How Filing for Bankruptcy Can Affect A Co-Signor, The Good and The Bad
A common situation that arises when people come into my office involves co-signors. Many people I talk to have either co-signed or had co-signers on loans. Typically these loans are for vehicles and clients wonder what will happen to co-signers if they file for bankruptcy.
This is a common questions with a pretty simple answer (most of the time). In general, the filing of a bankruptcy by one co-signor does NOT relieve the other co-signor of liability for the loan. So, for instance, if you have co-signed a loan for someone else and that person files for bankruptcy, you are still responsible for the entire amount of the loan. It often happens, of course, that the person filing for bankruptcy will choose to keep a car or other secured property. If they continue to pay on the property, then the filing of the bankruptcy will not affect the co-signor.
As with most bankruptcy situations, however, there is a caveat. When a bankruptcy is filed, there is a mechanism put in place called the automatic stay. It takes effect immediately upon the filing of the bankruptcy and protects the debtor from any sort of collection activities including phone calls or letters, lawsuits, wage garnishments or bank attachments. The automatic stay does not apply to any co-debtors or co-signors with the bankruptcy debtor. Or does it? There is a situation in which a co-debtor is also protected by the bankruptcy filing.
The bankruptcy code provides for a "co-debtor stay" in a Chapter 13 bankruptcy (11 U.S.C. 1301). The co-debtor stay will stay in effect for the duration of the Chapter 13 plan. However, a creditor can seek to get relief from the co-debtor stay unless the debt is a "consumer debt" and the debtor is re-paying the debt in full through their plan. If the creditor can show "irreparable harm" due to the co-debtor stay, the court may also grant them relief from the stay. If relief from stay is granted, the creditor can then pursue the co-debtor.
You should talk to an experience bankruptcy attorney for more answers on the scope and effect of co-signing. To speak with an experienced Ohio bankruptcy attorney, or for more information on Chapter 7 and Chapter 13, call me at 330-605-3508 or visit my website at http://www.ohiobankruptcyrelief.com/.
Being sued? here's the one thing you should never do.
If you're sued in Ohio, you need to act. Sitting back and burying your head in the sand is the WORST thing you can do. So how does your standard lawsuit proceed and what time frames are you looking at? And how does bankruptcy fit in the equation? Here's a primer on how they work and what can happen.
When you're sued, whether in municipal court or common pleas court, you have to be "served" with the lawsuit. Most people have the idea that process servers hunt people down and find unusual and amusing ways to hand them lawsuits and "serve" them. We can thank movies and television for this perception. The fact is that personal service is unusual in Ohio, except in the case of foreclosures. Most service is done by certified mail. Ohio rules dictate that you have to first be served by certified mail or any other private service that requires a signature for delivery, such as FedEx or UPS. If this type of service is unsuccessful, it is usually tried a second time. If it is unsuccessful again, service is usually by ordinary mail. If the mail is returned or service is otherwise unsuccessful, then you can be served by "publication". Basically, notice of the lawsuit is put in a newspaper and you are considered "served" after a certain amount of time. I won't go into the details, but the point to take away is that you can only delay being served with a lawsuit, but you cannot completely avoid it.
OK, so you've been served. You then have 28 days (not including the date of service) to "answer" the lawsuit. Answering it means filing an answer with the court and serving a copy of your answer on the plaintiff or their attorney, if they have one. If you've answered it, this will delay the lawsuit and the court will put it on a case management track that includes deadlines and hearing dates. If you don't answer it, the plaintiff will likely get a default judgment against you for not answering it. Either way, if it is a legitimate claim, you will likely have a judgment against you eventually.
So what are the consequences of having a judgment against you? This is where we need to pay close attention. If a creditor has a judgment against you, they can then start garnishing your wages, attaching bank accounts and putting liens on your property. The one thing that can stop a creditor dead in their tracks is filing for bankruptcy.
So how does bankruptcy fit in? A Chapter 7 or Chapter 13 bankruptcy will STOP any lawsuits, whatever stage they're at. Whether you've just been served or you're already having your wages garnished, a bankruptcy will stop it. But, as always, there is a caveat. If a creditor has a lien against your home, you may or may not be able to get rid of it through a bankruptcy. If the lien is completely unsecured (you owe more on superior liens than the house is worth), then you can get rid of it in a Chapter 7 or Chapter 13 bankruptcy. If, however, the lien is even partially secured, then the debt may be wiped away, but the lien may continue to stay on the property. If this is the case, then it will have to be dealt with whenever the house is sold or refinanced. An experienced bankruptcy attorney should be able to help you through the process of getting rid of liens in bankruptcy.
For more information on Chapter 7 and Chapter 13, give us a call today at 330-605-3508, or contact us through our website. We have a free consultation where we can determine if bankruptcy is a good option for you.
Debt Settlement May Raise Your Tax Bill
Oftentimes, clients come into my office confused about their debt relief options. They have a general idea about what bankruptcy is and how it works, yet they are bombarded daily with advertisements about settling their debts without bankruptcy. What they never hear is that settling with credit card companies or debt collectors may mean higher taxes in the long run.
Some people come into my office already enrolled in a "debt settlement" plan. Others have attempted to settle debts directly with creditors. When people settle debts with banks, collection agencies or other lenders for less than the balance due, the creditor is required to file a Form 1099-C with the IRS. The Form reports the cancellation of debt and the amount forgiven (the difference between what you owe and what you settle for) as income to the debtor.
For instance, if you owe $5,000 on a credit card, but you pay $3,000 to settle it with the creditor, that $2,000 of forgiven debt must be reported as income on your tax return. The result will mean either you will owe more taxes or a get a smaller refund. Not surprisingly, debt settlement companies and creditors do not tell their customers about these implications.
And while some debtors may feel better about settling the debts without filing for bankruptcy, they need to understand that there are real tax implications for doing so. So how is bankruptcy different? Debt that is discharged in a bankruptcy is not subject to taxation as forgiven debt. This is because technically the debt is not forgiven, your creditors are just prohibited from collecting on it.
In the end, many people may find that they've traded in a bad creditor for the worst creditor of them all, the IRS. It's important to speak with an experienced bankruptcy attorney about whether or not filing bankruptcy is your best option.
Filing bankruptcy can be complicated and confusing. For more information on Chapter 7 and Chapter 13, or for a free consultation, call me at 330-605-3508 or visit my website at http://www.ohiobankruptcyrelief.com/.
Filing Bankruptcy May Help You Get Your License Back
It never ceases to amaze me how many people drive without insurance. A common situation I see involves people who have gotten into an accident without having insurance. When there are damages, typically the other party's insurance company pays their insured customer and seeks reimbursement from the driver at fault. If the person is unable to pay, the uninsured driver can lose his license until the amount is satisfied. This is where bankruptcy comes in.
First off, coverage can be expensive, but it's required. If a person purchases automobile insurance, the State of Ohio requires the person to purchase Bodily Injury Liability Coverage as well as Property Damage Liability. In Ohio the required minimum for Bodily Injury Liability Coverage is $25,000 per person injured in any one accident and $50,000 for all persons injured in any one accident. The required minimum for Property Damage Liability Coverage is $25,000 for injury to or destruction of property of others in any one accident.
So what is the penalty for driving without the proper amount of insurance? Failure to provide proof of financial responsibility, when required, will result in the following civil penalties imposed by the Registrar of Motor Vehicles:
■Lose driving privileges for a minimum of ninety (90) days and up to two (2) years;
■License plates and vehicle registration suspension;
■License plate reinstatement fees for first violation, second violation, and third or subsequent violation (There is an additional non-voluntary surrender fee for failing to surrender the license, plates or vehicle registration to the BMV);
■Require filing with the BMV (SR-22 or bond) to continuously maintain proof of financial responsibility for a minimum of three (3), up to five (5) years from the date of the suspension of operating privileges;
■Vehicle immobilization and confiscation of plates for 30 to 60 days for violating FR suspension. Third and subsequent offenses could result in vehicle forfeiture and a five (5) year suspension of vehicle registrations.
Driving and registration privileges cannot be restored until all requirements of the suspension have been met. If you think this is bad, consider what can happen if you get in an accident. If you are involved in an auto accident without insurance or other proof of financial responsibility, additional penalties may apply. You may have a security suspension for two years or more and a judgment suspension for an indefinite period until the judgment is settled. These suspensions can involves several thousand dollars and people can often lose their license for years. This is where bankruptcy can come in.
Assuming there are no other holds on your license, filing for bankruptcy will allow you to get your license back immediately. As long as there were no drugs or alcohol involved, the amounts owed to the insurance company can be discharged through bankruptcy. In fact, the Ohio Revised Code even provides that your reinstatement fee can be discharged in bankruptcy (ORC 4510.10(G)). As soon as your case is filed, you can take your paperwork to the Bureau of Motor Vehicles to get your license reinstated. An experienced bankruptcy attorney will provide you with the appropriate paperwork and guide you through the process.
I'm an experienced Ohio bankruptcy attorney who has managed or filed over 2,000 cases throughout Northern Ohio. For more information on Chapter 7 and Chapter 13, call me at 330-605-3508 or visit my website at http://www.ohiobankruptcyrelief.com/.