Jeffrey M. Rosenblum, P.C.
A Fresh Start

Long Island Bankruptcy Law Blog

What happens when debt is discharged in Chapter 7?

If you're considering Chapter 7 bankruptcy, one of the terms you'll see a lot as you learn about the process is "discharge." That's a big step in a bankruptcy case. It usually happens approximately four months from the bankruptcy filing.

In Chapter 7, the bankruptcy trustee uses your nonexempt assets to pay off your creditors. A court order is then issued at the end of the process that relieves you of your repayment obligations for any remaining dischargeable debts.

Chapter 7 bankruptcy for businesses

Chapter 7 is traditionally associated with personal bankruptcy filings. However, in some cases, businesses can file for Chapter 7. It depends on how the business is structured.

Sole proprietorships are considered legal extensions of their owners. However, Chapter 7 can also be an option for partnerships and corporations. Sole proprietorships may also file for Chapter 13, which is also most often associated with personal bankruptcy. Let's look at Chapter 7 business bankruptcy.

Debt can harm your mental and physical well-being

Could your debt be endangering your mental and physical health? It might be, according to a report recently published by CarefulCents.com, a personal finance website. The site reported that consumer debt was linked not just to psychological distress but to poor overall health.

According to the report, credit card debt is more stressful than any other kind. One-fifth of respondents to a survey by NerdWallet said that their credit card debt had harmed their health. Two-fifths said it had impacted their general happiness.

It is your right to appeal an IRS decision

If you recently went through an IRS audit, you may have thought that was one of the most stressful things you could go through. However, when you learned that the findings of the audit left you owing the government a significant amount of money, you may truly know the meaning of stress. While it may seem as if the IRS has all the power, the truth is that you do have some options.

You may feel intimidated at the thought of going up against an agency with a reputation for ruthlessness, but you should not spend too much time thinking about your fears. If you do not take steps to dispute the findings of the audit, you will soon be receiving a bill from the IRS. It may be worth it to discuss your case with a New York professional with experience in tax laws.

Rebuilding your financial health and credit after bankruptcy

You've made the decision to file for bankruptcy, or maybe you've already begun the process. While the bankruptcy will impact your credit and your life for a while, it will also give you a fresh start.

It's essential to make the most of that fresh start. Let's look at some steps you can take moving forward that will help you avoid the kind of problems that led to the bankruptcy -- regardless of whether it was caused by credit card or other loan debt, medical expenses or unemployment.

What divorce-related obligations can you discharge in bankruptcy?

Financial issues can contribute to strains in a couple's marriage. It's not unusual for someone to consider filing for bankruptcy as they're also headed toward divorce or have already begun the divorce process. Sometimes people file for bankruptcy after they've divorced, but they still have obligations to their former spouse that were ordered as part of their divorce agreement.

It's essential to know what divorce-related obligations are dischargeable in bankruptcy and which aren't. At one time, child and spousal support were the only nondischargeable divorce-related obligations. However, Congress has updated the Bankruptcy Code to make other obligations nondischargeable as well.

What you should know about automatic stays

Among the relief that filing for bankruptcy brings is what's called an "automatic stay" on collection efforts by creditors. As one attorney says, "One of the reasons individuals ultimately file for bankruptcy is just to stop the harassment that goes on in the process of collection."

The stay is referred to as "automatic" because it takes effect as soon as a person files their bankruptcy petition. Among the debt collection enforcement activities that a stay is intended to freeze (in addition to calls and other notifications to the debtor) are:

  • Home foreclosure
  • Car repossession
  • Wage garnishment
  • Holds on bank accounts
  • Certain elements of divorce proceedings, like property division

Don't let the holidays destroy your budget

As we head into the holiday season, consumers' budget goals are going to be tested. Online, TV and print ads will abound. It seems like just about every retailer is offering great "deals" that can't be passed up around the holidays. Couple that with the pressure to give the right gift to everyone in your family as well as your social and work circles, and it's easy for spending to get out of hand.

According to the National Retail Federation (NRF) holiday spending increased every year from 2008 through 2018. The NRF defines "holiday spending" as money spent in "the months of November and December….[that] excludes automobiles, gasoline and food services."

Can you file for bankruptcy even if you have a steady income?

When you think about your financial situation, you may wonder how you ended up in such a difficult spot. Unfortunately, money issues can affect anyone unexpectedly, even if you have a regular income. You may have ended up in a situation in which your expenses began to exceed your income, and even living paycheck-to-paycheck in efforts to stay on top of things is not an option.

Still, you may wonder whether you could qualify for financial help. You may think that you are not eligible for bankruptcy because you do earn a regular income, but fortunately, that is not necessarily the case. Chapter 13 bankruptcy is known as the wage earner's bankruptcy for this reason.

Scammers are targeting people with student loan debt

Many college graduates -- from young adults to those looking toward retirement -- feel like they'll never escape their student loan debt. According to Student Loan Hero, Americans have a cumulative total of over $1.5 trillion. The website says that the average amount of student loans for students who graduated last year was nearly $30,000. It's been estimated that as many as 40% of people with outstanding student loans could default on them by 2023

Unfortunately, people anxious to get some relief from this crushing debt can sometimes fall victim to debt relief scams -- and there are plenty of them. The Wall Street Journal recently did an investigative report on these scams and the companies behind them. Typically, they attract their victims online with promises of helping them reduce their debt or even have it forgiven.