While many people file a Chapter 13 bankruptcy to save their home from a foreclosure sale, other people file either a Chapter 7 or a Chapter 13 bankruptcy so they can walk away from a piece of property and not pay any more money on it. Outside of bankruptcy, when a mortgage company forecloses on your home, if there is a balance owed after the mortgage company applies the proceeds of the sale to the loan balance, you are still responsible for that debt. The debt becomes what is known as a deficiency balance. This is commonly referred to as being “upside down” on your mortgage or having an “underwater mortgage.” By filing a bankruptcy, that deficiency balance is included as an unsecured debt. In a Chapter 7 bankruptcy, that debt will be discharged. In a Chapter 13, that debt will be treated as any other unsecured creditor is treated….
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District Court Denies Debtor Discharge of Student Loans: Appellate Panel Says ‘Not So Fast’! We’re following a potentially important bankruptcy case in 2013 that may affect the ability of individuals to discharge student loan debts in bankruptcy. On August 21, 2013, the U.S. Bankruptcy Appellate Panel for the Eighth Circuit (B.A.P.) reversed and remanded a decision of the U.S. Bankruptcy Court for the Eastern District of Missouri which denied a discharge of a debtor’s student loan debt. The B.A.P. found that denying the debtor a discharge of her student loan debts to National Collegiate Trust was an undue hardship on the debtor and remanded the decision to the Bankruptcy Court to look at each individual loan owed to National Collegiate Trust to determine if the debtor could pay any one or more of those loans owed over the course of a year. The Debtor in this case did not seem…
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One question clients often ask is whether filing a bankruptcy will cause them to lose their future income tax refund. When a person files bankruptcy, anything they own or are entitled to on the date they file bankruptcy is considered an asset of their bankruptcy estate. The tax refund amount the bankruptcy estate is entitled to is calculated on a pro-rata basis (according to the number of days in a year) and based on the date the case is filed. There are exemptions that can be used to protect some (or hopefully all) of these assets, including income tax refunds. Tax Refunds for Chapter 7 Cases In Kansas, under K.S.A. 60-2315, any portion of a debtor’s tax refund that is attributable to the earned income tax credit is exempt.B This exemption is only able to be applied towards one year’s tax refund. The remaining tax refund cannot be exempted and…
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