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Nashville Bankruptcy Law Blog

Bankruptcy trustees ask for passwords to online accounts

Tennessee debtors who file for bankruptcy might be asked about various assets, but they are normally not asked to provide passwords to online accounts. However, two Chapter 7 bankruptcy trustees in Maryland have requested that debtors turn over their passwords to eBay, PayPal and Amazon Prime accounts, a move bankruptcy attorneys say is needlessly intrusive. The paperwork also says that the passwords cannot be changed for 10 days and the accounts cannot be closed.

It is not clear how many debtors have been asked for the information, what will be done with it or who will have access to it. However, one bankruptcy attorney pointed out that the request raised serious issues around cybersecurity because of the number of trustees and the lack of IT security. Furthermore, as another attorney pointed out, the question could have the effect of discouraging people from applying for bankruptcy. He said that attorneys might respond by suggesting that before filing, clients close those accounts.

The importance of paying bankruptcy fees

Tennessee residents who are considering bankruptcy should be aware of the importance of following the rules of the bankruptcy process. While bankruptcy is often a stressful time for those who may be struggling with overwhelming debt, this stress does not absolve the debtor from meeting their responsibilities.

In a recent Chapter 7 bankruptcy case, a debtor was unable to pay the standard court fee. She had requested that the court provide her with a payment plan, which it did. However, the plaintiff did not make the final payment in the plan, nor did she appear before the court when requested to explain why the payment had not been made.

Chapter 7 and your credit card debt: WHAT credit card debt?

Credit card debt can rack up quickly, especially if you've been through a job loss, a divorce, a medical problem or another serious difficulty. Seemingly overnight, your monthly payments can skyrocket, your interest rates and fees can explode, and debt can beget much more debt. It's a very stressful thing to have to deal with.

If you have big credit card debt and you're trying to understand if Chapter 7 bankruptcy can help you get out of it, the answer is a quick YES ... IF you qualify for it. It's an important IF, but it's also a resounding YES. Generally speaking, you can get rid of all your credit card debt (and other unsecured debt, such as medical bills and unsecured loans) by filing under Chapter 7.

Life after Chapter 7: So WHAT if your credit is shot?

Being in serious debt is a lot like being in prison, emotionally . You may feel trapped and anxious for months or even years, with no relief. The overwhelming majority of Americans who are considering Chapter 7 bankruptcy are under financial stress because of medical expenses, a job loss, a divorce or another setback.

Even if you are struggling with massive debt, you may still be worried about the impact a Chapter 7 filing will have on your credit scores, which will probably take a significant dive after you file. Friends, family members and bloggers may be telling you things like:

  • "Your credit will be destroyed for seven to 10 years if you declare bankruptcy."
  • "Your credit will be ruined. You won't be able to get a mortgage or buy a car."
  • "You won't even be able to get a credit card or a loan."
  • "You'll pay a lot more for car insurance and other things."

How to tell when its time for bankruptcy

Some Tennessee businesses that are failing may benefit from filing for bankruptcy. It is possible that Chapter 11 bankruptcy offers an orderly method for restructuring debt and repaying creditors without having to shutter the company. There are many signs that a company may be headed to bankruptcy such as surviving on a line of credit, an inability to pay bills and a negative net worth.

If a company doesn't have adequate liquidity, it could be only a matter of time before it is forced to file for bankruptcy. Ideally, business owners will opt to file sooner rather than later because it may be possible to get better terms that way. In a Chapter 11 filing, it may be possible to avoid paying unsecured creditors and reorganize secured debts. Even if the business is lost, losing it in an orderly fashion is generally the best course of action.

Dangers of debt consolidation loans

When deeply in debt, some Tennessee residents may try to avoid bankruptcy by consolidating their bills via another method. Debt consolidation loans are a common method, as are assets like retirements accounts or home equity lines of credit. These strategies may save money by lowering interest rates, but they rarely solve an individual's real debt problem.

Sometimes, debt happens because of emergencies or large unforeseen expenses like medical bills. Debt may arise from sudden job losses or injuries that prevent a person from working. Much of the time, however, debt is a simple matter of a person consistently spending more than they make by buying unnecessary or luxury items on credit. When debt consolidation is used in these situations, it often fails to fix a person's financial problems because it fails to help them notice their habits or change their spending. Since no real controls are put on the person's spending, they often end up right back where they were before.

How retirement plans are treated in personal bankruptcy cases

Tennessee residents who are struggling with overwhelming bills may pursue debt relief by filing Chapter 7 or Chapter 13 bankruptcy petitions. While these individuals may be most concerned with their immediate financial situations and making ends meet, they should also be aware of how personal bankruptcies can impact long-term investments like 401(k) and IRA retirement plans.

Money saved in 401(k) retirement accounts are protected during times of financial hardship by the Employee Retirement Income Security Act of 1974. While these funds are generally off-limits to creditors during a personal bankruptcy, the Internal Revenue Service may levy future disbursals to cover unpaid taxes. While IRA and Roth IRA accounts are both protected in bankruptcy, lawmakers have established firm limits. The IRA exemption is capped at $1.3 million, but even these funds may not be safe under the provisions of the Bankruptcy Abuse Prevention and Consumer Protection Act if withdrawals are being used as income.

Question over liquidating property under Ch. 7 bankruptcy

When filing for Chapter 7 bankruptcy, a trustee oversees the liquidation of non-exempt assets to pay back creditors of an individual or married couple. Tennessee residents might like to know about a case where a person owned two homes.

In that case, a trustee wondered whether a Virginia man abused the bankruptcy system by maintaining expenses for two homes while filing for Chapter 7 bankruptcy. The trustee thought the man should sell one home in order to pay creditors. The man had a home with two mortgages and more than $60,000 in student loan debt after getting a higher degree for his career. The man's mother-in-law suffered from dementia, so his wife bought a larger home for the family so the mother could move in with her daughter.

Problematic debt: 5 signs that Chapter 7 could improve your life

A serious debt problem can affect every area of your life. You may be consumed with anxiety about bills you can't pay. You may feel hopeless and come across as angry and irritable with your spouse, children or other family members. You may be exhausted and unable to be your real self. These are normal responses to high stress that you can't break on your own.

Many people wind up in a problematic debt situation because of an income loss, a divorce, an illness or injury, or another serious life event. Something needs to change if you feel trapped and your best efforts, over time, aren't helping you regain control of your financial life. A Chapter 7 bankruptcy filing MAY be what you need if you see these signs.

Four things you'll be happy about after a Chapter 7 bankruptcy

It's a horrible thing to be buried in debt. Emotionally, you may move between powerlessness, hopelessness, anger, resentment, panic and a host of other miserable states.

If you feel stuck in major debt because of a divorce, a job loss, a medical event, a business failure or another serious problem, you are not alone in the stressful misery. If your best efforts -- a second job, selling possessions, credit card balance transfers, 401 (k) withdrawals, more debt, and the like -- have been unsuccessful, you may be reading about Chapter 7 bankruptcy to see if it is a viable option for you and your family. If you qualify for and file Chapter 7, which is often referred to as liquidation, these are some of the good things that could happen to you.

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