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Bankruptcy Basics: Median Family Income.

The next step is to obtain the applicable median family income. These figures for each state and household size can be found on the United States Trustee Program’s website at https://www.justice.gov/ust. The specific income figure used will be for the debtor’s household size. As the Bankruptcy Code does not define household, some courts apply the Census Bureau definition, which generally includes all people who occupy a housing unit regardless of relationship.

Bankruptcy Basics: Application of the Means Test.

Once the allowed expenses are determined and totaled, this amount is subtracted from the debtor’s current monthly income and then multiplied by sixty. The debtor “flunks” the means test, meaning that a presumption of abuse exists, if this amount exceeds the lesser of: (1) $9,075 or 25% of nonpriority unsecured debt, whichever is greater, or (2) $15,150. Put another way, a debtor may file a chapter 7 case without a presumption of abuse arising if their monthly income after expenses is less than $151.25 per month ($9,075 ÷ 60).

Bankruptcy Basics: When Advisable.

A reaffirmation is an agreement entered into during bankruptcy by the debtor with a particular creditor in which the debtor agrees to remain legally obligated on some or all of a debt that would otherwise be discharged. Such agreements must meet specific requirements provided in section 524 to be enforceable.

Bankruptcy Basics: Overview.

The discharge in chapter 7 covers all debts owed by the debtor except those that are specifically excluded under section 523(a). The exceptions to discharge of particular debts listed in section 523(a) are narrowly drawn and construed by the courts.

Bankruptcy Basics: Debts Excepted from Discharge by Operation of Law.

Some debts are nondischargeable simply based on the fact that they are of the type specified in section 523(a). If the creditor contends that the debt is covered by one of these exceptions to discharge, the creditor is not required to bring an action in the bankruptcy court to have the debt declared nondischargeable and may take action against the debtor once the automatic stay is lifted or the bankruptcy case is closed.

Mortgage Servicing and Loan Modifications: ALASKA

Alaska Stat. § 18.56.135

Scope: Mortgage loans purchased by the Alaska Housing Finance Corporation (AHFC) under a residential loan program authorized by this statute and serviced by an institution other than the AHFC.

Exclusions: None specified.

Bankruptcy Basics: Request for a Mortgage Payoff Statement.

A request for a mortgage payoff statement can be an effective tool for discovering whether a servicer has imposed improper fees and charges on the borrower’s mortgage account. Many states have enacted laws that require a prompt response to a borrower’s request for a mortgage payoff statement. In addition to setting a deadline for a response, these laws often specify the maximum fee a servicer may charge for responding to the request.

Bankruptcy Basics: Debt Collection Claims

When a third party is collecting on a debt, the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. § 1692h, and its implementing Regulation F, 12 C.F.R. § 1006.34, require debt collectors to provide “validation information” about the alleged debt and a consumer’s rights to dispute it. The validation information includes a great deal of detail about the debt. Debt collectors can provide this information orally, electronically, or via a written letter at or shortly after their first contact with a consumer.

Bankruptcy Basics: Overview

The Servicemembers Civil Relief Act, 50 U.S.C. §§ 3901–4043, provides special protections for military service personnel on active duty and their dependents, for debts incurred before the military service personnel went on active duty. The military is responsible for providing information to military personnel on the benefits available under the law. Among the most significant protections are:

Bankruptcy Basics: Court Documents.

Debtors should be asked to provide documents relating to any litigation in which they are involved. In actions brought against the debtor, a review of the documents may reveal other parties to be potential creditors or counterclaims to be potential property interests of the debtor. These documents may also indicate whether any postjudgment collection action is imminent or whether judicial liens may exist on the debtor’s home. In actions brought by the debtor, potential claims can be identified so that they may be properly listed and possibly exempted on the debtor’s bankruptcy schedules.

Bankruptcy Basics: Reasons to File Quickly.

By contrast, in some cases a debtor has no choice but to file immediately. Prompt action may be necessary to forestall a repossession, eviction, execution sale, or utility shut-off. A debtor may wish to file immediately before a foreclosure, if there is a possibility that the debtor will be able to cure a mortgage default through a chapter 13 plan. Such a cure may be possible even after the foreclosure if the sale process has not been completed and the debtor’s rights in the property under state law have not been terminated.

Consumer Bankruptcy Law and Practice: 6.5.2.2 Protecting Property and Exemption Planning

The 2005 amendments made it much more likely that exemptions will have to be considered in deciding when to file a bankruptcy case. The time period during which a debtor must be domiciled in the debtor’s current state in order to claim that state’s exemptions was extended from ninety days or less to two years.150 If a debtor’s state of domicile has changed in the two years before bankruptcy, the laws of the debtor’s prior domicile will usually govern.

Bankruptcy Basics: Exemption Planning.

The debtor can, within certain limits, take a number of steps to improve their legal position prior to filing bankruptcy. These steps are generally called “exemption planning.” Basically, exemption planning means arranging one’s affairs so that a maximum amount of property can qualify as exempt, and a minimum amount lost to creditors. In some cases, it may simply involve the timing of when the bankruptcy is filed.

Bankruptcy Basics: Finding an “Approved” Counseling Agency

The debtor must receive the required briefing from an agency that has been approved by the United States Trustee Program for the jurisdiction where the debtor is filing (debtors located in North Carolina or Alabama must use counseling agencies approved by the local bankruptcy administrator). A regulation sets out the qualifications for approval of counseling agencies at 28 C.F.R.

Bankruptcy Basics: Attorney Fees.

First, there may be costs associated with hiring an attorney to handle the bankruptcy. Fees charged by the attorney should be clearly specified in a retainer agreement with the debtor and all fees paid or agreed to be paid must be disclosed in a statement filed with the bankruptcy court. See Chapter 6, infra.

Consumer Bankruptcy Law and Practice: 9.8.2.1 Procedure

Section 366(a) is significantly limited by section 366(b), which provides that a utility may “alter, refuse or discontinue service” if the debtor does not, within twenty days after filing a voluntary petition, furnish adequate assurance of future payment. A temporary exception to this provision was enacted in response to the COVID-19 pandemic.

Bankruptcy Basics: Utility Deposits.

Finally, utility companies may be entitled to collect a security deposit following a bankruptcy (usually equal to approximately twice the average monthly bill). However, the debtor is given a breathing spell after the bankruptcy is filed to make arrangements with the utility. Section 366 provides that at least for the first twenty days after the petition is filed, the utility may not “alter, refuse, or discontinue service or discriminate against” the debtor solely on the basis of an unpaid prepetition debt or the filing of the bankruptcy case.

Consumer Bankruptcy Law and Practice: Forms Contained in This Appendix

This appendix contains selected forms promulgated by the Administrative Office of the United States Courts that are relevant to consumer bankruptcies. These forms are:

E.2 Adversary Proceeding Cover Sheet (B 1040)

E.3 Motion, Notice and Order for Adequate Protection Payments and Opportunity to Object (B 1130)

E.4 Required Lists, Schedules, Statements and Fees (B 2000)

E.5 Notice Required by 11 U.S.C. § 342(b) for Individuals Filing for Bankruptcy (B 2010)

E.6 Statement of Military Service (B 2020)