Cuddly Cars by thom.michaelj on Flickr

I just started a new job for much less income than before, and there’s no way I can make it without filing bankruptcy. Can I file and still keep my car? Without the car, I can’t drive to work 45 minutes away.

First, my condolences for the job loss and my best wishes with the new employment. Most people who file a Chapter 7 end up saving the car and here’s why: Chapter 7 is called a “liquidation,” meaning the trustee can take the car and sell it to pay creditors. But, if the vehicle is exempt, as often happens, the car is safe.

Figure out the private party sale value of your car. Let’s say you go online to one of the websites and the value for your car is $10,000.

Next, subtract the lien on the car. Say you owe $7,500. That means the equity in the car is $2,500. In your bankruptcy petition, you must disclose the numbers and claim an exemption. Then, you save the car.

The New Hampshire exemption for a motor vehicle is $4,000. In Massachusetts, it’s $7,500, unless you are handicapped or over 59, in which case the exemption is $15,000. When we use federal exemptions, a car is exempt up to $3,450.

The car in the above example is safe. Many people owe more than their cars are worth, so the bankruptcy filing does not endanger the car as long as everything is scheduled properly.

Tax Return and Income

Under U.S. Bankruptcy Code section 521, after the voluntary bankruptcy petition is filed, and before the creditors meeting, the person filing must submit all pay stubs and/or “payment advices or other evidence of payment received within 60 days before the date of filing the petition”.  This requirement applies to all income from all employment or self-employment.

Trustee Must Get Copies

The mandate is spelled out in section 521(a)(1)(B)(iv) of the Bankruptcy Code.  Under a different subsection, each bankruptcy filer must also submit to the trustee, 7 days before the creditors meeting, a copy of the Federal income tax return required to have been filed for the most recent tax year ending immediately before commencement of the case.  This is section 521 (e)(2)(A)(i).

These requirements apply to every U.S. bankruptcy filing, and are spelled out as pointed out above in the U.S. Bankruptcy Code.  However, the actual mechanics of compliance with these mandates are often spelled out in local bankruptcy rules applicable to the individual U.S. Bankruptcy Courts in each district.  Some trustees accept these materials by fax, while others still like to get the papers in the U.S. Mail.  There are also private uploading platforms many trustees encourage attorneys to use in sending the materials.

Do not file bankruptcy if you have not filed taxes in each of the last 4 years, this will cause problems.

Nosey?

Whether it is ‘nosey’ of the bankruptcy court is a separate question.  The goal of most consumer bankruptcy filings is to get a discharge of all or most debt.  This is a pretty extraordinary remedy, unavailable in many countries.  So, the bankruptcy laws impose conditions including those discussed here.

At the beginning of the claim, insurance companies will ask for signed authorizations allowing them to get the claimant’s medical records.  If the claim can’t be settled, then most courts will in fact allow insurance company attorneys to obtain signed authorizations allowing reasonable investigations into a claimant’s prior medical and physical history.

Indexing: Prior Insurance Claims

The insurance industry has a central indexing bureau that notifies them at the beginning of a claim as to any and all prior claims by that person.  The central index keeps track of and reports all kinds of claims, even if only for a property damage claim or a single medical bill payment after an accident.

The fact that a person may have had previous issues does not prevent a claim.  The negligent party is liable for all damages that represent an aggravation of any pre-existing condition.

Video Surveillance

Insurance companies often do video surveillance which can severely harm a claim.  Video cameras are now very small and of higher quality than they have been in the past.  Any claim can be investigated, but video surveillance is often used on workers compensation claims.

For example, if the injured person has made a statement that they can no longer reach groceries on the top shelf or carry grocery bags to and from the car, they should not be surprised later to see a video of them in the grocery store reaching a jar of pickles off the top shelf, and/or loading bags in and out of the car.  I’ve seen that, and many other such videos.

Additional Issues

Insurance companies sometimes do the obvious, like going out and interviewing every potential witness to an injury as soon as possible.  By reducing the witness statement to a signed writing and using a friendly adjustment company, they are more liable to swing the witnesses their way and lock down favorable testimony early.  Other times they’ll use less obvious techniques like hiring metallurgic engineers or others to claim that damages to a car do not match injuries to passengers.  These are only a few of many tools in the investigative toolbox.

First, calculate how long it will take to pay off your debts.  Throw all credit cards in a drawer.  Figure how much over the minimum payments you can make each month.  Then, determine when you will be paid in full.  Make a budget, starting out with your total monthly income.  Fit your needs into what you make. If the numbers don’t work, bankruptcy is an option.

The three most common types of bankruptcy include consumer liquidation or “Chapter 7″ because it falls under Chapter 7 of the U.S. Bankruptcy Code.  Chapter 13 allows people to repay their debts under a plan over time, under court supervision, often for only a percentage of the full amount of the debt. Chapter 11, reorganization, usually involves a corporation or other business, and allows the debtor to propose a plan to keep the business going while paying creditors over time.

Upon filing a proper bankruptcy petition, an automatic stay goes into effect stopping most debt collectors dead in their tracks.  In the end most debt is discharged.

But, not all debts are affected by bankruptcy. You cannot stop child support or alimony. The IRS can continue certain proceedings.  Court ordered payment of damages caused by drunk driving accidents cannot be discharged.   Student loans are almost never discharged, and only under extraordinary circumstances.

Foreclosures are initially stopped by the bankruptcy stay.  In a chapter 7, this gives you only a little breathing room. Unless you can pay the arrearage or quickly modify, the stay will be lifted for the foreclosure.  However, under a chapter 13 plan, the foreclosure is stopped for the duration of the case, giving the bankruptcy filer the opportunity to catch up on arrearages.

Once you get a chapter 7 discharge, you can’t file another chapter 7 for eight years.  Bankruptcy generally remains on your credit record for 10 years.

Credit can be rebuilt, often starting out with “secured” credit cards.  Then, after a while the credit companies actually seek you out because you can’t file another bankruptcy for a long time.  They figure they’ll just chase you until you pay.

That’s one of the reasons there’s mandatory credit counseling for bankruptcy filers.

At one time, personal injury attorneys and insurance adjusters simply tallied up the medical bills and multiplied the total by a “magic number”.  Sometimes lost wages were also lumped into the formula and the total was multiplied by 7 to 10 for a “demand” to the insurance company.  This depended on the attorney’s strategy and experience with the particular insurance company or claims adjuster.  Then, the insurance company would make an offer.  In this less-than-accurate ball-park approach it was often a universally accepted truism that a final settlement of 3 times the total of the “specials” or medicals and lost wages, was a good day.

However, this approach has been for the most part largely rejected for many reasons.  For example, the ever increasing cost of medical treatment, and the type of treatment, can skew the total of the medical bills out of proportion to the actual injury.   The magic multiplier method also punishes those who go on with their lives more quickly or “mitigate their damages” as the law requires.

Another standard approach to putting a dollar amount on injuries draws a time line after the date of injury, assigning periods of total disability, partial disability and residuals.  It would require dozens of pages to explain how insurers and attorneys arrived at various numerical quantifications for periods of total, partial and residual.  But in this scheme, such numbers were cooked up based on factors such as whether an individual did heavy duty work, light duty, what their actual average weekly wages were and other considerations.  However, this evaluation approach fails when the injured is for example an in home mother of children or a college student and there are no actual “wages” and a numerical equivalent must be fashioned.

The insurance industry has crafted various computer models to evaluate personal injury claims.  Among the first such insurance claim evaluation programs was “Colossus” which used some or all of the above factors and more.  As attorneys sent medical bills and other claim documents, insurance adjusters would key in various data.  The program calculated an evaluation based on numerical weight assigned to coded criteria built into the system.  This is the most arbitrary – but most widely used - claim evaluation approach.  Among many problems, a subluxation injury diagnosed by a medical doctor is given value, while the identical subluxation diagnosed by a chiropractor is given no weight.

Having evaluated thousands of personal injury claims it is clear that no two injuries are the same.  Injuries do not affect any two individuals the same.  However, where hypothetical injuries are summarized it is uncanny how experienced attorneys will often arrive at a consensus as to the reasonable settlement range.

I practice personal injury law in Massachusetts and New Hampshire.  However, these factors are universal.   Do not do this yourself.  The insurance industry’s own statistics indicate that once an attorney is brought into any claim, the value of the claim at least doubles.  One client came to me after struggling for months with attempts to settle themselves with the insurance company.  They had made a demand and did not understand why the insurance company would not give them an offer.  I took that claim and settled it several months later for over twice what that do-it-yourself injured person had demanded from the insurance company.

This is why the insurance industry wants you to “do-it-yourself” and actively discourages folks from seeking legal representation.

Can I legally be fired due to Facebook comments?  I work for a fairly large corporation and have been given a warning over posts I made that never directly used the company’s name.  For example, I said I wished that I had never left my previous job.  I joked that “Oh boy I made $10.00 today,” and that I was looking for a new job to make some real money.  In a totally different conversation I was asked the name of the company I worked for and I gave the name.  Can I be terminated for this?  I’m not saying anything negative about the company itself, just mainly about me making no money.  What about my freedom of speech?

Anyone reading the whole context of this sees that you aren’t happy with your employer and it isn’t rocket science to see who that is.

The First Amendment requires state action of some sort in order to invoke the protection.  In other words, where the Amendment says “Congress shall make no law” abridging freedom of speech, this is interpreted to mean that no governmental unit may infringe upon free speech.  However, in your case, it is a private company proposing to take action, so First Amendment protections aren’t there for you.

Without an employment contract or a union, we are all employees at will.  That means an employer can terminate for any reason or no reason, as long as they are not engaging in discrimination against a protected class or violating public policy.

I just read a Facebook posting about someone’s crazy dog.  I would stick to innocuous postings like that.

This post - © 2011 Eagle Tribune Corp. Originally published in Derry News, “About The Law”.

Car Loan

If you have a car that was reaffirmed in the bankruptcy, make every payment before it is due, assuring that the lender receives timely payment consistently. If you do not have a car, buy an affordable car. A car is transportation. You do not need the bigger fancier gas guzzler. If the goal is to rebuild credit, buy a car with payments you will easily be able to knock off each and every month on time. Car loans are secured debt. So generally, lenders will work with you knowing they can repossess if payments are missed. Paying this loan on time every month will build a good record.

Secured Credit Card

With a secured credit card, you make a deposit. That amount is your credit limit. Use the card every month, making sure you do not exceed the amount you have deposited. Every month, put more money into the account and plan to use the card for regular foreseeable expenses such as gas and groceries, not impulse buys. Remember, you are rebuilding credit. Taking baby steps at the start will pay off if you stick with it. Secured credit cards work like a debit card, but are reported as a credit card. Used correctly this will help reestablish credit.

Store Credit Cards

Often, store credit cards are easier to obtain than regular credit cards. So, try applying for a store credit card. Use the card for small purchases. Make payments every month, well in advance of the due date. If you are unable to get the store card at first, do not be discouraged, wait for a period of time and then try a different store.

Budget

This is not a dirty word, especially in view of getting a fresh start on your finances and restoring your credit. Keep track of the money you spend and take a serious look at whether you really need all of the stuff that eats up your income. If you still have the budget you developed during credit counseling and/or in your bankruptcy schedules, review it, cut spending and stay within the guidelines.

Stay Within The Budget

Do not buy on impulse. Avoid “sales”. Buy only what you need. When it comes to holiday and gift shopping, make a realistic shopping budget in advance and stay within the plan rather than impulsively snatching up catchy display items. The markup on restaurant food is high – prepare a meal at home, brown bag a lunch make your own coffee in the morning.

Never Co Sign a Loan

Do not co sign loans for anyone. Ever. Understand that if you co sign a car loan or a credit card loan you are primarily liable if the other person does not pay for any reason. They might be the nicest person in the world (today). But, if they fall ill or become unemployed, the creditor will, without question, look to you and report the delinquency against your credit report.

Credit After Bankruptcy

Your credit may go up after the bankruptcy. One calculation underlying credit ratings is your debt-to-income ratio. Let’s assume your income stays the same. The chapter 7 bankruptcy wipes out your debt. The ratio automatically changes and your credit will increase within a year of the filing. I’ve told incredulous clients this. But, it is not unusual.

These are the major steps. Follow them. Although the bankruptcy filing can, by law, stay on your credit report for up to 10 years, if you follow these steps, it is likely that you can rebuild your credit within 3 years. I’ve seen people file a chapter 7 in the spring, and receive new credit card before it’s time to do Christmas shopping.

Rise to the challenge and do a great job. Like a baseball player stepping up to the plate against that feared pitcher with the fastballs, take your best swing and hit it out of the park. If they throw curveballs, you have an opportunity to connect with the ball and slam it over the green monster. (That’s what us Red Sox fans call the left field wall.)

That’s your job here. The law is that the mere fact of an injury does not automatically entitle a person to recover. Court rules place the burden of proof on the injured person. So, accept the opportunity to state all of the facts, whether they are your observations at the time of the accident, or the recounting of what you went through afterward.

Many credit counseling and credit repair agencies, in the experience of my clients, in fact do more damage than good. Some, again in my experience through my clients, are outright fraudulent.

The only credit counseling that you should really investigate is through the agencies that are approved by the U.S. Justice Department. You can navigate to a list of approved agencies by going on to the website for the U.S. Bankruptcy Court in your jurisdiction. Then, find the page for the U.S. Trustee. They will have a tab guiding you to approved credit counseling.

In my experience, through my clients, if something can be worked out, they will let you know and help you. If not, they will tell you whether bankruptcy is appropriate.

At that point, retain experienced local bankruptcy counsel to guide you through the complexities of the bankruptcy law and procedure.

Whether or not bankruptcy filers can keep any individual piece of property depends on many factors, including how much property is owned and what exemptions are available to cover the property.

Volumes are available on the subject, so here’s a summary in response to your general question. In 2005 Congress amended the bankruptcy laws, imposing a “means test”. If your household’s average monthly income over the last 6 calendar months is less than the census bureau’s statistics for current monthly income in your state, then you qualify for a chapter 7 discharge. If not, then you would likely qualify for a chapter 13, which requires that you pay a certain percentage of your debts in a “plan” over the next to five years.

Even though bankruptcy law is federal, the next question is whether all of your assets, including any equity value in your real estate, car(s) or other property is protected by exemptions available under your state law.

Finally, bankruptcy requires review of your entire financial situation including all debts, income and assets. I highly recommend that you seek representation from an attorney in your jurisdiction who is experienced in bankruptcy law.