Stephen Behrends Law Office Blog | Eugene, OR

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Stephen Behrends Law Office | Bankruptcy | Eugene, OR


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This blog is for people who are thinking that they might have to file bankruptcy. I have been helping people work through their financial problems for so many years that I know the concerns that come up again and again. I want to provide practical information that you can use right now in helping decide how to take on these complicated issues.

By Stephen Behrends, Apr 14 2017 03:51AM

A: Yes, definitely! There are several reasons why. First, while you will still have penalties for failing to pay on time, you won’t have penalties for failing to file. This will reduce the amount that you owe. Second, filing the tax returns will start the statute of limitations running. This sets the amount of time that has to go by before income taxes can be discharged in bankruptcy. It also starts the clock on the total amount of time for an audit and for collection of the taxes. Finally, it avoids the danger that the IRS or the ODR will file a “substitute for return” which includes your income but no deductions or exemptions in determining how much you owe. If this happens, not only do you owe more than you would if you did the returns yourself, but those taxes can never be discharged in bankruptcy, no matter how much time passes. So, always file your tax returns on time, even if you don’t have the money to pay the taxes you owe on them.

By Stephen Behrends, Mar 9 2017 06:24PM

We all know that filing bankruptcy will be a negative or adverse event on your credit report. So how can it help you rebuild your credit? Won't potential lenders avoid loaning money to someone who has filed bankruptcy?

The answer is that they look at one part of your credit report, your debt to income ratio, as part of their decision making process. And bankruptcy improves this aspect of your financial situation because the discharge that comes at the end of the bankruptcy case means that you do not have as much debt anymore or, maybe, not any debt at all.

One way of thinking about this is from the point of view of one of these potential new lenders. If they see that you do not have much debt, they will conclude that it will be easier for you to repay money loaned to you now. This is because you do not have many other debts that you are trying to pay.

Of course, the usual concerns will still apply. Any new lender will want to know if you have a source or repayment and whether there is anything, like a car, that can be security for the loan. But a bankruptcy discharge can be the first step towards rebuilding your credit just because it reduces the other debt that new lenders would think that you would still have to try to pay.

By Stephen Behrends, Feb 20 2017 05:31PM

This is the next in a series of blogs I am calling “The Big Questions.” These are the things that I usually discuss first and worry about the most when I talk to someone for the first time about bankruptcy.

We worry if you have repaid friends or family in the last year because the trustee has the power to demand that money back from them. This typically would be a disaster for the friend or family member you repaid. So, it has to be avoided if at all possible or at least addressed in some way.

The usual ways that this comes up are either use of a tax refund to repay someone or monthly payments.

An example involving use of your tax refunds:

Your car broke down and your mother offers to pay the $2,500.00 repair bill. You are grateful and so when you get your $3,500.00 tax refund a few months later, you pay her back. Then, you get sued by a collection agency on an old medical bill and suddenly they are garnishing your paychecks. You contact an attorney and file bankruptcy but some how the question of whether you repaid a friend or family member doesn’t seem to come up. You fill out a questionnaire as completely as you can and list the fact that you paid her but your lawyer doesn’t mention it. Maybe you have forgotten about it until you go to the hearing with the trustee but then remember it when you are under oath.

Either way it is now a big problem. The trustee wants your mother’s name, address and phone number unless, he or she tells your attorney, “... your client wants to make an offer...?” You leave the hearing and ask your attorney what the trustee was talking about and find out that unless you can make payments to the trustee, a demand is going to be sent to your mother to pay the trustee the $2,500.00 you paid her from your tax refunds.

An example of problems arising from repaying a friend or family member in monthly payments:

A close friend let you use her credit card to pay to replace your water heater. Or maybe it was your share of a trip you took together or for clothes for the kids for school when you didn’t have any money. You agree to repay the $2,000.00 you borrowed by paying $200.00 each month and you almost have her paid back when you get garnished and have to file bankruptcy to stop it. The trustee will want to collect the payments you made within the last year back from your friend.

The final example is if you transferred something to a friend or relative to repay them money you owed, like when you get a replacement car and instead of trading in the old car you transfer it to your brother to pay the money you have owed him for years.

In all of these situations, you may have to wait to file a bankruptcy case until it has been long enough that the trustee can’t recover them money. If you are making payments, we will advise you to stop the payments until the amount you repaid in the last year is less than $600.00.

If you can’t wait to file, you have to be prepared to make an offer to the trustee as an alternative to having them trying to collect the money from your friend or relative. We negotiate this arrangement with the trustee for you. A usually agreement is for you to pay 70% to 80% of the amount repaid in monthly payments. The trustee is typically willing to accept this kind of proposal if the payments are not going to take over a year from the time the case was filed.

Sometimes, you can go to the friend or relative and borrow more money to settle with the trustee and then make payments to them.

In any event, these are problems that have to be addressed or they could become a disaster. So you should tell your bankruptcy attorney right away if you have made any repayments to a friend or family member within the last year.

By Stephen Behrends, Feb 9 2017 04:27AM

There have been some encouraging changes to the ODR’s settlement forms. A new package for preparing your Settlement Offer became effective starting in January, 2017. The biggest change is that the income calculations for the settlement amount and the time to make the settlement payment are now more favorable to the person proposing a settlement.

The big changes are on page 13. The old form required on line 83 that the settlement amount include your net disposable income times 36. Then, it provided that the maximum time to pay the offer, if accepted, was 6 monthly installments.

This was basically a requirement that you have some way to fund the settlement other than payments since you had to pay 6 times your net disposable income for 6 months after the offer was accepted. This would have been difficult for most people to do on their own.

The new form can be found at:…/…/FormsPubs/form-or-soa_101-157.pdf

It requires on page 13, line 83 that the settlement amount include your net disposable income times 12 instead of 36. Just as significant, the maximum time to pay the offer, if accepted, has been increased to 12 monthly installments instead of just 6.

This means that it might be possible for you to use your disposable income for 12 months to fund the settlement offer.

Of course, there is still the requirement that your offer also include 75% of the equity in your assets.

I have had real problems getting the ODR to accept any settlement offers in the past. I am hopeful that this change in the settlement forms is an indication that the ODR is now going to make its settlement program work for more people.

By Stephen Behrends, Jan 24 2017 04:30AM

This is a subject of confusion for many people if they start being garnished at work for an old bill. They often mistakenly think that once a garnishment has started, a bankruptcy cannot stop it. This is incorrect. The bankruptcy filing immediately stops all collection actions like garnishments.

We notify your employer and the creditor as soon as the case is filed that they must stop the wage garnishment. Then, we follow up to make sure that the garnishment is actually stopped. If funds are taken out of one of your paychecks after the case is filed, we make sure that that money is paid back to you.

To be able to quickly stop a garnishment when a case is filed, we need to have the contact information for your payroll department. Then, we can call as soon as the case is filed to notify them to stop the garnishment and then send a follow up letter.

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