Individual debtors who find it difficult to pay all their debts generally have two options for obtaining debt relief under the Bankruptcy Code — either through a Chapter 7 or Chapter 13 bankruptcy petition. Filing under the appropriate Chapter will depend on the specific circumstances of the debtor and the desired outcome, ideally determined by a bankruptcy attorney. In some situations, debtors who initially file for Chapter 13 bankruptcy may later consider Chapter 13 bankruptcy conversion in Washington to explore alternative routes to debt resolution.

Chapter 13 Bankruptcy Conversion in Washington

A major feature of Chapter 13 of the Bankruptcy Code is the distribution of a debtor’s future income among creditors mentioned in a court-approved payment plan. If for any reason, a Chapter 13 case is not working out for the debtor, he has an option to convert the Chapter 13 filing to a Chapter 7 case at any time. The conversion will lead to the termination of the services of the Chapter 13 trustee (the person who distributes the debtor’s future wages or properties to creditors under a court-approved payment plan).

But what happens to the debtor’s Chapter 13 accumulated wages if the provisions of Chapter 7 only include pre-filing income for payment to creditors? The United States Supreme Court addressed this issue in its recent decision in the case of Harris v. Viegelahn.

Background of Harris Case

Harris owed several creditors, one of them Chase Manhattan on an unpaid home mortgage. He filed for Chapter 13 bankruptcy and obtained a court-approved payment plan which ordered the continued payment of his Chase mortgage at $530 per month to be withheld from his future wages. Despite the Chapter 13 payment plan, Harris was still unable to keep up with his mortgage leading to its foreclosure. The trustee then stopped making payments to Chase causing an accumulation of $5,519.22 in withheld wages.

After the foreclosure, Harris converted his Chapter 13 case to Chapter 7. But the Chapter 13 trustee still continued to pay his Chapter 13 creditors using the accumulated withheld wages. While the Bankruptcy Court ordered the trustee to refund the accumulated wages, the appellate court reversed it.

Supreme Court Ruling for Chapter 13 Bankruptcy Conversion in Washington

The Supreme Court ruled in favor of the debtor stating that undistributed wages earned after the filing date of the original Chapter 13 petition are excluded from the properties to be distributed in the converted Chapter 7 case for as long as bad faith does not exist in the conversion.

Importance of Contacting a Bankruptcy Attorney

Chapter 13 bankruptcy is governed by numerous complex rules that require strict compliance among the parties. If you are contemplating a Chapter 13 petition, consulting a bankruptcy attorney first is absolutely essential.

In Vancouver, Washington, the law office of Erin Bradley McAleer represents the human side of bankruptcy, helping people rise above their economic hardships through appropriate Chapter 13 bankruptcy proceedings.

Mr McAleer is highly regarded as one of the top 40 attorneys under 40 in Washington, and has earned a superb rating of 10.0 from Avvo.

Your call is welcome today at (360) 334-6277 to discuss your potential or existing bankruptcy situation.

The United States Supreme Court recently came out with a decision that addresses a significant aspect of bankruptcy law – the treatment of junior mortgages in Chapter 7 bankruptcy cases. This ruling has far-reaching implications for homeowners facing financial distress. It allows a junior mortgage to remain in Chapter 7 bankruptcy proceedings even if the current value of the collateral is lower than the value of the first mortgage. Understanding the nuances of this Supreme Court ruling on junior mortgage in Chapter 7 bankruptcy is crucial for both homeowners and legal professionals navigating the complexities of bankruptcy law.

Background of Supreme Court Ruling on Junior Mortgage in Chapter 7 Bankruptcy

The latest decision stemmed from two cases that involved debtors who were similarly situated. One debtor owed $183,000 on a first mortgage and $47,000 on the second mortgage which were secured by the debtor’s home with a current market value of only $98,000. The second debtor’s home had a current market value of $78,000 and owed $135,000 on the first mortgage and $32,000 on the second mortgage.

When the value of the senior mortgage exceeds the current market value of the collateral property, the situation is referred to as being ‘partially underwater’. Having a second mortgage when a first mortgage that is larger than the value of the collateral property exists is further known as being ‘completely underwater.’

Being completely underwater, both borrowers filed a Chapter 7 bankruptcy case two years ago and sought to have the second mortgage liens held by the Bank of America voided. The bankruptcy courts discharged those debts and on appeal, the Court of Appeals affirmed those decisions. Dissatisfied with the outcome, the Bank of America raised the issue before the Supreme Court which reversed the lower courts.

Issue and Ruling Affecting Chapter 7 Bankruptcy Cases 

The Supreme Court dealt with the issue whether a debtor can void a second mortgage that is completely underwater or when the property is worth less than the first mortgage. The high court said that the second mortgage may not be voided if it is not a disallowed secured claim as defined under Section 502 of the Bankruptcy Code.

Both parties in the case agreed that Bank of America’s claims were not disallowed under that provision. Citing an earlier case (Dewsnup v. Timm) which was decided in 1992, the Supreme Court said that ‘secured claim’ mentioned in Sec. 506 referred to ‘a claim supported by a security interest in property regardless of whether the value of that property would be sufficient to cover the claim.’

The Need for Advice from a Bankruptcy Lawyer 

If your home is tied to senior and junior liens, you may have to consider this rule when you consider applying for Chapter 7 bankruptcy. Bankruptcy proceedings may offer relief to debtors but it is covered by hundreds of legal provisions with technical meanings and loopholes that a non-lawyer may miss.

In Vancouver, Washington, Attorney Erin McAleer has years of experience in Chapter 7 bankruptcy, helping individuals overcome their financial challenges through bankruptcy proceedings. He holds a Superb Rating of 10.0 from Avvo and is listed by the National Trial Lawyers as one of the top 40 attorneys in Washington under age 40.

We invite you to call us today at (360) 334-6277 to schedule a consultation and discuss your individual situation.

Ex US Congressman Kerry Bentivolio recently made headlines as he filed for Chapter 7 bankruptcy, revealing a stark financial situation. In his bankruptcy filing, Bentivolio declared possessing only $100 in cash and $200 in a savings account, juxtaposed against a substantial burden of close to $300,000 in debts and unpaid bills. The decision by the Ex-Congressman Bentivolio to file for bankruptcy sheds light on the challenges individuals can face, regardless of their professional background, and highlights the potential benefits of seeking legal relief through the bankruptcy process.

The former congressman made $174,000 a year as a lawmaker but he did not own a credit card and was able to spend only what he had to his name. A major part of his debts consisted of an unpaid mortgage, legal fees, and unpaid rent for his Washington, DC apartment.

Events Leading to Ex-Congressman Kerry Bentivolio Files Chapter 7 Bankruptcy

The congressman was a former reindeer farmer and school teacher before he entered politics. Failing to raise enough funds to support his candidacy, Bentivolio sold his reindeer and borrowed from his retirement fund in order to pay his campaign bills in 2014.

The next blow came when he fired his campaign manager due to loyalty issues. The disgruntled campaign manager sued him for damages and unpaid benefits. The county court issued judgment against Bentivolio and ordered him to pay the campaign manager around $120,000.

The day after Congress adjourned, Bentivolio said that he tried to reduce his debt and raise funds by bringing back some of the furniture and items he bought at Ikea. In order to relieve the pressure of mounting obligations, Bentivolio sought relief from the federal court by filing for bankruptcy.

Chapter 7 Bankruptcy in the United States

Bankruptcy is a legal remedy available to individuals and corporations who are unable to pay their debts. Under the United States Bankruptcy Code, a debtor may file for debt relief under different Chapters: 7, 11, 12, and 13.

In 2014, the US Bankruptcy Courts reported that a total of 911,086 new cases of bankruptcy under different chapters were filed in the US courts. 596,867 of those filings were based on Chapter 7 of the Bankruptcy Code. Of all Chapter 7 filings, 579,340 were classified as non-business debts.

Chapter 7 allows a debtor to liquidate his assets, the proceeds of which will be used to pay certain debts – but not everyone can qualify for Chapter 7 filing.

The law requires the debtor to meet the ‘means test’, a complex formula for determining whether the application for debt relief is presumptively abusive, in which case, filing a Chapter 7 is not allowed.  However, if you are faced with mounting debts that you are unable to pay off as they fall due, you may still be qualified to file Chapter 7 bankruptcy.

In Vancouver, Washington, the Law Office of Erin Bradley McAleer has years of experience in bankruptcy cases.  We help people overcome their most difficult challenges and start a new life. Attorney McAleer is one of the National Trial Lawyers’ top 40 attorneys in Washington under 40 and maintains an Avvo Superb Rating of 10.0.

We invite you to call our office at (360) 334-6277 if you are in financial trouble.

Debt Discharge Lawsuits in Washington

Amidst lawsuits filed by former debtors, whose debts were discharged in various bankruptcy proceedings – including Chapter 13 bankruptcy filings, two major US banks have announced their plans to delete negative credit reporting records of some borrowers. These debt discharge lawsuits in Washington and similar actions in other states have prompted a significant shift in credit reporting practices, indicating a growing acknowledgment of the legal and ethical implications of retaining such information for individuals who have successfully sought relief through bankruptcy.

Bank of America and J.P. Morgan Chase & Co. were among several banks accused of unfair reporting after allegedly sending notices to credit reporting agencies that a borrower’s account was ‘past due’ or ‘charged off’ instead of ‘discharged’.

Discharged Debts Being Sold to Credit Collectors?

The lawsuits also accused top banks of ‘ruthless’ credit collection strategies – selling off debts that are legally discharged in court. By not deleting the past due accounts and marking them as ‘past due’ or ‘charged off’, discharged debtors felt compelled to pay off the recorded debts in order to clean their records for improving job prospects and obtaining new loans.

Without admitting fault or wrongdoing, the two banks announced that they will ensure that bankruptcies will be correctly noted in credit reports.

Under Federal law, debtors who have paid their debts under a repayment plan in Chapter 13 bankruptcy are entitled to an updated credit report where the discharged debt no longer appears as owed – even though the Chapter 13 plan may not have paid the debt in full. A creditor is required to report the status of a debt accurately.  Thus, the banks are required to remove any notation of the debt being ‘past due’ or ‘charged off’ and replace it with “discharged in bankruptcy” instead.

The plaintiffs in the lawsuit against the banks claimed that a notation of ‘charged off’ has a more negative impact than a debt being discharged.  The reason is that when a debt is “charged off”, it is still technically owing.  The charging off of a debt simply means that the creditor has written off the debt as “bad” and will no longer pursue it.  However, charged off debts can be sold to debt collectors who will attempt to collect them. A discharged debt, conversely, is no longer owed.

About Chapter 13 Bankruptcy

Chapter 13 of the Bankruptcy Code offers debtors, who continue to have steady incomes, a remedy for managing mounting debt. Under this chapter, the debtor will propose a repayment to creditors by outlining an installment payment plan lasting 3 to 5 years, depending on the debtor’s current monthly income. This remedy can help a debtor save a home from foreclosure because the filing of a bankruptcy petition can stop foreclosure proceedings.  A Chapter 13 also allows the debtor to catch up on delinquent mortgage payments over a period of time.

Unpaid Debts Can Be Overwhelming

Mounting pressure from unpaid financial obligations can overwhelm you and leave you feeling helpless. If you continue to have regular income and are able to follow a repayment plan for the next few years, a Chapter 13 bankruptcy may be for you. The process of filing the petition and other paperwork is complex, however, and you will need an attorney who understands the law and will, more importantly, empower and uplift you during this most trying time.

In Vancouver, Washington, the Law Office of Erin Bradley McAleer can help sort out your financial obligations and create a repayment plan that is acceptable to your creditors. We welcome your call today at (360) 334-6277 to speak to one of our experienced attorneys.

The Economist recently reported that about 1 million Americans filed for bankruptcy in the previous year. Bankruptcy proceedings filed by individuals may fall under Chapter 7 or 13, depending on the circumstances of the petitioner. Chapter 7 petitions generally provide qualified debtors with a fresh start by wiping out most debt. However, the current application of the means test can make it more difficult for people to meet the requirements of Chapter 7 bankruptcy. If that applies to you, you can still get relief from your debts by filing a Washington Chapter 13 bankruptcy, which offers an alternative path to managing your financial challenges.

A Chapter 13 bankruptcy which offers a different kind of debt relief by shielding you against creditor lawsuits through a payment plan that is mostly based on what you can afford to pay.

Understanding Chapter 13 Bankruptcy

Chapter 13 petition can reorganize your debt, adjust a personal property loan’s high interest rate to a lower one, and stop the accumulation of interest and penalties on unpaid taxes. Ideal candidates for Chapter 13 are those who may have the means to pay off a reasonable portion of their obligations, such as previously unemployed or laid off workers who recently rejoined the work force, and employed individuals who struggle with high medical expenses.

Benefits of Chapter 13

• Protection against the legal action of creditors
• Shield against garnishment of wages and salaries
• Protection against repossession of properties such as your home or car
• Protection against garnishment of bank accounts
• Extension of debt payment period usually between 3 to 5 years
• Extinguishment of remaining debt after the expiration of the payment period

Many people incur debt when their cash flow is insufficient to meet expenses.  This is usually the case when a family member loses a job, suffers injuries in an accident, or becomes sick and requires extensive treatment. Filing Chapter 13 bankruptcy can help you reorganize your debts so that you can pay them off gradually.

Why You Need a Washington Chapter 13 Bankruptcy Attorney

The rules surrounding Chapter 13 bankruptcy are complicated and courts are often strict regarding the forms required for it. We can help you prepare and file the appropriate forms with the court and explain the meaning of resulting court orders affecting your obligations.

In Vancouver, Washington, the Law Office of Erin Bradley McAleer has earned the Avvo Superb Rating of 10.0 and the Mr. McAleer was awarded the National Trial Lawyers recognition as one of the top 40 attorneys under 40 in Washington.

We invite you to call us today at (360) 334-6277 to learn more about how Chapter 13 can buy you enough time to straighten your finances and settle your debts.  All initial consultations are free.