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Fresh Start Bankruptcy

Welcome to our Bankruptcy Blog page!
Serving Oregon and Washington individuals and businesses.

Bankruptcy is an excellent tool available to people to eliminate debt and protect assets. Whether it's Chapter 7 or Chapter 13 bankruptcy, we can help you on the path to financial recovery. Call our office now for a free 30-minute bankruptcy consultation to explore your legal options.


Several Good Reasons to File Chapter 13 Bankruptcy

  1. You can Stop the Foreclosure on your Home.
    In bankruptcy, an automatic bankruptcy stay goes into effect, that prohibits any collection action against you, including stopping a foreclosure. Any mortgage payment arrearages (i.e., past due payments) will be paid back through the 3 to 5 year Chapter 13 payment Plan. Those arrearages will get paid through the Chapter 13 Trustee from the regular monthly payments you make to the Trustee.
  2. You can Strip the Wholly Unsecured 2nd Mortgage Lien in Chapter 13
    If you have a 2nd mortgage or 2nd lien on your home that is completely unsecured then that lien can be stripped off in a Chapter 13 bankruptcy. So if your first mortgage loan amount is $250,000, and the home's fair market value is only $230,000, then the $50,000 2nd mortgage is considered completely unsecured as there is not enough equity to cover even the first mortgage. Therefore, the 2nd mortgage lien could be stripped off the home in the bankruptcy. Keep in mind that a mortgage lien cannot be stripped off in Chapter 7 bankruptcy, only in Chapter 13 bankruptcy. Further, note that you have to complete your 3 to 5 year Chapter 13 Plan to make the lien strip off permanent.
  3. You can Cure Tax problems or a Child/Spousal Support obligations over 36 to 60 months
    Non-dischargeable taxes or child/spousal support obligations can be paid through a Chapter 13 plan over 36 to 60 months depending on the plan length for your case. The Chapter 13 will keep the tax authorities and domestic support obligation authorities off your back (i.e. they can not collect) while you are in Chapter 13 bankruptcy, and provides you the breathing room for you to pay those debts off.
  4. You can Stretch Out your Car or Other Secured Debt payments & Propose a Reduction in the Interest Rate
    In a Chapter 13 bankruptcy you can spread out your vehicle payments or other secured debt payments (e.g., secured furniture, computer, jewelry, tires, etc.) over the life of your 3 to 5 year Chapter 13 payment plan. The interest rate can be reduced to a lower rate if you have a high rate of interest. Further, if you are behind on your secured debt payments, any arrearages can be paid through the Chapter 13 plan, which would allow you to get current with your payments.
  5. Generally, you are Able to Keep Non-Exempt Property in Chapter 13 Bankruptcy
    In most Chapter 13 bankruptcy cases, people are able to keep non-exempt assets (those assets not protected by the law) that normally could have been taken if the person had filed a Chapter 7 bankruptcy. Keep in mind there are exceptions to this which are fact dependent.

Additional Resources
There are many other good reasons to consider filing chapter 13 bankruptcy besides the ones described above. Some people utilize chapter 13 bankruptcy as a tool to get protected from the creditors temporarily and then later on voluntarily have the case dismissed once their have their situation under control again.

by Scott M. Hutchinson, Attorney at law

Debts that are generally not dischargeable in Bankruptcy

Most debts are able to be eliminated (or "discharged") in consumer bankruptcy (Chapter 7 or Chapter 13). However, there is a short list of debts that are considered non-dischargeable, meaning those debts can not be eliminated through bankruptcy.

A comprehensive list of the types of debt that cannot be eliminated in bankruptcy are listed in the Bankruptcy Code under Title 11 U.S.C. Section 523 called "Exceptions to Discharge." What follows are common types of debts that can not be eliminated in bankruptcy:

  1. Most taxes (there are complicated exceptions to this rule if the taxes old enough)
  2. Debts incurred through fraud, false representation, or false pretenses
  3. Debts not listed or scheduled on the bankruptcy
  4. Debts incurred through fraud, defalcation, embezzlement, or larceny
  5. Domestic support obligations, for example, child or spousal support
  6. Debts related to willful or malicious injury by the debtor against another or the property of another
  7. Fines, penalties, or forfeiture payable to or for the benefit of a governmental unit, for example, a traffic ticket, parking ticket, or library fine.
  8. Student loans
  9. Criminal restitution
  10. Debt related to a death or personal injury caused by driving while intoxicated

There are a few other types of debts that cannot be eliminated in bankruptcy but they applied to a very limited segment of all bankruptcy filers, and those types of debt can be found in Section 523 of the bankruptcy code mentioned above.

All other types of debts can be eliminated in bankruptcy such as debt from: credit cards, medical, utilities, personal loans, payday loans, title loans, old landlords or apartments, deficiency balances on repossessions and foreclosures, judgments, lawsuits, vehicle loans, mortgage debt, collections, etc.

Bankruptcy is a complicated process and figuring out what can and cannot be discharged in bankruptcy requires a thorough understanding of the bankruptcy laws. Always seek out competence legal advice from an experienced bankruptcy lawyer to find out what debts you may and may not be able to eliminate in bankruptcy.

by Scott M. Hutchinson, Attorney at law

(Real questions from internet visitors and my specific responses to their questions)
by Scott M. Hutchinson, Attorney at law

TOPIC: Reaffirmation Agreements

Q: We filed Chapter 7 in January. We submitted the re-affirmation on our Credit Union car loan.: The legal representative from the credit union kept saying that she needs a judge to sign off on it. We attempted to obtain that but the clerk at the Bankruptcy court (4 different ones) told us that the only time we can get an actual court date to obtain this is if the credit union itself asked for it. The Bankruptcy court said that the agreements (unless disputed by them or the BK judge) are accepted by the court. Now that we got discharged we called the Credit union to talk about our car loan and see about refinancing. We were told that because the reaffirmation agreements were not signed by the judge, they are not active and they must take possession of the vehicle immediately. IF they take the cars, does it fall under the Bankruptcy filing? We surrender the cars and we owe nothing else?
Asked in 2011

A: Scott's answer: Since you did not get a reaffirmation agreement signed by you and the credit union, and approved by the Judge (although with credit unions, there are special rules for them so that there actually does not need to be Judge approval as long as your bankruptcy attorney signs the reaffirmation agreement also), it is too late to sign a reaffirmation agreement after you've obtained your bankruptcy discharge. Since you did not sign a reaffirmation agreement, when the credit union takes the vehicle back or you voluntarily surrender it, you will not owe the credit union any money on that vehicle as long as the credit union was listed as a creditor in your bankruptcy schedules. The question for the credit union is do they really want the vehicle back or do they want to continue to get voluntary payments from you on the loan amount (and allow you to keep the vehicle). And the question for you is do you really want to keep the vehicle or do you want to walk away from the debt on the vehicle (and lose the vehicle itself). If the credit union is not willing to take voluntary payments from you, then the choice is out of your hands, effectively, but at least you will not owe them on the vehicle loan anymore because of your bankruptcy discharge. Yes, the vehicle falls under the bankruptcy filing if you listed the creditor in your bankruptcy schedules. And if the creditor was listed and you surrender the vehicle, then you will not owe that creditor any money for that vehicle.
Answered in 2011.


TOPIC: Homeowner's Association dues and fees.

Q: I filed bankruptcy in January 2010 and got my Chapter 7 bankruptcy discharge in May 2010. My home mortgage was discharged in the bankruptcy. I was living in the home and paying until July 2010. I walked away from my home as of December 2010. The homeowner's association fees were mailed to my new address to be paid for January 2011. Am I liable for the homeowner's association fees? And what do I tell them?
Asked in 2011

A: Scott's answer: The Home Owner's Association must have a really good lobbyist because they receive special treatment as a creditor under the Bankruptcy Code. Specifically, the bankruptcy code provision is 11 U.S.C. Section 523(a)(16). First, any association fee or assessment for a period arising before the date of your bankruptcy filing (this is when an “order of relief” is automatically entered when a voluntary bankruptcy petition is filed) is dischargeable (i.e. meaning it will be eliminated). Second, any fee or assessment that becomes due and payable after the bankruptcy filing date is NOT dischargeable as long as you continue to have legal, equitable, or possessory ownership interest in the property. Once you have extinguished your ownership interest (typically done through a foreclosure process) in the property, then you are no longer legally obligated to pay any Home Owner's Association fees or assessments that accrue after that point. So if you still have a legal/equitable ownership interest in that property then you can still be liable for those HOA fees and assessments after the date of the bankruptcy filing. This area can be complex and qualified attorney can address your specific situation. If you are in the State of Oregon or Washington, give my office a call.
Answered in 2011.


TOPIC: Student Loans

Q: Subject: Bankruptcy / Student loan relationship: How does a bankruptcy affect a student loan if I am still in school and not yet paying on it? Asked in 2011

A: Scott’s answer: In general, a bankruptcy should have little to no effect on your student loan. The general rule is that students loans, whether they are public or private loans, can not be eliminated (i.e. "discharged") in bankruptcy. There is a limited exception to this rule called the "hardship" exception. However, it is very difficult to fit within that exception. After you finish your bankruptcy you will still be obligated to pay your student loans. Many times, people file bankruptcy while their student loans are in deferment, and so it becomes a "non-issue" for the student loan lender because they were not expecting payment at the time of the bankruptcy anyway. Now, while you are in school, the student loan providers should not be concerned because they should know that student loans can not be eliminated in bankruptcy. If the student loan lenders think about it for a bit, you would be a better credit risk after filing bankruptcy than you were before because after you have completed your bankruptcy you will have either dramatically reduced or eliminated your debts. And then you will be in a better financial situation to be able to pay your student loans back.
Answered in 2011

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