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Bankruptcy Does Not Mean You Become Debt Free

Some people mistakenly believe that after they file for bankruptcy, their debts are wiped clean and they get a completely fresh start. Unfortunately, the federal bankruptcy code is not that kind.  If you file for Chapter 7 bankruptcy, the majority of your debt will be cleared away, but there are some debts that are “nondischargeable.” This means they stay with you even after your bankruptcy is filed and done.

Types of Nondischargeable Debt

The Bankruptcy Code lists 19 categories of nondischargeable debt. These types of debts do not require a court hearing to determine whether or not they will be dischargeable. The burden is on the debtor to show extraordinary circumstances in order to convince a court to discharge on the debts listed below. Here is a sample:

  • Student loans
  • Child support and alimony
  • Debts from a civil judgment related to drunk driving
  • Debts which are the result of fraud or criminal acts

No Right to a Debt Discharge

When you file for Chapter 7 bankruptcy, it is important to keep in mind that you do not have an absolute right to a discharge of any debt. In order to receive a discharge, you must follow the provisions set forth in the Bankruptcy Code.

Image Source (CC BY 2.0) by Jeremy Crawshaw via flickr

Image Source (CC BY 2.0) by Jeremy Crawshaw via flickr

For example, Section 727(a) of the Bankruptcy Code outlines a list of reasons why the court may deny a Chapter 7 discharge. Basically, this Section states that if you fail to follow the express rules and regulations, or do not provide the necessary information, then a creditor, bankruptcy trustee, or the U.S. trustee may object to your Chapter 7 discharge. If the court agrees, it can deny your debt discharge outright. This is a big reason why it is important for you to have an experienced Florida bankruptcy attorney by your side to help you navigate through the Chapter 7 bankruptcy process. Even an inadvertent mistake or a set of missing documents can torpedo a debt discharge.

Debts Are Not Dischargeable if a Creditor Successfully Objects

Along with near de facto nondischargeable debts like alimony and child support, there are other types of debts not automatically excepted from discharge that will need a court hearing to determine dischargeability. The burden is on a creditor to request a hearing so a judge can examine the debts and determine if they are dischargeable or not.

The types of debts subject to this type of hearing are usually those that were accrued shortly before you filed for bankruptcy. For example, if you purchased “luxury goods” via credit card totaling more than $650 within 90 days of filing for bankruptcy, the credit card company can challenge the dischargeability of this debt. The reason is that public policy wants to limit the risk that someone will go out and make lavish purchases just prior to filing for bankruptcy. The burden is on the creditor to present the facts to the court. If you prove that you intended to pay the charges back or that the goods are not “luxury” items, then the debt will likely be discharged.

The same discharge challenge can be made for cash advances totaling more than $925 within 70 days of filing for bankruptcy.

Speak to a Florida Bankruptcy Lawyer Today

As you can see, filing for bankruptcy is not a cakewalk to a fresh start with debts taken off your back. Once you file for bankruptcy, you have to navigate a complicated maze of regulations and laws embedded in the bankruptcy code. Speak to the experienced bankruptcy attorneys at Hoffman, Larin & Agnetti, PA. The firm offers free, confidential consultations so that you have nothing to lose.

Understanding the Similarities and Differences Between SSDI and SSI

You may have heard of disability benefits, though you may have questions regarding the regulatory maze that disabled individuals must work through to obtain them. A major area of confusion is the distinction between Social Security Disability Insurance (SSDI) and Supplementary Security Income (SSI). Both programs are administered through the Social Security Administration and have different criteria and requirements. This blog is meant to help demystify these two important federal programs and help you understand whether you or a loved one qualify.

Image Source (CC BY 2.0) by Aric Riley via flickr

Image Source (CC BY 2.0) by Aric Riley via flickr

Similar Medical Criteria for SSDI and SSI

SSDI and SSI are similar in the area of medical eligibility. For both programs, there must be some evidence of a disability. Additionally, the disability must be diagnosed by a licensed medical treatment professional, must have lasted or be expected to last at least one year, and must be defined by the Social Security Administration as being disabling.

To keep it simple, if you are considered disabled under the SSDI program, there is a very good chance you will be deemed medically eligible for SSI benefits.

Financial Eligibility

The biggest distinction between the two programs is the financial requirements to obtain SSI benefits. Generally, SSI is meant to be accessed by senior citizens 65 or older, the disabled, or the blind whose income is below the federal benefit limit. SSI is provided for the disabled when they do not qualify for SSDI, or the amount of benefits they receive through SSDI and any other income they might have is not enough to place them above the government’s financial standard.

Source of Benefits

Another key distinction is where the benefits come from. SSDI funds are taken from pooled contributions you make throughout your working life. Basically, you pay into the SSDI program through taxes. You essentially insure yourself to protect you in case of a disability. This is why the Social Security Administration requires SSDI applicants to have worked a minimum period of time prior to qualifying for benefits. Conversely, SSI benefits are funded by general tax revenues and do not require you to have worked for a specific period of time to qualify.

Can I Apply for Both SSDI and SSI Benefits?

It is possible to be eligible and apply for both SSDI and SSI. To obtain benefits through both programs, you must suffer from a medical condition listed as disabling by the Social Security Administration under both programs. That is key to ensure you qualify for SSDI benefits since those who can work generally would not qualify for SSDI.

To obtain SSI benefits, your monthly income must be below the SSI federal benefit rate. In 2015, that rate was $733 per month. In addition, to obtain SSI benefits, you must have total assets worth less than $2,000 if you are single,or $3,000 if you are married.

If you meet the criteria set forth above, there is a good chance you can get benefits through both SSDI and SSI.

Speak to an Experienced Social Security Disability Lawyer Today

As you can see, social security law is complex and requires a level of understanding to navigate the federal benefit system. At Hoffman, Larin & Agnetti, we are here to help you and your loved ones. We offer free, confidential consultations so that you can understand your rights under both federal programs. There are no fees for representation before the Social Security Administration in disability claims unless we win your case.

Social Security Disability Versus Veterans Disability Benefits

If you served our country and suffered a serious injury during combat, or developed a debilitating injury or condition after being discharged, you may be tempted to pursue both Social Security and veterans’ disability benefits. It is quite common for veterans to have claims going on simultaneously. You can receive VA disability benefits and Social Security disability insurance (SSDI) benefits at the same time. This is because VA disability benefits are not tethered to income, unlike SSDI insurance claims.

Image Source (CC BY 2.0) by Port of San Diego via flickr

Image Source (CC BY 2.0) by Port of San Diego via flickr

Understanding the Differences Between Social Security and Veterans Disability Benefits

A major difference is that the process of qualifying for VA benefits is less stringent when compared to qualifying for SSDI benefits. To qualify for veterans’ disability benefits, you do not need to be totally disabled in order to be eligible. SSDI benefits, on the other hand, are not accessible for a mere partial loss of employment. For SSDI, you must be totally disabled to get compensation.

Another difference is the “treating physician rule.” For SSDI claims, your physician is considered your “treating physician” and their opinion is given deference. Conversely, for VA disability benefits, your treating doctor’s opinion is not given deference. The VA has broader authority and can determine that your physician’s opinion is biased. This means the VA could require you to undergo an independent examination.

Pursuing Both Benefits Can Actually Work Synergistically

If you are eligible, it makes sense to pursue both VA and SSDI benefits. Why? Because if you are approved for VA disability benefits, it can help you qualify for SSDI benefits. This is due to the fact that another federal government agency has determined you are either incapable of working or you are disabled to the point where full-time employment would be difficult for you to maintain.  In fact, many federal courts have held that the VA’s assessment of your disability, and the associated disability rating, are entitled to “great weight” in the determination of whether you are actually disabled (and would therefore qualify for SSDI benefits). So this means that the Social Security Administration will likely place major weight on the VA’s determination of whether you receive disability benefits.

On the other hand, the VA does not place much weight on an SSDI benefit award. Why? Because the VA’s assessment of whether you qualify for benefits under their program depends largely on your service record and when you developed your disability. This means it is not necessarily the fact that you are disabled, but whether it is service-related. Nevertheless, the VA should be given your entire SSDI file and decision since this information could provide evidence to support your VA claim. In fact, the VA is required to consider your SSDI records.

Contact an Experienced SSDI Benefit Lawyer Today

As you can see, qualifying for SSDI benefits can be quite complex and there are numerous hurdles you must overcome. We are here to help. The experienced SSDI lawyers at Hoffman, Larin & Agnetti, PA offer free consultations to determine whether you qualify for disability benefits.

Is a Short Sale Right for You? Understanding the Law

If you are under water on your mortgage (i.e. you owe more than the house is actually worth) and you are having difficulty making monthly mortgage payments, you may want to consider a short sale. This type of sale may benefit you in the long-run by avoiding a hit to your credit from a foreclosure.

Image Source (CC BY 2.0) by Trulia via flickr

Image Source (CC BY 2.0) by Trulia via flickr

Understanding the Basics of a Short Sale

A short sale would enable your home to be sold for its current value, as opposed to the presumably higher value of your mortgage. So, for example, if you owe $250,000 on a home in Dade County, but the home is currently valued at $200,000, the short sale would put the home on the market for $200,000.

Entering into such an arrangement is a serious consideration, for which there are (at least) two big things to keep in mind:

  1. A short sale must be approved by your lender
  2. This type of sale negatively affects your credit, just not as severely as a foreclosure

Florida Law and Foreclosures – Why a Short Sale May be an Attractive Option

Under Florida law, lenders have the right to pursue borrowers for up to 20 years after a home foreclosure to get their money back. This means you, or a loved one, could face decades of wage garnishment long after you have left the home and tried to rebuild your life. An article published in the Wall Street Journal is a prime example of how lenders are willing to engage in a long, drawn-out battle over a foreclosure. The homeowner in that article has been battling her lender for over 25 years.

When it comes to a short sale, lenders may be willing to write off the remainder owed on the loan if they believe there is a good chance they will recover the value of the home via the sale. It is a pretty basic calculus the lender must go through – do they swallow a $50,000 loss through a short sale but still recoup the remaining $200,000 owed, or do they risk not getting any money back by the homeowner going into foreclosure? This is why lenders are open to agreeing to short sales, especially if the homeowner has not shown the ability to pay their mortgage on time.  

Keep in mind, there is still a risk that the lender will try to collect the balance, but such a pursuit occurs much less frequently compared to foreclosures. This may be due to the fact that, for short sales, the homeowner is attempting to work with the lender and the lender is getting a good portion of their loan back. Also, the law is much stricter on a lender going after a homeowner post-short sale. In fact, with a short sale, the lender must obtain a judgment from a court to get the authority to pursue the borrower for what is owed on the principal. For foreclosures, the lender can immediately pursue the borrower for what is owed.

A Short Sale Is Not a Solution for All Housing Difficulties

Whether a short sale is the right option depends largely on the specific facts of your situation. A big drawback with a short sale is that you have to disclose your financial information to the lender. This can actually encourage the lender to go after you to try and recover on the remaining principal owed. Nevertheless, someone who is having a hard time paying their mortgage probably is not concerned about the lender discovering a hidden treasure trove of assets.

Speak to an Experienced Short Sale and Foreclosure Defense Law Firm Today

Do not try and take on the lender by yourself. You should have an advisor on your side looking out for your best interests. For any short sale or deed in lieu of foreclosure transaction, make sure you have a legal counsel experienced with short sales to protect your interests.  The law firm of Hoffman, Larin & Agnetti, P.A. offer free, confidential consultations. We are here to help.

Student Loans and Why They are Not Dischargeable in Bankruptcy

Imagine the following scenario: You have hit financial trouble and are contemplating bankruptcy to help get your financial house in order. You hope that bankruptcy will provide some respite from your financial follies and/or staggering debts. Unfortunately, this is not the case if you owe student loans.

Image Source (CC BY 2.0) by Lendingmemo via flickr

Image Source (CC BY 2.0) by Lendingmemo via flickr

If you are being crushed by massive student loan debt, you, unfortunately, have few options when it comes to debt forgiveness. Bankruptcy is certainly not the best strategy. Other debts, such as a mortgage and auto loans, are dischargeable through bankruptcy. For student loans, you carry the burden of establishing “undue hardship” and a court must agree with that determination for a student loan to be wiped out. It is within the court’s discretion to decide whether a borrower meets the undue hardship standard, and that standard varies depending on the court since the bankruptcy code does not provide an actual definition of the term.

Have Student Loans Always Enjoyed This Special Non-Discharge Protection?

No. Prior to 1976, student loans could be discharged in bankruptcy. However, Congress became concerned over high default rates on loans that were guaranteed, even partially, by the federal government. Therefore, Congress passed legislation intended to protect “federal investments.”

However, there have been different iterations of student loan protection. For example, initially, there was a ban on bankruptcy discharges only for the first five years after a federal student loan was originated. After five years of payments, you could discharge the remainder of the loan through bankruptcy.

In 1990, the five-year rule was extended to seven years. In 1998, the law was revised again to remove any timeframe for allowable discharges, leaving undue hardship as the only way out.

In fact, in 2005, the non-dischargeability of student loans was broadened to protect private student loan debt in addition to the previous protection granted only to student loans guaranteed by the federal government.

Why Were These Protections Put In Place?

According to a 2013 report titled “No Way Out: Student Loans, Financial Distress, and the Need for Policy Reform,” the special treatment and bankruptcy protections afforded to student loans is the result of panic and exaggerated stories about wealthy doctors and lawyers filing for bankruptcy to discharge student loans at a relatively young age and basically leaving the government or a bank holding the bag. However, the data has shown that these fears were completely unfounded. In fact, the General Accounting Office found, in 1977, that only 1 percent of all matured student loans had been discharged in bankruptcy prior to any protections being put in place, according to Consumerist.com. So, these protections were enacted based on a false premise leaving struggling students holding the bag.

Changes on the Horizon?

A group of 12 senators introduced legislation recently that would amend the current bankruptcy code to allow private student loans to be held in the same regard as other private unsecured debt and therefore be dischargeable in bankruptcy. Unfortunately, this is just a proposal, as of the date of this posting.

Speak to a Florida Bankruptcy Lawyer Today

Whether you have student loans or not, if you are struggling financially and are seriously considering filing bankruptcy, speak to the experienced bankruptcy law firm of Hoffman, Larin & Agnetti. We offer a free, no-obligation consultation, and if retained, we help guide you through the bankruptcy process from beginning to end. Of course, if relevant, we will explore whether you qualify for the undue hardship exemption mentioned above in addition to all other possible regulations that can help your case.