Of Chapter 7 And Security Clearances

Of Chapter 7 And Security ClearancesWorkers at Fort Dix, Fort Monmouth, the FBI in Newark, and other employers in The Garden State sometimes hesitate to file Chapter 7 Bankruptcy because they’re afraid of losing their security clearances. While bankruptcy debtors may face some increased scrutiny, there are some very important legal protections in place.

Federal Law

11 U.S.C. 525 prohibits discrimination against those who file a voluntary petition. Subsection (a) states that “a governmental unit may not deny, revoke, suspend, or refuse to renew a license, permit, charter, franchise, or other similar grant. . . solely because such bankrupt or debtor is or has been a debtor under this title or a bankrupt or debtor under the Bankruptcy Act.”

The key phrase is “solely because.” A bankruptcy filing does create some very serious questions about a person’s fitness to hold a security clearance, and if you were on the other side of the desk, you would probably ask the same questions about one of your employees. Fortunately, there are also some very good answers to these questions.

As a brief aside, subsection (b) applies the same prohibition to private employers and subsection (c) forbids bankruptcy discrimination in student loan matters.

Department of Defense Guidelines

Financial responsibility is one of several considerations, along with foreign preference, alcohol consumption, sexual behavior and a few others, in a security clearance. There is no automatic disqualification in any of these areas. Plenty of people have friends or relatives overseas, drink beer on the weekends or are unfaithful to their partners, but these individuals retain their status.

DoD Directive 5220.6, Guideline F, works the same way. The concern, at least where bankruptcy is concerned, is that a person with money problems may turn to illegal acts as a way to generate funds. Some additional considerations include:

  • History of Unmet Financial Obligations: If this matter is your first filing and it can be traced to divorce, illness or a sudden financial trauma, as is generally the case, this question is arguably inapplicable.
  • Deceptive Financial Practices: Very few consumer bankruptcies involve embezzlement, fraud, income tax evasion and other financial crimes.
  • “Issues of Security Concern”: Similarly, very few filings are directly attributable to gambling, alcoholism and drug abuse.

There is more good news. Directive F goes on to list several “mitigating factors” which usually can be found in a Chapter 7:

  • Isolated Incident: Most bankruptcies do not involve a pattern of reckless spending or prolonged financial irresponsibility.
  • Lack of Control: On the contrary, most bankruptcy filings do involve divorce, business downturn, illness, job loss and other similar incidents.
  • Debt Counselling: All debtors receive debt counselling and debtor education, and most seek financial advice from other sources as well.
  • Good Faith Effort to Resolve Debt: If you lack the funds to pay your debts, bankruptcy is the best way to legally resolve them.

People file bankruptcy to get a fresh start, and it is impossible to get that fresh start if you lose your job. That may be the main reason that most debtors get to keep their security clearance.

Contact John Hargrave and Associates

We have provided comprehensive counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-547-6500.

The Automatic Stay in Bankruptcy

The Benefit of the Automatic Stay in Bankruptcy

The federal bankruptcy laws were enacted to give individuals and business owners a way to get a fresh financial start. But Congress also recognized the need to provide relief from aggressive collection efforts. That relief comes in the form of the automatic stay.

When you file a bankruptcy petition, whether in Chapter 7 or Chapter 13, the automatic stay automatically goes into effect. The automatic stay prohibits your creditors or their representatives from calling, writing or taking any action outside of the bankruptcy proceeding to try to collect a debt from you. The automatic stay applies to creditors and their legal counsel, collections agencies, and most governmental entities. Some specific provisions of the automatic stay include:

  • Foreclosure proceedings—An automatic stay will suspend (but not terminate) foreclosure proceedings
  • Evictions—The automatic stay can stall the eviction process for a few days, unless your landlord has already obtained a judgment of possession or can show that you are endangering the property
  • Utilities—Typically, an automatic stay will suspend the disconnection of services for up to 20 days
  • Wage garnishments—The automatic stay stops any garnishment proceeding

Exceptions to the Automatic Stay

You cannot use the automatic stay to stop or suspend:

  • Criminal proceedings
  • Child or spousal support actions
  • Some tax actions
  • The withdrawal of funds from your paycheck to repay a pension or retirement plan loan

The bankruptcy court has the authority to lift or remove the automatic stay, if a creditor can show that the stay serves no purpose. If you have real property with no equity, and have no way to make payments on the property, the bankruptcy court may lift the stay so that your lender can foreclose and protect its interests.

Contact John Hargrave and Associates

We have provided comprehensive counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-547-6500.

Is Your Past Haunting You?

The Zombie Apocalypse probably won’t occur, but these creatures can still haunt your credit report, even if you filed bankruptcy.

Also known as debt scavengers, zombie debt-buyers purchase delinquent credit card accounts, overdue payday loans and other unsecured debt that the original lender wrote off as uncollectible. Since the debt may be eight or nine years old, or even older, the purchaser only pays a few cents on the dollar for the right to collect the account. Typically, after running a skip trace to find the debtor’s current contact information, the letters and phone calls begin.

Legally, a debt-buyer is supposed to provide written verification of the debt upon request. Since these accounts are so old, the original records may have been lost or destroyed. Many time, a zombie debt-buyer may only have a name, account number and outstanding balance.

Dealing with Zombie Debt During a Chapter 7

If you get a call from a debt collector before your bankruptcy is discharged, tell the caller that you have hired a bankruptcy lawyer and provide them with your attorney’s name and phone number. That’s all you need to do. Do not volunteer any other information and politely refuse to answer any questions. If you receive a letter, give it to your attorney.

If you get another call or letter, repeat the same process. Do not argue with the person about the debt. Let your lawyer handle that for you.

Dealing with Zombie Debt After a Chapter 7

Once you receive your discharge order, keep a copy of both the petition and order close at hand, because you’ll probably need them again.

Monitor your credit report closely. If another debt-buyer appears, be proactive and send them a copy of the discharge order. If they call, politely give them the case number and discharge date and then hang up. If they keep calling, you may need to speak to an attorney to get the harassment to stop.

Contact John Hargrave and Associates

We have provided comprehensive counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-547-6500.

When Can I Start Rebuilding My Credit after a Bankruptcy?

How Soon Can You Start Reestablishing Credit after Bankruptcy?

If you’ve had to file bankruptcy, for any reason whatsoever, you may be wondering how soon you can start to rebuild your credit, as well as the best ways to do so.

You Can Start Immediately

There are no legal restrictions on how soon you can begin to reestablish credit after a bankruptcy. Though you may find fewer opportunities to do so, and incur greater expense, there are companies that will take the risk. You should understand, though, that the interest rates and penalties assessed to sub-prime borrowers (which you will be after a bankruptcy filing) are significantly higher than for most borrowers.

The reality, though, is that you should take some time to get on your feet before you try to incur any new and significant debt. By simply paying your existing obligations—rent, utilities—in a timely manner, you start to rebuild your creditworthiness.

Depending on the type of bankruptcy you filed, you may actually become more attractive to some lenders after a bankruptcy. In fact, it’s pretty common for persons who’ve just completed a bankruptcy to start receiving offers for credit cards, often within a month. Some may be secured credit cards—where you must deposit a certain amount to have the card—but they can help you begin to rebuild yoru credit. The key is making payments in a timely manner.

If you filed Chapter 7 liquidation, your debt-to-income ratio, one factor considered by lenders, will be dramatically reduced. If you have income, but little debt, a lender may perceive that you can afford to take on a new obligation. You can reap the same benefit in Chapter 13, but it typically takes longer, as you will be paying down existing debts over a three-to-five year period.

Contact John Hargrave and Associates

We have provided comprehensive counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-547-6500.

How Come I Can Be Thrown in Jail for Not Paying Child Support If I’m in Bankruptcy

Bankruptcy and Delinquent Child Support Payments

You are behind on all your bills, including your child support. Maybe you lost your job, maybe you’ve had a difficult time getting back on your feet after a divorce or maybe you’ve been sick or hurt. So you decide to file for bankruptcy, having heard that a bankruptcy filing will keep creditors from harassing you. But then you get a notice from the court that, unless you pay past-due child support, you could face incarceration. How can that happen? Shouldn’t the bankruptcy laws protect you?

The simple answer is no. The bankruptcy laws do not allow for the discharge of child support (or spousal support) obligations in bankruptcy. So the laws that apply to most other debts simply do not apply to child support obligations. The state agency that has responsibility for collecting and disbursing child support payments can still take any action to try to collect those payments, from calls and letters to garnishment of wages to seizure of assets to jail time. Furthermore, child support arrearages must typically be paid off in full in a Chapter 13 proceeding.

One of the important things to remember is that a jail sentence is based on a finding of “contempt of court.” If you are truly without income — not just simply avoiding paying child support — a judge may be less inclined to order jail time. If you have some income, but not enough to pay child support and other creditors, you may want to consider a Chapter 7 bankruptcy, which will potentially eliminate all or most other debt so that you can afford child support payments.

Contact John Hargrave and Associates

We have provided comprehensive counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-547-6500.

Questions to Ask Your Lawyer About Bankruptcy

Considering Filing for Bankruptcy? Here Are the Questions to Ask Your Bankruptcy Lawyer

You’ve been working hard to get your financial life back in order, but still can’t see any light at the end of the tunnel. You’re thinking maybe it’s time to consider filing for bankruptcy, but you are uncertain what that means, now and in the future. Here are the key questions to ask a bankruptcy attorney.

  • What are your qualifications? Before you hire a bankruptcy lawyer, find out how much experience they have, what types of bankruptcy proceedings they have handled and how well they have worked with others.
  • What are my options in bankruptcy? There are different approaches to bankruptcy. Chapter 7 allows you to permanently discharge most debts. In a Chapter 13 proceeding you have to make monthly payments to a Chapter 13 trustee who will distribute that money to your creditors over a three to five year period. A Chapter 13 bankruptcy case can also be used to catch up on missed mortgage payments, stop a foreclosure, or get back a car that has been recently repossessed.
  • Do I qualify for Chapter 7 protection? Under the 2005 revisions to the bankruptcy laws, to qualify for Chapter 7, you must demonstrate to the bankruptcy court that you lack the means to pay off your debts over a three-to-five year period. Your attorney should be able to walk you through the means test, provided you supply accurate financial information. Most people who are considering filing a Chapter 7 bankruptcy are eligible for Chapter 7.
  • If I file Chapter 7, can I keep any assets? The federal bankruptcy laws allow certain exemptions when you file for protection under Chapter 7. Each state has its own set of exemptions. You can choose one or the other. As a practical matter, nearly 98% of all people who file a Chapter 7 bankruptcy are able to keep everything that they own, including their houses and their cars.
  • What debts can I discharge? Most debts can be discharged in bankruptcy. However, not all debts may be discharged in a Chapter 7; certain tax obligations, child support arrearages and student loans are typically not dischargeable.
  • What information do I need to provide? You will be required to make an accurate and complete disclosure of your assets and liabilities as well as your monthly income and expenses. Your lawyer can work with you to collect all the documents necessary for a bankruptcy filing.
  • What is the cost? The cost for filing a bankruptcy case varies based on the complexity of the case. Between court costs and attorney’s fees, a standard Chapter 7 case can cost between $1,500 and $2,000. This amount is usually only equal to a small fraction of the debt owed.

Contact John Hargrave and Associates

We have provided comprehensive counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-547-6500.

Pros and Cons of Bankruptcy

Considering Filing for Bankruptcy? Reasons for and Reasons Against Filing

If you are struggling under a mountain of debt and you have been unable to get creditors to work with you, you may be considering a bankruptcy filing. Before you hire an attorney, here are some of the pros and cons of the process, so that you can make an educated decision about how you want to proceed.

The Advantages of a Personal Bankruptcy Filing

One of the principal benefits to seeking protection under Chapter 7 or Chapter 13 bankruptcy is that you get the protection of the automatic stay. When you file your petition, your creditors will be put on notice and will be prohibited from calling, writing or taking legal action outside of the bankruptcy court to collect the debt.

If you file under Chapter 7, you can permanently discharge most debts. Most people who file a Chapter 7 bankruptcy keep everything they own and are not required to repay their creditors from their future wages. If you file for Chapter 13 you will typically only need to repay a small portion of the debt that you owe. The remaining balances are discharged at the end of your Chapter 13 case.

A bankruptcy filing can also immediately suspend a foreclosure or repossession proceeding, allowing a homeowner who was unemployed but is now working again the opportunity to catch up on past due mortgage payments.

The Disadvantages of a Personal Bankruptcy Filing

When you file for bankruptcy protection, it goes on your credit record and stays there for 10 years. It may hamper efforts to obtain credit, but the reality is that creditors are usually more interested in what you have done with credit since the bankruptcy filing. The mere fact that you filed will not necessarily exclude you from consideration.

You are only eligible to get your debts discharged in bankruptcy every so often. The law requires people wait 8 years after receiving a Chapter 7 discharge to receive a Chapter 7 discharge. The law requires people wait 6 years after receiving a Chapter 7 discharge to receive a Chapter 13 discharge and 4 years from Chapter 13 discharge to Chapter 13 discharge.

Contact John Hargrave and Associates

We have provided comprehensive counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-547-6500.

What Is the Difference Between Chapter 7 and Chapter 13 Bankruptcy?

Deciding Between a Chapter 7 and a Chapter 13 Bankruptcy Filing

If you’ve concluded that the best (or only) way out of your current financial predicament is to seek protection in bankruptcy, your next step is to determine which direction you want to go. You’ve heard references to “Chapter 7” and “Chapter 13,” but you may not know what these terms mean and what the basic differences between them are.

What Happens to Your Debt?

In both a Chapter 7 and a Chapter 13 you will receive a discharge of your debts. The primary difference is what source creditors can look to for possible repayment.

In a Chapter 7, creditors can only be paid from your current assets – they do not have a right to be paid from your future income. However, in Chapter 7 the person filing for Chapter 7 protection can protect (“exempt” in bankruptcy lingo) their assets up to certain limits. In New Jersey and Pennsylvania these limits are generous and as a result, most people who file a Chapter 7 keep all of their assets, discharge their debts, and do not have to make payments to their creditors. A Chapter 7 discharge of debt typically takes place 100 to 120 days after the Chapter 7 case is filed.

In a Chapter 13, creditors are typically repaid only from the future income of the person who files (i.e. monthly payments). The money paid each month is paid to the Chapter 13 trustee and not to each individual creditor. A Chapter 13 case can last between 36 and 60 months.

There are two primary types of Chapter 13 cases, as determined by what the goal of the Chapter 13 case is. The first type of Chapter 13 case is a “cure and reinstate” plan, where the person filing for bankruptcy has fallen behind on mortgage payments, car payments, or IRS tax payments and needs to impose a repayment plan on their creditors. In these types of plans, the person filing for Chapter 13 makes a monthly payment to a Chapter 13 Trustee who channels this money to the appropriate creditor. Some of the money paid will also go to their other creditors such as credit card and medical creditors. At the end of the Chapter 13 case (which can be as short as 36 months or as long as 60 months), the unpaid amounts on remaining debts will be wiped out.

The second type of Chapter 13 case is a case where the person looking to file for bankruptcy is ineligible to file a Chapter 7 case. Roughly speaking, this is because they “make too much money” to wipe out their debts without at least paying a portion of those debts back to their creditors. In these cases the person filing for bankruptcy must pay their monthly disposable income to their creditors for 60 months. At the end of the Chapter 13 case the unpaid balances are discharged. Even in this kind of case creditors are only paid a fraction of what they are owed.

Contact John Hargrave and Associates

We have provided comprehensive counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-547-6500.

Why Is Bankruptcy Called Chapter 13?

Why Is It Called a Chapter 13?

So you are facing a mountain of debt, but have some income. Your attorney or a friend has recommended that you seek protection under “Chapter 13.” But what does that mean? Why is it called a Chapter 13 bankruptcy, and what does that look like? This form of bankruptcy is called Chapter 13 because it is provided for in Chapter 13 of Title 11 of the United States Code. (When Congress passes a law it become part of the United States Code. Title 11 of the United States Code provides for the country’s bankruptcy laws and is known as the Bankruptcy Code)

Chapter 13 bankruptcy is often called a “reorganization bankruptcy”, but that term is often misleading. It is more appropriate to call Chapter 13 a “partial repayment bankruptcy”. In a Chapter 13 bankruptcy your attorneys work with you to craft a Chapter 13 bankruptcy plan where you will make monthly payments to a Chapter 13 trustee. These payments will be payments that you can afford each month. The Chapter 13 trustee will distribute these payments according to your Chapter 13 plan. Your unsecured creditors will typically receive only a portion of what they are owed. At the end of 3 to 5 years the unpaid balances will be wiped out.

When you file for protection under Chapter 13, as with other forms of bankruptcy, you are immediately subject to the protections established under the automatic stay. The automatic stay prohibits your creditors from calling, writing, pursuing legal action or making any other effort to collect your debts, other than through the bankruptcy proceedings. So the calls and letters must stop, and any legal proceedings that are already underway must be suspended.

Contact John Hargrave and Associates

We have provided comprehensive bankruptcy counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-547-6500.

Why Is Bankruptcy Called Chapter 7?

What Is a Chapter 7 Bankruptcy?

If you have been wrestling with a large amount of debt – and you don’t see any way to pull yourself out of your financial problems – Chapter 7 could help you. Legal counsel, or a friend or family member, might have mentioned this form of bankruptcy to you, which is called ‘Chapter 7’ because it is provided for in Chapter 7 of Title 11 of the United States Code. (When Congress passes a law it become part of the United States Code. Title 11 of the United States Code provides for the country’s bankruptcy laws and is known as the Bankruptcy Code)

In a Chapter 7 filing, you are allowed to permanently discharge certain debts; that means that once the bankruptcy proceeding is finalized, you won’t ever owe that money again. However, there are some caveats:

  • You must qualify to file for protection under Chapter 7. The 2005 revisions to the bankruptcy code established what is known as the “means test.” The means test requires that, to be eligible to file for Chapter 7 protection, you must show that you lack the resources (means) to repay any money to your creditors over a three-to-five year period (as set forth in Chapter 13 of the bankruptcy laws).
  • Some debts cannot be discharged under Chapter 7. You cannot rid yourself of certain tax obligations, student loan debt, or child support or alimony in a Chapter 7 filing.

Once you file for bankruptcy under Chapter 7, you get the protection of the automatic stay, which prohibits your creditors from calling, writing or taking any other action outside of the bankruptcy proceeding to try to collect your debts.

Contact John Hargrave and Associates

We have provided comprehensive counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-547-6500.