Seriously Consider a Reaffirmation Agreement in Nevada Bankruptcy





Hi, Matt McArthur. Bankruptcy attorney at Clear Counsel Law Group. Today we're going to be talking about Reaffirmation Agreements in the state of Nevada.

Now warning ahead of time, this conversation's going to get a little technical and can be a little complicated. If there is any confusion about this, please come in and see me at a free consultation.

I'd be happy to discuss this in greater detail with you. Make sure that you fully understand that topic.

For now, we're just going to dive in.


What is a Reaffirmation Agreement?

Reaffirmation Agreement, first let's talk about what one is.

When you file for bankruptcy and you have a secured debt, this would be a loan that is attached to something like a house or a car, creditors will often seek to have you sign what we call, Reaffirmation Agreements.

This is an agreement or a contract between you and the lender for that loan that you are agreeing to not include them in your discharge and that you will be responsible for that debt following the bankruptcy regardless of whether or not you receive a discharge at the end of your bankruptcy case.

There may be reasons why you would want to do a Reaffirmation Agreement; however, in the state of Nevada, particularly when it pertains to vehicle Reaffirmation Agreements, my recommendation is that my clients do not sign them.


Why a Reaffirmation Agreement May Not Be in Your Best Interest

The reason is because there's been a recent change in Nevada law.

In October 2011, Nevada law changed and there was a bankruptcy case here at the District Court level, an opinion by one of the local judges was issued. It was in a case called In Re Henderson.

In that case the Judge essentially interpreted the Nevada law to mean that the simple act of filing for bankruptcy does not constitute, or is not the equivalent of, a breach of contract under your purchase agreement.

Let's take a minute to slow down and try and understand this.

Typically when you buy a car you sign a contract saying that you'll pay back the bank for the money that they lent you to be able to buy the car.


reaffirmation agreement, agreements, Nevada, Las Vegas Copyright: ginasanders / 123RF Stock Photo

In that contract, somewhere in that fine print, there's probably a clause that says the mere act of filing a bankruptcy is a breach of contract. When you breach this contract, or you're in default under this contract, we have the right to take back the car regardless of whether you're current on your monthly payments.

It's a big issue when the Court here says that even though you have a specific contract with this bank that says if I file bankruptcy you can come and get the car and Nevada law says, no you cannot.

It is not a breach of contract. You did nothing wrong pursuant to the contract according to the laws of Nevada.

In other words, what does this mean? What does this mean for your ability to keep your car? As long as you are otherwise in good standing under the contract, you're making your monthly payments, likely you're required to maintain current insurance on the vehicle and keep it registered.

As long as you're otherwise fulfilling your end of the bargain on the initial contract, filing for bankruptcy doesn't change any of that. You can continue to make your payments, perform under the contract and keep the vehicle without fear of the bank coming and taking your car away.


You May Not Need a Reaffirmation Agreement to Keep Your Car

That's a big reason why my counsel is, let's not sign this Reaffirmation Agreement that's going to keep you on the hook and keep you liable for the full amount of the loan of the car because we never know what's going to happen down the road.

If the remaining amount of time on the contract is two, three, four, five years you may experience a job loss, this car may become unaffordable for you in the future, and you retain the option to give the car back or surrender the car without any further financial obligation if you don't sign the Reaffirmation Agreement. Not so if you did sign the Reaffirmation Agreement.

If a Reaffirmation Agreement is signed and you later turn in a car after the bankruptcy discharge, it's very likely the dealer or the car lender will try to resell the car at an auction for much less than what's owed and the difference between what the car sells for and what is still owed is called a Deficiency Judgment.

The car lender will inevitably pursue you and try to collect that money still. Even though you filed bankruptcy.


If You Want to Keep Your Car, Come Talk to Me

In my mind, retaining that flexibility and that protection from future liability is a much greater benefit than the nominal benefits that you may receive by actually entering into a Reaffirmation Agreement.

Such as, continued reporting on your credit report. If there's some reason that you feel strongly about signing a Reaffirmation Agreement, we can absolutely do that.

Please come in and see me if you have any questions about any of this and let me help you navigate the landmines that exist with this particular topic.

The consultations are free, the advice is free, the information is free.

There's no reason not to come in and speak with me.

I hope to hear from you soon and we can talk in greater detail about your car, your house, your ability to keep it and whether or not a Reaffirmation Agreement is appropriate in your situation.

Hope to hear from you soon.


What You Need to Know About the Automatic Stay of Your Bankruptcy




Hi. Matt McArthur, bankruptcy attorney at Clear Counsel Law Group. Welcome back.

Today what I wanted to discuss was an issue that often comes up during our free consultations that we offer here at Clear Counsel Law Group, and that is the topic of the automatic stay and its limitations.

Now you'll remember from previous videos, if you've had a chance to view those, that the automatic stay is the federal law that goes into place upon filing a bankruptcy that protects the person that has filed for bankruptcy from harassing creditors and from collection efforts by other creditors that are trying to collect on this debt.

Now this is a very powerful protection, and it's one of the most looked forward to benefits by individuals filing for bankruptcy because it stops phone calls, it gives them a little bit of breathing room, allows them to keep their car or their house a little bit longer while they're dealing with the financial mess that they find themselves in.


Limitations of the Automatic Stay

Related to this conversation is: What limitations are there? Is there any sort of limit placed upon my ability to keep my car or my house in a chapter 7 bankruptcy? As you would expect, yes, there are limitations.

What those limitations are, are found in the bankruptcy code: It allows a creditor to ask the court for permission to terminate the automatic stay before the bankruptcy case has ended if certain conditions are present.

Now in a chapter 7 bankruptcy, the only condition that needs to be present is that the property which has the loan tied to it is worth less than what the outstanding balance of the loan is.

In other words if you're underwater on your house, if you're underwater on your car payments, if you owed fifteen-thousand dollars on your car, for example, but the car's only worth twelve or ten, then the conditions are present in a chapter 7 case for that creditor to ask for termination of the automatic stay so that they can pursue their state law remedies.

The state law remedies would be foreclosure or repossession of the vehicle.


A Few Practical Considerations

One of the practical considerations that we look at in this situation is if you are current on your monthly payments on your mortgage, or your car payment, it's very unlikely that a creditor would pursue a termination of the automatic stay to pursue their state law remedies because the state law is not going to allow them to repossess the vehicle, or foreclose on a house, if you're making your monthly payments.


bankruptcy, automatic stay, las vegas, nevada


It would be an exercise in futility, or it wouldn't make any sense, for these creditors to ask for court permission and incur all the legal expenses associated with that, only to be able to sit on that right and not exercise any state law remedies ... Not being able to foreclose or take the car back.

Now if you're thinking of filing for chapter 7 bankruptcy, this is one of the things that we review in detail about your case before we file the case and potentially subject you to a situation where you would lose your car or your house.


I Will Examine Your Unique Situation

There are other options available as well that we'll explore; Potentially filing a chapter 13 case that would give you a little bit more protection than a simple chapter 7 case.

If you're at all worried about keeping property, especially property that still has loans attached to it inside of a chapter 7 bankruptcy or inside of a chapter 13 bankruptcy, please come in and visit with me.

The consultation is free.

The advice is free.

It doesn't hurt to come in and get that information so that you can make the best decision possible for you.

Again, there's no obligation. That first consultation is completely free.

I hope to hear from you soon so that we can talk about getting your case started as soon as possible.


Know the Difference Between Secured and Unsecured Debt


The Important Distinction Between Secured and Unsecured Debt


Hi, Matt MacArthur, bankruptcy attorney at Clear Counsel Law Group. A common misunderstanding, or confusion that I come across on a daily basis with my clients, is understanding the difference between an unsecured debt and a secured debt.

In fact, one of the bankruptcy forums that's typically filled out will ask the question, "Have you paid any unsecured credits more than $600 in the last 90 days?"

Many of my clients simply don't know how to answer this question, because they don't know what an unsecured creditor is. I'd like to take a moment to clarify what each of these means, and help you understand the difference.


What is an Unsecured Debt?

An unsecured debt is something like a credit card debt, a medical debt, a payday loan. These are very common examples of unsecured debts.

Secured debt, unsecured debt, bankruptcy, Las Vegas, Nevada

We say that they're unsecured because there's no collateral attached to the debt. In other words, if you don't pay the debt, the creditor cannot come and take anything away from you, because there's nothing securing what's owed. It might be a little bit easier to understand what an unsecured debt is by talking about what a secured debt is.


What is a Secured Debt?

The two most common types of secured debts, or loans, are mortgages and car loans. When a person purchases a home, they take out a mortgage on the home, and they owe the bank, or the mortgage company, a certain number of dollars.

The bank is taking a big risk by lending this huge amount of money to this person to buy a very large asset. What the bank does is in exchange for them agreeing to allow you to have all this money to purchase the home, you agree as the purchaser to give the bank a security in your home.

In other words, if you fail to make payments on the house loan, then the bank has the right to exercise their security by conducting a foreclosure sale and trying to get some of their money that's been lost back through the sale of the home.

This helps them hedge against their bet on you as a borrower, and makes them feel a little bit more secure. It makes it easier to obtain these types of loans.


Why Banks Provide Secured Loans

It's really a good thing for most people, because it gives more people the opportunity to get a home loan, and it also provides security for the bank.

Now, a car loan is another great example of what a secured debt is. If you purchase a car, the car lender inevitably is going to make you sign a security agreement that says that if you fail to make payments on your car loan, that the car company will be able to repossess the car if you fail to make those payments.

Then they'll sell the car at an auction. Recoup some of their losses. In that way, they are a secured creditor.


How Can You Tell if a Debt is Secured?

The easiest way to think about the difference between a secured creditor and an unsecured creditor is if I don't make payments on this debt, is there anything that I would expect the creditor to come and take away from me?

Sometimes, you aren't going to know if a particular debt is secured or unsecured, simply because security agreements can sometimes be found in the small print of contract documents that people don't pay too much attention to when they're trying to purchase an item.

However, if you have any questions about whether a secured debt is secured or unsecured, the easiest way to tell is by looking at the original contract documents.

For something like that, you'd probably would like the help of an attorney.

I would be more than happy to help you in this process of determining what's an unsecured debt and what's a secured debt.

How the difference between these types of debt will affect the outcome in your particular bankruptcy.

Again, my name's Matt MacArthur, bankruptcy attorney at Clear Counsel Law Group.

Please come and see me, and I hope to hear from you soon on your path back to a fresh start.

Take care.

Do You Get to Choose Your Bankruptcy Chapter?



Choose What Chapter of Bankruptcy Is Best for You


Hi, I'm Matt McArthur, bankruptcy attorney at Clear Counsel Law Group. The topic I'd like to discuss today stems from a phone call that I recently had from a man who called in and was very upset because he felt like he was being forced to do a bankruptcy that he didn't want to do.

Now the question I would like to address from that conversation I had with this man is whether or not you can be forced into a bankruptcy chapter that you don't want to do. I'm going to start by answering this by giving examples of scenarios where you're unable to do a certain type of chapter.

There are certain requirements to be able to fit into any given chapter of bankruptcy.


bankruptcy, chapter, Las Vegas, Nevada


Chapter 7 Bankruptcy

First, ch. seven bankruptcy. There are income requirements for ch. seven bankruptcy.

If you make too much money based upon your household size, you could be required to choose a different chapter of bankruptcy or dismiss your case. They simply don't allow you to do a ch. seven bankruptcy, in other words, if you don't meet certain requirements.

They won't ever force you to do a ch. 13 against your will if you filed the ch. seven and it turns out that you are ineligible to do that chapter of bankruptcy.


Chapter 13 Bankruptcy

An example of ch. 13 bankruptcy where you may be forced out of that chapter is if you filed the ch. 13 bankruptcy and, for example, you have too much debt.

Too much unsecured debt over the allowed amount can force you out of a ch. 13 bankruptcy because you would be ineligible for a ch. 13 discharge, which essentially makes the ch. 13 kind of pointless.

At that point what would normally happen is you'll be given the choice of dismissing the ch. 13 case or converting to another chapter, ch. seven or possibly ch. 11.

In either scenario, you're not going to be forced to do something that you didn't want to do, but your options will be limited.

It's very important when you're considering filing for ch. seven bankruptcy or 13 bankruptcy that you meet with a qualified attorney that's going to look at your situation, analyze what's going on, and determine whether you're able to file for the chapter of bankruptcy that you want to file for, or whether another chapter would be more appropriate for you.

If you have any questions about the type of bankruptcy, please come and see me, Matt McArthur, bankruptcy attorney at Clear Counsel Law Group.

I have a lot of experience in dealing with my clients' situations, advising them on which course is best for them, helping them achieve their goals so that they can best address their financial needs.

Until next time, I hope to speak with you soon on your path towards a fresh start.

Take care.


La bancarrota ayudará con llamadas telefónicas excesivas



La bancarrota y llamadas incesantes


Hola, le habla el abogado Matt McArthur, de la Oficina de Clear Counsel Law Group. Me gustaría hablar un poquito sobre una pregunta que recibo cada vez que hago una consulta con mis clientes.

Y la pregunta es: “¿Si yo me declaro en bancarrota, puedo parar las llamadas incesantes de mis acreedores?”.

Esto es un problema muy grande que confrontamos en la bancarrota, porque cuando usted debe dinero a un acreedor, ellos van a tratar de colectar ese dinero.

Y el problema que usted va a tener es que ellos le van a llamar constantemente, sin cesar, y eso puede ser un gran problema, especialmente si le están llamando en su trabajo.


La bancarrota y llamadas incesantes, Las Vegas, Nevada


La bancarrota le ofrece una protección, y esa protección se llama “Stay Automático”. El Stay Automático le protege de las llamadas, las cartas de colección. Y esa ley es – empieza en el momento en el que nosotros empezamos la bancarrota. El mismo día, podemos parar las llamadas y las cartas.

Entonces, si usted es una persona que está recibiendo esas llamadas de sus acreedores y le están molestando, por favor, venga y hable conmigo en mi oficina. Y podemos hablar sobre su situación financiera y podemos darle las opciones que usted necesita para corregir el problema que está confrontando en ese momento. Hasta la próxima vez, ciao.

Watch this discussion in English here.


Declaring Bankruptcy and the Effect on Child Support Payments



How Bankruptcy Affects Child Support Obligations



Hi. Matt McArthur, bankruptcy attorney here at Clear Counsel Law Group. There seems to be a little confusion out there regarding domestic support obligations and bankruptcy.

The question that I received not too long ago from a concerned mother who was receiving domestic support payments was that her ex-spouse had filed for bankruptcy, and she was worried that, not only would the back due child support stop coming, but that continued ongoing child support payments would stop and she would have an extreme difficulty in providing for the well-being of her child.

What I told her and what I'll tell you now is that bankruptcy is not an effective means of addressing domestic support obligations, and the reason is twofold.


Why Bankruptcy Isn't Effective

First, domestic financial obligations, debts that have accrued in this area of liability, cannot be discharged in a bankruptcy. What that means is that at the end of a bankruptcy when the final order comes in that is called the discharge that typically wipes out the debt of the person that filed bankruptcy, it doesn't touch or affect domestic support obligations.

The second reason why bankruptcy isn't going to be much help for a person that's filing for bankruptcy and trying to deal with domestic support obligations through that vehicle, is that there is an exception to what we call the automatic stay for domestic support obligations.


child support, bankruptcy, Las Vegas, Nevada


The automatic stay is the collections freeze that stops creditors from collecting against debtors. This typically goes into place at the outset of a bankruptcy case, and stops all collections actions. However, the exception for domestic payment obligations allows a creditor to continue to collect if they're owed this type of debt.


A Single Parent Doesn't Need to Worry

So not only can this debt not be wiped out at the end of the bankruptcy case, when the case is first filed, the person filing has no protections from being collected against for this type of debt. If you're a single mother or a mother concerned about receiving ongoing domestic support obligations, you shouldn't be worried because the bankruptcy is not going to affect your ability to continue to receive payments.

On the other hand, if you're a person trying to address back due child support or alimony payments that are owed, your best bet is to seek recourse in the family law court, where the order was first issued for that domestic support obligation.

Outside of that, bankruptcy court is not going to help you, so your best bet is to seek a qualified family law attorney, ask their advice on how to best modify or adjust what is currently owed.

This is Matt McArthur, bankruptcy attorney at Clear Counsel Law Group. If you have any questions about this, I'd be happy to speak with you and our phone number here at Clear Counsel Law Group, by the way is 702-476-5900. Please give me a call and I'll be happy to speak with you. Until next time.


Will Declaring Bankruptcy Help You With Medical Debt?



How Bankruptcy Can Help Conquer Your Medical Debt


Hi, I'm Matt McArthur, bankruptcy attorney at Clear Counsel Law Group. Today I want to speak a little bit about medical debt and specifically using bankruptcy as a vehicle for dealing with overwhelming medical debt. This is common type of debt that we come across.

There's been a lot of significant changes to healthcare laws recently and a lot of people are left a little confused about their situation and oftentimes, they come across a situation where they owe a lot more to the medical providers and services than they would have normally expected.


Is Bankruptcy a Good Option?

The first question we need to address is, is bankruptcy a good option for dealing with medical debt. Generally speaking, this can be answered in a way that can be applied to any type of debt.

If the debt is at a level where it's high enough to where it makes sense to file for bankruptcy then, yes, bankruptcy can definitely wipe out medical debt and be an effective means for eliminating any financial responsibility of the person that owes the debt.

Now, there are some pitfalls that you need to worry about with dealing with medical debt, specifically in filing bankruptcy to eliminate the medical debt.


Good Things to Know about Medical Debt

One of the most common things that I come across when a person has had significant medical services provided to them, is that they are unsure of who is owed money and how much money is owed. What we do, typically, when we get ready to file bankruptcy for an individual is we will run a credit report that pulls from the three different reporting bureaus.

Any debts that are currently being reported to the reporting bureaus will show up on that report. We have a way of knowing who is owed the money and is actually reporting to the credit reporting bureaus.


Medical debt, medical bills, bankruptcy, nevada, las vegas


Now, the shortfall with that method is that we can only pick up or find out about debts that are currently being reported to the credit reporting bureaus. This means that you have a creditor that is actually owed money but for some reason isn't reporting to the credit reporting bureaus, that's not going to show up on a credit report.

An attorney getting ready to prepare bankruptcy paperwork to file a case for you, isn't going to know about that creditor unless you have some other form of documentation to show the attorney.

That's why it's really important if you are facing an enormous amount of medical debt and it's coming from a number of different sources, to save any bills that are coming in the mail so that those bills can be cross-referenced with the credit report to ensure that everybody is being listed in the bankruptcy, the debt is going to be eliminated, and all proper parties are going to receive notice of your bankruptcy.


An Example Through an ER Trip

Now, another issue that you need to be aware of when filing for bankruptcy and trying to list all of your creditors is that one trip to an emergency room could result in a number of different types of bills. The bills could be from the hospital itself, it could from the treating physician, it could be from the lab company that the ... Any labs that are sent off for during your visit, it could be from an anesthesiologist, a different type of doctor, there's a whole range of potential medical service providers that are going to be sending you bills and wanting to be paid.

Just because you only went to the emergency one room, doesn't mean there's only going to be one bill. You need to be on the lookout for multiple bills from multiple sources.

Save those bills and make sure that you provide those bills to your attorney before filing for bankruptcy so that we can make sure that if you're filing for bankruptcy you're getting the full benefit of the bankruptcy and all parties are being noticed, all debts are being eliminated.

If you have any questions about this, please come and see me, Matt McArthur, bankruptcy attorney at Clear Counsel Law Group, and I'd be happy to discuss this with you on your path towards a fresh start.


Filing for Bankruptcy and Your Tax Refund



Tax Refunds and Bankruptcy: What You Need to Know


Hi, Matt McArthur, bankruptcy attorney at Clear Counsel Law Group. This time of year, tax season, a very common question that I receive is how will filing bankruptcy affect the status of my tax returns and any tax refund that I may be entitled to if I file?

This is a somewhat important issue for people filing for bankruptcy because people filing for bankruptcy typically don't have a lot of disposable income and tax refunds are often treated like a nice little bonus that you can use to catch up on bills, pay for the bankruptcy itself, or do some other needed things because it's money that wasn't really being counted on that's now available to you.

The problem is, specifically if you're filing a Chapter 7 bankruptcy, is that when you file for bankruptcy anything valuable that you own is potentially part of the bankruptcy estate and even the right to receive a refund can be considered a valuable asset.

In other words, if you filed your bankruptcy in January and you filed your tax return in February and you're entitled to receive a certain amount of money as part of your tax refund, then the bankruptcy case that was filed in January is going to possibly include part of that refund as property in the bankruptcy estate.


What does that mean?

That means if it's property in the bankruptcy estate the court has the power to take that money, make it available to your creditors and make distributions to your creditors.

For example, a person filing in January that files their tax return in February, let's suppose that they're entitled to a refund of $2,000. If this person didn't have any protections available to protect that refund the court has the power to take that $2,000.

They can either intercept it directly from the IRS or require you to pay that amount to the bankruptcy court and then they take that money and give it to your creditors. That's considered fair price to pay for wiping out all the other debt that you may have.


Tax Return, bankruptcy, Las Vegas, Nevada


The important question is do you have protection that's available to exempt the refund from being part of the bankruptcy estate? In the State of Nevada there are 2 main types of protections that we typically use to protect the tax refund.


The Income Credit Exemption

The first is the earned income credit exemption. In the State of Nevada, if you receive earned income credit as part of your tax refund, that is 100% exempt and is yours and is not part of the bankruptcy estate. This is kind of a confusing issue and if you're concerned or not sure whether you received earned income credit it's going to be important to take a look at your tax return.

An experienced bankruptcy attorney should be able to find this with you, or a qualified tax professional should be able to help you determine whether or not your entitled to earned income credit. Generally speaking, if you get earned income credit it's protected though, and that's a good thing for filing bankruptcy and protecting your tax refund.


The Wildcard Exemption

The other protection that we have available in most cases in a Chapter 7 bankruptcy in the State of Nevada is what we call the wildcard exemption. This is $1,000 or $2,000, depending if it's an individual or a couple filing jointly, that is available to be applied to any asset, any personal property, so it can be applied to a tax refund in other words.

In the optimal situation, a person filing for bankruptcy would have some earned income credit that would be 100% protected and any remaining portion of the refund that might not be covered by the earned income credit would be covered by the $2,000 wildcard or the $1,000 wildcard. Anything over that amount and that's technically part of the bankruptcy estate, that may be required to be turned over to the court for your creditors to make a claim against.

If you have any questions about your ability to protect your tax refund, especially this time of year, in tax season, and you're thinking about filing for bankruptcy please come and see me before you file for bankruptcy. I'd be happy to walk you through this and make sure that we're being able to protect your tax refund to the extent possible. Hope to hear from you soon and be part of your path back to a fresh start. Take care.


The Effect of Including Your Mortgage in Your Chapter 7 Bankruptcy


Considering Your Mortgage When Converting to a Chapter 7 Bankruptcy


Hi, Matt McArthur, bankruptcy attorney at Clear Counsel Law Group. I had an email sent to me, I'm going to read it here. It says "I have converted from a Chapter 13 to a Chapter 7 and included my mortgage. Will I have to leave the house after it has been discharged?"

I have to make a couple of assumptions here because I don't have quite all of the information. However, the assumption that I'm going to make is that the Chapter 13 case was filed on this individual's behalf, and they originally included the mortgage to try and save the home. However, at some point something happened and they needed to convert to a Chapter 7 and they're now including the mortgage as part of the discharge in the Chapter 7, and they will not be paying on the house moving forward.

There's a very good possibility in this situation that a person who has converted from 13 to a 7 will have to eventually leave their home. Now, there may be situations where you can still keep your home, but it's probably going to depend upon your ability to get back in good standing with the mortgage lender. Whether that mean curing the default or the arrears that are outstanding on the loan, or whether you are able to obtain a loan modification that puts you back in good standing and either rolls in the arrears into the back portion of the mortgage or re-amortizes the loan so that you are currently found to be all caught up on your monthly payments.


Mortgage, bankruptcy, Las Vegas, Nevada


With that being said, the Chapter 13 is the best way to be able to ensure that you can keep your home because you force the bank into a repayment plan that allows you to cure the arrears within a plan that's approved by the court, where you're paying back the arrears over a 5 year period, but in a Chapter 7 bankruptcy, you don't have that time involved. It's a 3-4 month process and it's over very quickly. You're probably looking at a shorter timeline to be able to stay in your home in a Chapter 7.

If you're concerned about your ability to keep your home, there may be some methods outside of bankruptcy that would allow you to keep your home, such as the Nevada Home Foreclosure Mediation Program or other like services. If you're trying to keep your home in a post-bankruptcy situation, please come and see me and I'll give you the best advice that I can as a former representative of bank lenders. I'm familiar with the processes and can give you good advice on the best way to give you the best chance at keeping your home. Until next time, I'm Matt McArthur at Clear Counsel Law Group. Hope to see you soon.


Will a Bankruptcy Court Consider a Loan as New Income?


Is a Loan Considered New Income?


Hi, I'm Matt McArthur, bankruptcy attorney at Clear Counsel Law Group. A situation came about recently where an individual received a loan from a family member while their chapter seven bankruptcy was still pending. The question was whether or not this was income and if it would adversely affect their chapter seven bankruptcy case.

First let's think about reporting income in a chapter seven case. The main concern is making sure that an individual passes the means test, which is an analysis of the six months leading up to the filing of the bankruptcy case. What we're concerned about when we file your chapter seven case income-wise is how much income did you receive in the six months prior to filing bankruptcy and what your current monthly income is at the time that your case is filed.

With this being a loan that is after the filing of the bankruptcy case, it doesn't affect the analysis of what transpired in the six months leading up to the bankruptcy case. It's not going to have an adverse effect on the individual's bankruptcy case. The other part of this is that it's a loan. It's not truly income. This is something that's going to have to be paid back. It's a loan that is non-dischargeable since it was a loan that came into being after the case had been filed. This is money that has to be paid back. That's not a true measure of what an individual's income is.


Debt, loan, bankruptcy, Las Vegas, Nevada


Now with that being said, we can apply this principle more broadly across the whole spectrum of types of loans that a person may receive. It doesn't apply just to loans from family members and friends. It can apply to a new car loan, a new personal loan from a bank. An individual's ability to receive these loans and acquire these loans while a bankruptcy is pending will probably be limited. Any new loan after filing bankruptcy is not a part of the bankruptcy analysis when it comes to the discharge or what the income of the individual is in terms of passing the chapter seven means test.

If you are in the middle of a bankruptcy and you have obtained a new loan, it's probably not the direction you want to be going in because the whole point of filing for bankruptcy is to get out of debt. However, I understand that emergency situations do arise and these situations do happen from time to time. If you're at all worried about something like this, please come and see me. I'll give you the best legal advice possible moving forward and we'll give you all the information you need to move forward. Take care.


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