South Atlanta Bankruptcy Blog

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Gina Karrh

Gina Karrh

Gina Karrh graduated from Cumberland School of Law in Birmingham, AL in 1996. She has worked for large and small law firms and has essential local knowledge and contacts to get the best possible results for you.

Hardship Discharge of Student Loans

Posted by on in General

The amount of student loan debt now exceeds outstanding credit card debt in the United States. This is not surprising because acquiring a higher education is perceived to be necessary to landing a job in a competitive environment. Further, it is easier to borrow for a student loan than it is to borrow for other purposes, since unlike other types of loans, neither a job nor a co-signer may be needed. Moreover, the government often guarantees repayment of student loans, and it is not easy to obtain a hardship discharge of student loans in bankruptcy.

Even so, it is not strictly true that you can never do anything about student loans in bankruptcy. For example, you can certainly pay, or partially pay, a student loan in Chapter 13 under the protection of the Bankruptcy Court. However, any unpaid portion will not be discharged in the Chapter 13. Otherwise, the Bankruptcy Code provides for the possibility of wiping these debts out without payment only by obtaining a “hardship discharge”.

A hardship discharge is available only under extremely limited circumstances. Thus, you should not expect to file for a hardship discharge casually. A responsible lawyer would only recommend that route in circumstances where you have a reasonable chance for success. Furthermore, you should expect it to be expensive litigation, and for it to involve substantial time and effort on your part to comply with discovery demands and other trial preparation.

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Garnishments and Frozen Bank Accounts in Chapter 13

Posted by on in Chapter 13

How it starts:

Under general contract law, if a person borrows money, and is late in repaying it, the lender may sue to collect the debt. A lender starts a suit by filing a “summons and complaint” that usually states that payments have not been made as required in the contract.

A suit requires that the defendant/borrower file an “answer” within 30 days. The answer should state a reason why the borrower is not legally obligated to pay the debt as stated in the complaint.

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Does Filing Chapter 13 Have Any Effect on Obligations Arising in Divorce?

Posted by on in Chapter 13

It’s common knowledge that you can’t “bankrupt on child support or alimony”. Obligations “in the nature of support” (even if they are labeled something else in the divorce decree) have never been dischargeable in bankruptcy. This means that you can’t get rid of them without payment.

Even so, it is possible to stop (“stay”) a contempt proceeding on past due obligations and catch up those debts over a period of years in Chapter 13. Chapter 13 is often used to avoid going to jail on a contempt proceeding. However, the bankruptcy judge will not rewrite a divorce obligation no matter how unfair it is, and no matter what has changed since the divorce was final. Only the Superior Court can do that. The reason is that a divorce is strictly a matter that is governed by state law in state court (Superior Court), whereas bankruptcies are federal. Federal courts will not interfere in matters that are traditionally the subject of state jurisdiction.

Over the years, this principle has become stronger and stronger. It is no longer possible to discharge a property settlement (as distinct from a support obligation) in Chapter 7. Thus, you should not expect to “fix” a bad result in divorce court by filing a Chapter 7 bankruptcy. It may be possible however, under limited circumstances, to pay property settlement obligations less than in full under a Chapter 13, and still receive a discharge. There is nothing easy or automatic about this, and you would have to discuss your particular situation with a lawyer to be confident about how this would work out for you.

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What Happens to Tax Refunds in Chapter 7?

Posted by on in Chapter 7

A tax refund is money that the government owes you because you paid in more (usually withheld from your pay) than what you owe in taxes. Since someone else owes you money, a tax refund is an “asset” like your bank account or your car, and it must be disclosed in the bankruptcy petition.

In a Chapter 7, if you have not yet received your refund, you should disclose it, and then your lawyer will claim an “exemption” in it so that you keep it. You can exempt up to $5,600.00 per debtor, but this same “exemption” must be used to protect bank accounts and other miscellaneous property.

If you have already received the tax refund before you file bankruptcy, then it is not an asset at the time you file, and you would not need to disclose it or to use your available exemptions to protect it as a tax refund. However, if the money was simply deposited in your bank account, you would then exempt that money as a bank account, but not as a tax refund. The same $5,600.00 limit would apply.

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