Unsecured Debts

Debts that are unsecured (e.g. credit cards, medical bills, etc.) are those which are not secured (secured means if you do not pay, the can repo or foreclose, e.g cars, house, etc.) anything you own. The creditor does not have a right to repossess anything if you don’t pay the debt. In general, it’s easier to deal with unsecured debt than secured ones in bankruptcy.

Unsecured Debts Turning into Secured Ones

Unsecured debts can turn into secured ones if you don’t pay them. A credit card holder or medical provider can sue you for the balance owed, get a judgment against you, and usually can record that judgment as a lien against your home and other possessions. If you don’t pay your federal income taxes, the IRS can record a tax lien against your real estate and personal property without suing you.

Under some circumstances, bankruptcy can turn an unsecured debt that had been turned into a secured one by the creditor back into an unsecured one. But not always. For example, an older income tax debt that could have been completely “discharged”—written off without paying anything—may have to be paid in full once a tax lien was recorded on it. So, in general it’s better to file a bankruptcy case before creditors can turn unsecured debts into secured ones.

Secured Debts Turning into Unsecured Ones

When a secured creditor repossesses or forecloses on something you own and sells it and credits the sale proceeds against your balance, any remaining debt is now unsecured. Many times, when a creditor asks you to voluntarily surrender your car, they do not tell you that they will sell it at auction and come after you for any remaining amount due. It is not uncommon for someone to voluntarily surrender a car and then get a bill for $5,000 to $15,000 after it is sold.

“Priority” versus “General Unsecured” Debts

There are two broad kinds of unsecured debts.
Priority debts are those that the law treats as special because of different policy reasons for treating that particular kind of debt more favorably. For example, unpaid child support and income taxes are priority debts. Congress has determined that bankruptcy should not be able to discharge child support or hinder its collection because of the high value Congress places on the payment of child support. And income taxes are considered a social obligation that we should not be able to avoid easily. And yet income taxes can be discharged if they are old enough and meet some other conditions.

General unsecured debts are simply unsecured debts that do not fit into any of the “priority” debt categories. General unsecured debts include most unsecured ones, such as medical and credit card debts, retail accounts, personal loans, many payday and internet loans, unpaid utilities and other bills, claims against you arising out of vehicle accidents other injuries, and out of contractual and business disputes, overdrawn checking accounts, bounced checks, the remaining debt after a vehicle repossession or real estate foreclosure, many kinds of debts from operating a business, and on and on.

Chapter 7 vs. Chapter 13

If most of your debts are classified as general unsecured debts, and are not “priority” ones, you’d lean towards filing a Chapter 7 bankruptcy case. That’s because it usually discharges (writes off) those debts quickly – let’s say 3 or 4 months – and almost always without you needing to pay anything on those debts.
In contrast, in a Chapter 13 case you would usually have to pay some portion of your “general unsecured” debts (although in some situations you may not pay anything). Also, the discharge of the remaining unpaid portion would not happen until the end of the 3-to-5-year payment plan.

Sen. Dick Durbin has proposed a new bill that has an escape clause for people with student loans that are forced to carry the debt to their graves.

44,000,00 Americans owe on student loans. The amount owed is more than $1.5 trillion. The only kind of dent that exceeds this figure is  credit card debt. The act is supported by Sens. Tammy Duckworth, D-Ill. and Elizabeth Warren, D-Mass., and U.S. Reps. Jerrold Nadler, D-N.Y., and John Katko, R-N.Y.

The Student Borrower Bankruptcy Relief Act of 2019 was introduced last month would remove a section of bankruptcy law that makes student loans nondischargeable unless the you can show the loans present an “undue hardship.” If the act is passed, it would allow the loans to be treated like other forms of consumer debt. Senator Durbin stated, “We’ve created a standard for discharge that is so high that in a recent survey across the United States, they could only find four cases despite the millions of people who have student debt . . . that were discharged in bankruptcy.” “People literally carry this debt to the grave. We have millions . . . of Americans under the age of 50 who are still paying off student loan debt and many who have reached retirement age who are still facing these debts that are not discharged. I think it’s time for that to come to an end,” Durbin said. We all know that people who took out student loans intended on paying it back. But with the rise of tuition and interest rates on student loans, that has become next to impossible. The Senator hopes the is one that crosses party boundaries and the vast majority of the debt is owed to the federal government. The senator said he’s going to ask the judiciary chairman for a hearing on the bill because “it’s time to come to grips with this reality.” If he’s able to get the hearing, and then get the bill to the floor of the Senate, then Durbin believes there’s a chance to pass it.
Congratulations to all those who passed the February 2019 Arkansas Bar Exam!

Here are the results: 2019FebruaryBarExamResults

Enjoy scrambling around to find a judge to swear you in on Tuesday.  Let the fun begin!

But seriously—we are pleased to have you all as colleagues. Do well.

Looking for some extra reading? After You Get Your Bar Exam Scores

 

Hey fellow Arkansans,

Looking for Wilson & Haubert law firm? Yes, you found us! We have simplified our name from Wilson & Haubert to  wh Law. We want our name to promote our goal: We Help.

Now, when you see our name, it may be in a combined fashion, the company name “wh Law” along with the company tagline “We Help”

“wh Law | We Help.”

Why did we change our name? Well, we aren’t your average law firm, so we don’t want an average law firm name (no one wants to type out Wilson & Haubert, PLLC, anyway). We got into this business to help people, and we think people should know what we do, not who we are. Ultimately, our name is not as important as the help we provide our fellow Arkansans here in Central Arkansas.

So, if you are looking for Wilson and Haubert, it is still us. We are here, we will be here for a long time to come, and we will help.

Many people gift property to others to qualify for Medicaid only to find out that they’re still not qualified. Usually this situation is caused by Uncompensated Transfers.  These transfers trigger “penalty periods.” So, what is an Uncompensated Transfer? How do such transfers incur a penalty? What is the Transfer Penalty and how does it work? Here are some useful definitions.

Uncompensated Transfer:  This is the transfer of assets (cash, cars, real estate etc.) where less than equal value was received for the exchange.  That means you gave something to someone without getting paid the full value of the thing you gave away. For example, you gave your ’67 Mustang to your son for $10.  If you gave away anything valuable and didn’t get equal value back in exchange, that is an Uncompensated Transfer.

Look Back Period:  There is a time limit on looking at Uncompensated Transfers.  The state may only look back in time for a period of 60 months.  If the Uncompensated Transfer occurred more than 60 months prior to an application for Medicaid, then the transfer is not a penalizing transfer.  If the Uncompensated Transfer occurred within 60 months of applying for Medicaid, then the transfer gets you a Penalty Period.

Penalty Period:  This is the time period where the Medicaid applicant is disqualified from Medicaid because of the Uncompensated Transfer.  In other words, the applicant is otherwise qualified for Medicaid, but because of the Uncompensated Transfer, they are disqualified for a period of time.

Penalty Divisor:  This is a number set by the state which is used to determine the Penalty Period.  It is based upon the current average semi-private bed rate for nursing homes in your state.  It is adjusted once a year in order to stay accurate. In Arkansas as of the date of this article, the Penalty Divisor is $5,493.  

Calculating the Penalty Period:  The Penalty Period in Arkansas is determined by the following formula:

Amount of transfer (divided by) Penalty Divisor = Penalty Period.

Example:  If a person made Uncompensated Transfers totaling $100,000 during the 5 years prior to applying for Medicaid, those Uncompensated Transfers would result in a Penalty Period of 18.2 months

$100,000 (divided by $5,493) = 18.2 month Penalty Period.

Penalty Period Start Date:  The Penalty Period incurred for Uncompensated Transfers does not begin to run until:

1, The applicant is institutionalized (in a nursing home)

  1. An application has been submitted
  2. The applicant is Resource Eligible:  meaning the applicant had less than $2,000 in resources on the 1st day of the month when the application was submitted.  
  3. The applicant was Income Eligible:  meaning the applicant’s income was less then the state published Income Cap or a Miller Trust was in place on the 1st day of the month in which the application was submitted.  The Income Cap in Arkansas as of the date of this article is $2,250 per month.  Otherwise the applicant does not qualify for Medicaid or the start of the Penalty Period.

What is a Miller Trust?

There are a lot of rules to navigate when it comes to Medicaid qualification.  We know those rules and we can assist your family in the preservation of family wealth.  Give us a call if you have questions.

If your wages are currently being garnished, or if you are in danger of having them garnished, the attorneys at wh Law | We Help can stop the process.  We have attorneys who specialize in bankruptcy, who will use the bankruptcy code to prevent your wages from being taken from you, once and for all.

A little known feature of the bankruptcy code, known as the “automatic stay,” can prevent your creditors from collecting any debt you owe, in addition to stopping your wages from being garnished.  The automatic stay goes into effect as soon as you file for bankruptcy.  It is a court order which stops all collection efforts against you.  Wage garnishment is a collection on a previous judgment against you, and so your creditors must stop the garnishment.  Creditors can ask the court to get rid of the stay, but it is incredibly rare for bankruptcy courts to do this.

Wage garnishment typically happens when a creditor has sued you and gotten a judgment against you for a debt you owed.  Next, the creditor has to get a second court order allowing for a wage garnishment.  Finally, the sheriff usually has to serve the garnishment order on your employer, who then withholds part of your check for your creditor.

There are a few exceptions to the automatic stay, in which case the garnishment would continue.  The most notable, and most common, is garnishments for child support.  Because of the government’s interest in making sure children are supported, wage garnishments for child support continue, even when the automatic stay is in place.

As soon as you file for bankruptcy, you must provide a list of your creditors to the court.  The court will then send notice of your bankruptcy petition to your creditors, who must then stop all their collection efforts against you.  You can speed up this process by delivering a copy of your bankruptcy filing directly to your creditors.

Most of the time, when your bankruptcy case ends, the court will discharge your debts.  This means you’re no longer responsible for the discharged debts.  What this means, is that your creditors won’t be able to go back to garnishing your wages.

There is something you can do.  If you’re having trouble paying your bills or making ends meet because of a wage garnishment, we can help.  The first step to getting your creditors off your back, and stopping your wages from getting garnished, is giving us a call.  If you need help you can text or call.

wh Law, is a debt relief agency. We help people file for bankruptcy protection under the U.S. Bankruptcy Code.

Automobile dealers and lenders like to try and scare people into scrambling to make up behind payments by threatening to repossess a vehicle.  Don’t let yourself be fooled.

When you are behind on payments and don’t know how to make them up, filing bankruptcy can give you more time to figure out how to get caught up on your payments.  When you file for bankruptcy, the court will issue an order called the “automatic stay.”  This is a fancy way of telling your creditors that they have to stop trying to collect money you owe them while the court hears your bankruptcy petition.  If creditors continue harassing you after the automatic stay has been issued, they can be sanctioned and fined with hefty penalties.  While some creditors don’t know about the automatic stay, we’d be more than happy to write a strongly worded letter to educate them about how they’re no longer allowed to pester you.

Filing bankruptcy won’t necessarily stop all attempts at repossessing your vehicle, though.  In some cases, a lender can ask the bankruptcy court for permission to take the vehicle back.  However, most lenders don’t understand the process for doing this, and we can help you fight the process.

While bankruptcy can wipe out your responsibility to pay back your loan on a car, it doesn’t always get rid of the lender’s lien on the car (see our main bankruptcy page for more information on getting your debts discharged).  What this means is that even though you no longer have the responsibility to pay the lender, they can still take back possession of the car.  The upside is that filing for bankruptcy can buy you some time before repossession, and give you some leverage to renegotiate the terms of your loan.  Most lenders would rather get some of the money you originally owed them than go through the trouble of repossession and reselling the vehicle.  Note that to get a better deal on your original loan you have to “re-affirm” the debt, which wipes out any discharge the bankruptcy court may have issued, which means you are now personally responsible for the loan again.

Additionally, redeeming the car might be a good option for some debtors.  Oftentimes, the market value of a car is less than what people still owe on the vehicle.  If that is the case, you can “redeem” the vehicle.  That means that you can pay the market value of the car in one lump sum and wipe out your existing loan responsibility.  For example, if you still owe $20,000 on a car, but the market value of the car is currently only $10,000, if you can somehow come up with the $10,000, you can wipe out your responsibility to pay the $20,000.  Obviously, this isn’t an option for a lot of people who are in bankruptcy, but it can be an attractive option for some.

Don’t let creditors boss you around.  If you’re getting calls from creditors or threats of repossession, give us a call.  We can help. If you need help you can text or call.

wh Law, is a debt relief agency. We help people file for bankruptcy protection under the U.S. Bankruptcy Code.

The attorneys here are WH Law all have families and small children, so we understand the importance a stable home has for a family.

Don’t let your concerns about bankruptcy prevent you from keeping your home.

Many attorneys don’t understand the ins and outs of the bankruptcy code, but we do. If you are behind on payments on your mortgage, or even if you are already in the foreclosure process, filing for Chapter 13 Bankruptcy can help you get caught up on your behind payments, or even stop the foreclosure process altogether. When you file a bankruptcy petition, all of your debtors must stop efforts at collecting on your debts. If they continue to harass you after filing, they can be sanctioned and fined. Don’t let frequent calls from the bank and other creditors ruin your peace of mind. There’s something you can do about it: give us a call.

In a Chapter 13 Bankruptcy, the bankruptcy court will determine what your monthly payment obligations are for necessary living expenses, and use leftover income for monthly payments to the bank on your past due mortgage payments, as well as your other creditors. So, in that way, bankruptcy can help you get caught up on your mortgage, in addition to any other creditor payments you’re behind on. Since the single monthly payment you’ll have under your bankruptcy is based on your disposable income, the payments are usually fairly small, and spread out over three to five years. Once you reach the end of the payment period, most people are caught up on their past due payments, and can resume paying their monthly payments as they were before the bankruptcy filing.

Have questions? The attorneys here are WH Law all have families and small children, so we understand the importance a stable home has for a family.

Don’t let your concerns about bankruptcy prevent you from keeping your home.

Many attorneys don’t understand the ins and outs of the bankruptcy code, but we do. If you are behind on payments on your mortgage, or even if you are already in the foreclosure process, filing for Chapter 13 Bankruptcy can help you get caught up on your behind payments, or even stop the foreclosure process altogether. When you file a bankruptcy petition, all of your debtors must stop efforts at collecting on your debts. If they continue to harass you after filing, they can be sanctioned and fined. Don’t let frequent calls from the bank and other creditors ruin your peace of mind. There’s something you can do about it: give us a call.

In a Chapter 13 Bankruptcy, the bankruptcy court will determine what your monthly payment obligations are for necessary living expenses, and use leftover income for monthly payments to the bank on your past due mortgage payments, as well as your other creditors. So, in that way, bankruptcy can help you get caught up on your mortgage, in addition to any other creditor payments you’re behind on. Since the single monthly payment you’ll have under your bankruptcy is based on your disposable income, the payments are usually fairly small, and spread out over three to five years. Once you reach the end of the payment period, most people are caught up on their past due payments, and can resume paying their monthly payments as they were before the bankruptcy filing.

Have questions? If you need help you can text or call.

wh Law, is a debt relief agency. We help people file for bankruptcy protection under the U.S. Bankruptcy Code.

Creditor harassment is a major reason people seek bankruptcy assistance. Phone calls at home, work, threatening letters, lawsuits, garnishments, and bank seizures can make your life more difficult than it already is. When the creditor harassment is too much, call an experienced bankruptcy attorney and get some relief! Once you file your bankruptcy petition, all creditor harassment must stop immediately.

The Fair Debt Collections Practices Act (FDCPA) is a federal law that protects consumers from creditor harassment. Part of this law prohibits third party collectors from directly contacting you after you have retained an attorney to deal with your debt, which includes a bankruptcy attorney. An original creditor, the one you aculatty borrowed money from, is not a “third party collector” and does not fall under the FDCPA. This includes: Capital One, Bank of America, Chase, Synchrony Bank, as well as your local banks and many more. A collection agency or an attorney hired by the bank your borrowed money from is a third party collector, and cannot continue to call or write you. Third party collectors must call your attorney, although any legal action can continue until you file your bankruptcy case.

Creditor harassment could continue even after you hire a bankruptcy attorney. The likely reason for this is that the creditor has not received any information that changes your status. Letting the creditor know that you have hired an attorney is generally good enough to stop the harassment. Tell the creditor, “I’m filing bankruptcy, call my attorney!” and give the caller your bankruptcy attorney’s name and telephone number. (Our number is 501.891.6000) Original creditors usually stop telephone contact after this for fear of violating the bankruptcy automatic stay. Third party collectors know that by law they can no longer call you.

Once your bankruptcy petition is filed, the clerk of the bankruptcy court will send notices to all of your creditors informing them of the bankruptcy automatic stay. Contact your attorney immediately if you are contacted by a creditor after your bankruptcy case is filed.

Hiring a bankruptcy attorney can provide temporary relief from creditor harassment. Filing bankruptcy and obtaining a discharge of your debts guarantees that you are no longer legally liable for the discharged debts. Any further contact from a discharged creditor violates the federal court order and subjects the creditor to sanctions for contempt of court. If you need this powerful legal protection from creditor harassment, contact an experienced bankruptcy attorney today! If you need help you can text or call.

wh Law, is a debt relief agency. We help people file for bankruptcy protection under the U.S. Bankruptcy Code.

In most cases, if you have already decided to file for bankruptcy, continuing to make credit card payments is a waste of money. So,if you are going to file bankruptcy, then you should probably stop paying your credit cards. But if you are still undecided about bankruptcy or may not file your case for a long time, stopping your credit card payments can subject you to collection calls and lawsuits or cause unnecessary damage to your credit.

When you file for bankruptcy, all of your unsecured debts are eliminated, meaning you do not legally owe these bills any longer. Credit card companies who choose to pursue you for old, discharged debts will do so in violation of the law and will be subject to sanctions by the bankruptcy court. Furthermore, unlike debts that are forgiven through private negotiation with a lender, there is no tax liability for debts that are discharged in bankruptcy.

While the general rule is that credit card debt is easily eliminated by filing for bankruptcy, fraudulent activity can jeopardize your entire bankruptcy discharge. Using credit cards for luxury purchases prior to bankruptcy creates a presumption of fraud which can be difficult to overcome. Don’t use credit cards after meeting with a bankruptcy attorney unless you’ve decided not to file. The bottom line is any use of credit cards with the intention of not paying the debt back is fraudulent. The bankruptcy code protects debtors who behave in good faith and punish debtors who to try to game the system. For more information see: Using Credit Cards Before Bankruptcy is a Big No No! If you need help you can text or call.

wh Law, is a debt relief agency. We help people file for bankruptcy protection under the U.S. Bankruptcy Code.

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