in which you may owe more in taxes than you expected. If you file bankruptcy, the IRS might audit your previous tax returns, to see if you made any extra cash. They could then seize the refund to pay for the extra owing they found in your records. This extra money is usually not written off in bankruptcy, as you did not know the debt existed. Despite the fact this kind of gold mining in a debtor’s past tax records is unsettling and seems underhanded, it is legal.

In both Chapter 7 and Chapter 13 bankruptcy proceedings, bankruptcy trustees may file motions to seize tax refunds to pay creditors and back taxes owed the IRS. In a Chapter 7 filing, the liquidation of assets takes the tax refund and uses it to pay off the maximum amount of the debt. The rest is written off. In a Chapter 13 filing, the taxes are seized to roll them into an individual’s court-approved payment plan.
Kevin Ahrenholz is an Iowa bankruptcy lawyer and Iowa bankruptcy attorney. To contact him, visit http://www.iowachapter7.com or call 1.877.888.1766.

Posted on Wednesday, April 24th, 2013 and filed under Bankruptcy, News and Press | Comments Off on The IRS is a Creditor Like Any Other Business Owed Money .
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Unemployment Compensation is Factored into the Bankruptcy Means Test

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If you are receiving unemployment, it is considered in a bankruptcy means test.

For those considering filing for personal bankruptcy, and receiving unemployment, you must provide this information to your Iowa bankruptcy lawyer. This includes all pay stubs from the past year and anything that demonstrates ownership and the value of property you own. This information is used to fill out bankruptcy forms, and that includes Form B22A, referred to as the “means test.” Overall, the Iowa bankruptcy lawyer uses your income, plus unemployment, to perform a means test.

If your income is just above the state median income parameters, you will be told whether you are eligible to file for Chapter 7 bankruptcy, after the means test results are determined. Your means test must include records of any and all income within the past six months, aside from your regular job. The means test process starts by figuring out your current monthly income and what income types are present.

For instance, there are a wide variety of income types that may include:

Salary
Tips
Wages
Bonuses
Commissions
Overtime
Real property income
Retirement income
Business income
Unemployment
Contributions to the household income

Note: Social security benefits are not included in the means test.

 

What happens next is the Iowa bankruptcy lawyer adds up all of your income and divides by six, representing your average monthly income for the six months prior to filing for bankruptcy.  This average monthly income figure is then multiplied by 12 to show your yearly income.  This is compared to the median family income across the state for a household of your size.  If the figure is above the state median, you will initially appear to be ineligible for Chapter 7 Bankruptcy, but the lawyer will take additional steps to figure out your disposable income in order to see if you could get back into a Chapter 7 category.  Disposable income figures are calculated by deducting allowable expenses from your monthly income.

The final step is to determine if the presumption of abuse may rear its head should you file for Chapter 7. In short, if your monthly disposable income is under $6,000, there is no presumption of abuse. If it is more than $10,000, abuse is presumed and you would not be eligible to file for Chapter 7 bankruptcy protection.

Each state is different when it comes to the means test, but in general, your income is figured out along those lines no matter where you live. Always discuss your situation with a skilled bankruptcy lawyer, and avoid the very real possibility that should you attempt to file on your own, you may run afoul of the hundreds of rules and regulations governing bankruptcy.

Kevin Ahrenholz is an Iowa bankruptcy lawyer and Iowa bankruptcy attorney. To contact him, visit http://www.iowachapter7.com or call 1.877.888.1766.

Posted on Thursday, April 11th, 2013 and filed under News and Press | Comments Off on Unemployment Compensation is Factored into the Bankruptcy Means Test .
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A Chapter 13 Mortgage Lien Strip May Remove Second Mortgage for Filers

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A process known as lien stripping can remove a second mortgage for individuals seeking bankruptcy protection.

Many people are not aware of the benefit a mortgage lien strip. If you have taken out a second mortgage on your home to try and keep your head above water, but foreclosure is looming, filing Chapter 13 will halt the process, no matter how far along it is.

Chapter 13 bankruptcy proceedings have a potent tool that allows a debtor to remove the second mortgage. This is beneficial during a housing crisis that may have caused the value of a home to plummet below the amount of the mortgage.

The removal of the second mortgage is referred to as lien stripping, and it is legal in all 50 U.S. states. To qualify for this, the value of the debtor’s house must be lower than the balance of the first/primary mortgage, meaning the second mortgage is not supported by any equity, thus turning the second mortgage into an unsecured loan. This process may not be available to everyone, and for this reason, when declaring bankruptcy, it is necessary to discuss the various options that may apply with an Iowa bankruptcy lawyer.

In a Chapter 13 repayment plan, the second mortgage is regarded as an unsecured debt, like medical bills or credit card bills. Since the bills are paid on a pro-rated basis, in accordance with the court-ordered Chapter 13 repayment plan, the amount to be paid on a second mortgage becomes a mere fraction of what it would have been had the lien stripping option not been applied.

When the Chapter 13 repayment plan has been completed and the debtor has made all court-ordered payments, the second mortgage lien is permanently removed from the debtor’s property. Before choosing this route, it is wise to know the value of the residential home.

To this end, the home will likely need to be appraised. Additionally, homeowners need to check what their property tax appraised value is, because the recession may have caused property tax appraisals to come back higher than the appraised value of the home. Again, this is something that needs to be reviewed with an experienced Iowa bankruptcy lawyer.

Kevin Ahrenholz is an Iowa bankruptcy lawyer and Iowa bankruptcy attorney. To contact him, visit http://www.iowachapter7.com or call 1.877.888.1766.

Posted on Friday, March 15th, 2013 and filed under News and Press | Comments Off on A Chapter 13 Mortgage Lien Strip May Remove Second Mortgage for Filers .
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What Federal Income Taxes May Be Discharged in Bankruptcy?

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There are some circumstances in which federal taxes may be discharged in a bankruptcy proceeding.
While it is possible to include taxes owed the IRS when you file for bankruptcy protection, there are very strict conditions that need to be met. If you are considering doing this, you must seek the experienced legal counsel of an Iowa bankruptcy lawyer.

If you are filing a Chapter 7 bankruptcy, which is by far the most common bankruptcy declared in the U.S., federal income taxes may be discharged only if the taxes in question were due to be filed more than three (3) years ago, and were actually filed more than two (2) years ago, and were assessed on previous returns at least 240 days prior to seeking bankruptcy protection, and you did not file a fraudulent tax return or try to avoid paying taxes. The issue is that if you are seen to have made an effort to pay the taxes, but just did not have enough funds at your disposal, you may be able to discharge your federal taxes.

The courts may consider discharging a tax debt if the IRS has not already filed a tax lien on your assets. If they have, the lien will then carry over through the bankruptcy, meaning the IRS may still seize your property to collect on your debt. By and large, debtors may find this process more beneficial for them, instead of agreeing to what the IRS refers to as an “offer in compromise.” That would, if the debtor accepts it, mean they must make payments for a long time to come.

Federal tax liens are a tricky area, and you really need to understand how this process may work, by consulting with an Iowa bankruptcy lawyer. For instance, any federal lien filed against property prior to a bankruptcy, should only attach to the equity you have at the time the bankruptcy petition is filed.

Make certain before you file for bankruptcy protection that you are up-to-date on all of your tax returns and amendments before going to the 341 meeting. The fact is there are a large number of bankruptcy trustees who refuse to have a 341 hearing if you are missing tax returns for the last four years. If information is missing, the trustee will not know if you have non-dischargeable tax liability, which makes a difference in how your case is handled. In other words, be prepared before filing Chapter 7, and do it in partnership with an experienced Iowa bankruptcy lawyer.

Kevin Ahrenholz is an Iowa bankruptcy lawyer and Iowa bankruptcy attorney. To contact him, visit http://www.iowachapter7.com or call 1.877.888.1766.

Posted on Tuesday, March 5th, 2013 and filed under News and Press | Comments Off on What Federal Income Taxes May Be Discharged in Bankruptcy? .
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HAMP May Actually Have Hampered Homeowners Needing Help

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HAMP was designed to help homeowners facing foreclosure and bankruptcy. The program has offered too little, too late.

For those that don’t know what the acronym HAMP means, it represents a program put together by President Obama, referred to as the “Home Affordable Modification Program.” It had good intentions, and was supposed to be designed to help close to 4 million householders facing bankruptcy and foreclosure. Unfortunately, good intentions are about all the program managed to deliver.

There is quite a bit of speculation over why the HAMP program failed, and most people lay the blame at the doorstep of the complicated qualifications people needed to meet. The target group it was supposed to help could not understand how to access the program.  Further, by offering a mere 10 percent reduction of principal, it was ultimately not worth attempting to use.

It looks like the program won’t have too much of an effect on bankruptcy filings, not that its original intention was to prevent bankruptcies. However, it was intended to help some homeowners keep their homes. While this program may have helped a few, the stark increase in filings over the last few years is dismal.

Foreclosures are virtually the number one reason people seek bankruptcy protection. If you are facing foreclosure but still happen to have a sustainable income, you just might qualify for HAMP. The advantages are tangible for homeowners who are still employed and have a high interest rate. HAMP has the ability to lower an interest rate by up to 2 percent, extend a mortgage term up to 40 years and waive interest charges on a certain portion of the principal. While this sounds good on the surface, the biggest glitch so far, is just being able to qualify for HAMP.

To qualify, you must be behind on your mortgage payments or be facing a risk of defaulting. You should have gotten your mortgage before January 1, 2009 and you must live in the mortgaged property. The principal balance should not be greater than $729,750 for a one-unit house. While this sounds easy enough on first glance, there are some loopholes that can backfire on the homeowner. For instance, if the owner is approved for a modification, they have a three month trial where their usual mortgage payment is made. Once they meet that requirement, the modification is to become permanent.

However, one large loophole in the program is that the lender gets to make the determination if the modification is permanent. Needless to say many homeowners have reported being put off by the bank or denied for a variety of reasons, typically leading to a legal battle; the last thing a stressed homeowner needs.

If you don’t have a sustainable income or enough money to face possible legal difficulties, this program may be a waste of time for you. If you are already in a bad financial situation, an added legal confrontation won’t help matters any. The best advice an Iowa bankruptcy lawyer may give you, with regard to HAMP, is try to avoid it and discuss your situation in detail with the lawyer. Bankruptcy isn’t easy, and the more complex it becomes, the more confusing things are for the person trying to get out from under a crushing debt load.

Kevin Ahrenholz is an Iowa bankruptcy lawyer and Iowa bankruptcy attorney. To contact him, visit http://www.iowachapter7.com or call 1.877.888.1766.

Posted on Monday, February 25th, 2013 and filed under News and Press | Comments Off on HAMP May Actually Have Hampered Homeowners Needing Help .
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Collections Must Cease on Implementation of Automatic Stay

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When you file for bankruptcy, collections must halt. This is thanks to the automatic stay that kicks in when a debtor seeks bankruptcy protection.

While the bankruptcy itself is quite complex and complicated, there is no doubt about what an automatic stay means when bankruptcy protection is sought. Once you have filed, all of the creditors that you listed are told you have filed for bankruptcy via first class mail. This doesn’t mean the calls stop the day you file, as typically, it takes about seven-to-ten days before the phone calls will end completely.

If you do get calls from creditors, just give them the name and phone number of your Iowa bankruptcy lawyer. You may also want to provide creditors with your case number and ask that this information is noted on your file. If, for some reason or other, you are still getting phone calls and letters in the mail, call your lawyer and give him the creditor’s information. At this point, the attorney will send the creditor a “cease and desist” letter, which typically stops harassing creditors cold in their tracks.

It’s not unusual for creditors to still keep calling and sending mail, even at this point. If they do, they are in direct violation of your automatic stay and you need to contact your Iowa bankruptcy lawyer with a detailed log of all calls and letters. Your lawyer can then file stay violations against creditors who overstepped their bounds.

Filing for bankruptcy is not easy and the less stress you have to deal with, the better. You have a difficult journey ahead of you and many decisions to make about how to overcome your desperate financial situation. Some people feel enormous guilt over declaring bankruptcy, others feel it is their right and may have done it a time or two.

Declaring bankruptcy is not a shameful decision. It is often fueled by desperate necessity, by honest people who got into a financial bind and didn’t realize how dire their circumstances were until it was too late. The most common sense approach to declaring bankruptcy is to speak to an experienced Iowa bankruptcy lawyer and find out what Chapter may apply in your situation. Chapter 7 is not for everyone. Chapter 13 isn’t for everyone, either. It depends on the circumstances of your case.

Just because your friend or neighbor may have declared bankruptcy does not mean their case was the same as yours. No two cases are alike in detail. However, they are alike in the way they are processed by the bankruptcy court. This is not something that an individual should try without the help of a skilled bankruptcy lawyer. There is too much at stake.

Kevin Ahrenholz is an Iowa bankruptcy lawyer and Iowa bankruptcy attorney. To contact him, visit http://www.iowachapter7.com or call 1.877.888.1766.

Posted on Friday, February 15th, 2013 and filed under News and Press | Comments Off on Collections Must Cease on Implementation of Automatic Stay .
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If a Debtor Has a Default Judgment Against Them, It May Affect the Bankruptcy Process

Posted by: Admin User

Default judgments typically mean a debtor is quite advanced in the collections process. Creditors do not like having to involve the court and having to file for default judgment, but they will do so if a debtor demonstrates they are ultimately unwilling or unable to pay.  A default judgment is a court order demanding that the debtor surrender money or property to the creditor. If you have such a judgment against you, it means the court has ruled against you for not appearing in court and for failing to pay off a type of loan or a credit card.

One of the ways to stop a default judgment is to file bankruptcy. Filing bankruptcy effectively stops any and almost all legal action, thanks to the “automatic stay.” Even if a creditor has started to enforce their judgment against you via garnishment or bank levy, once you file bankruptcy the “automatic stay” goes into effect and the creditor is legally required to “stay” (cease and desist) all collection efforts against you.  This automatic stay also means that your creditors are not allowed to contact you in any way about your outstanding debt and/or judgment.

The automatic stay remains in effect the entire four to five months that your bankruptcy case is pending, unless a secured creditor (mortgage or car loan) files a motion to have the stay lifted, in which case the court may or may not allow the creditor to resume pursuit of collection in order to protect or repossess the security (house or car) for which payments are delinquent.  When your bankruptcy case is done, you will receive a formal debt discharge decree from the bankruptcy court and the court will close your case.  The discharge decree makes the automatic stay permanent, and there forward your creditors are prohibited from taking action against you personally to collect the debt that you previously owed. In most jurisdictions, the debtor or his/her attorney must also file paperwork in the district court case in order to vacate the default judgment, even if the bankruptcy discharge acts as protection from its enforcement.

Another thing you should understand is that the protection you receive from the automatic stay only remains in place as long as your bankruptcy case is progressing successfully toward discharge. If your bankruptcy case ends up being dismissed, you will lose any protection you had, and thus, the creditors will start the collections process once again. This is something that you need to discuss with a skilled an Iowa bankruptcy lawyer, as it is far too complex a process to attempt on your own.

If you are declaring bankruptcy, it only makes sense to do it according to all the rules and regulations. Failing to do so could leave you back at square one, struggling to get out from under your bills and various judgments. Bankruptcy is not an easy process, but if it is done with the help of an experienced Iowa bankruptcy lawyer, the process can go relatively smoothly.

Kevin Ahrenholz is an Iowa bankruptcy lawyer and Iowa bankruptcy attorney. To contact him, visit http://www.iowachapter7.com or call 1.877.888.1766.

Posted on Thursday, January 24th, 2013 and filed under Bankruptcy | Comments Off on If a Debtor Has a Default Judgment Against Them, It May Affect the Bankruptcy Process .
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What is Involved in Foreclosure?

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One of the most common questions debtors have when they speak to an Iowa bankruptcy lawyer is, “What is involved in foreclosure?”

Declaring bankruptcy is a stressful thing to do — with so many details, documents, rules, regulations and various meetings, it can be a nightmare to manage everything. The most upsetting part of bankruptcy for most is the threat of foreclosure.

Generally speaking, foreclosure occurs when a lender takes action to repossess someone’s property — property they have a mortgage against, resulting from money lent to the debtor. In the case of a mortgage, the home is considered to be the collateral. Thus, if an individual stops making payments on their mortgage, the financial institution holding the paper on that property has the right to take the property back on default.

The foreclosure process varies slightly from state to state.  If you live in Iowa, you will want to discuss the foreclosure process with an experienced Iowa bankruptcy lawyer. In general, the overall process is the same, and that is once a debtor has not paid for 90 days, a notice of default is filed with the county to initiate foreclosure. There is a grace period of sorts in this process, where the debtor has the right to bring their mortgage current by catching up on all the payments, or at the very least, working out a plan with the lender.

If neither of these two options is viable, the financial institution will put the home up for auction, which typically takes place on the county courthouse steps. The highest bidder takes the home, and the bidding process is carefully monitored by a bank trustee. The bank trustee’s goal is to cover their mortgage, or at least limit their loss. If this is not possible, the bank trustee bids until they secure the home back, with plans to fix it and put it back on the market.

Bankruptcy can be a very confusing process, and even though it is possible for a debtor to file their own bankruptcy papers, it is not advisable to do so. If something is done improperly, according to the law, the debtor takes a real chance that they could have their petition dismissed, or they could be charged with fraud. There are far too many ins-and-out for a debtor to take the chance on doing the wrong thing. For this reason, consulting with an Iowa bankruptcy lawyer is highly recommended.

Kevin Ahrenholz is an Iowa bankruptcy lawyer and Iowa bankruptcy attorney. To contact him, visit http://www.iowachapter7.com or call 1.877.888.1766.

Posted on Monday, January 14th, 2013 and filed under Bankruptcy | Comments Off on What is Involved in Foreclosure? .
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Foreclosure Causes High Stress and Health Problems, Bankruptcy Can Help

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Foreclosures create health problems. A foreclosure impacts people’s lives in many ways not easily visible.

Imagine facing foreclosure, losing what you worked so hard to secure. That is a 10 on a scale of 1 to 10, with 10 being the maximum stressor. It hits hard at the foundation of everything we identify with, work to attain, take pride in and call our haven. While losing your boat may not bother you quite as much, losing your home is a completely difference scenario.

There are a variety of reports available online which clearly indicate that foreclosures have more than just economic repercussions. In fact, economic difficulties tend to go hand-in-hand with health problems. Debt and foreclosure can bring on health issues. The reverse could also be true, that health difficulties bring on foreclosure, with the added drawback that if someone goes into foreclosure while ill, their symptoms will likely get worse.

The core finding of many of the recent surveys of those about to go into foreclosure, were in foreclosure, were about to file bankruptcy or had started the process, showed that the people felt their physical and mental health had deteriorated over the last two years. Their levels of deprivation, anxiety and depression were exceedingly high.

How do you pay bills if you have no money and no hope of getting any? In many cases, if you wish to save your home or salvage your present financial status as best you can, seeking bankruptcy protection with the assistance of a qualified Iowa bankruptcy attorney, will put an automatic stay on most debt collection procedures.

The foreclosure crisis is an epidemic in the US today, and according to the National Bankruptcy Research Center, filings in Chapter 7 and 13 are on the increase, despite a glimmer of hope for the nation’s economy. The increase in Chapter 7 filings is of interest largely because in 2005, a means test was introduced to direct people to Chapter 13 filings instead. Chapter 13 would mean they would still need to repay a portion of their debt.  However, with the economy being what it is, the means test is getting a good workout.

Bankruptcy is not an option  one certain class or social strata of people. It can hit everyone and anyone, even those with higher incomes and education. It could be just around the corner for you. If you are facing bankruptcy, and have no other option, filing will halt all collections activity.  This may help your medical situation as well, although it’s not a recommended cure for stress.  The automatic stay may help you get your life together and go forward. Don’t attempt to do this without the assistance of a qualified and experienced Iowa bankruptcy attorney.

Kevin Ahrenholz is an Iowa bankruptcy lawyer and Iowa bankruptcy attorney. To contact him, visit http://www.iowachapter7.com or call 1.877.888.1766.

Posted on Saturday, December 15th, 2012 and filed under News and Press | Comments Off on Foreclosure Causes High Stress and Health Problems, Bankruptcy Can Help .
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