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 Means Test

The Means Test in Bankruptcy

The Means Test in BankruptcyBefore 2005, persons seeking to file bankruptcy could generally choose between a Chapter 7 liquidation proceeding and a Chapter 13 reorganization. However, as a part of the revisions to the federal Bankruptcy Code in 2005, Congress set limits on who may qualify to discharge debts under Chapter 7. To be eligible, you must now submit to what is known as the “means test.”

The purpose of the means test is to determine whether you reasonably have the capability to repay your creditors rather than having your debts discharged. The means test is designed to keep persons with high incomes from discharging debt and immediately having substantial discretionary income that could have gone to creditors. Under the means test, however, you don’t have to be without income to qualify for Chapter 7. Here’s an overview of the how the means test works.

Determining Your Eligibility for Chapter 7

The first question the bankruptcy court will ask: Is your income less than the median income in your state for a household of your size? If so, you don’t have to go any further—you qualify.

If, however, your income exceeds the median income, you must document your expenses to determine whether you have enough income left after paying “allowed expenses” to pay some portion to your creditors. If your income exceeds your total expenses by a specified amount (which varies from state to state), you fail the means test and must file a Chapter 13 petition if you choose to use bankruptcy to get a fresh financial start.

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.

Special Asset Issues

Bankruptcy and Special Assets

Bankruptcy and Special AssetsIf you have decided to file for bankruptcy as a way to get a fresh financial start, you may have concerns about how the bankruptcy filing will affect certain articles of property. What about any money you have received or are eligible for through an inheritance? What about your retirement plan assets? Will you have to reclaim property given to friends or family, or that you’ve recently sold or given away?

Inheritance and Bankruptcy

Whether or not the proceeds of an inheritance will be accessible to the bankruptcy trustee in a Chapter 7 proceeding depend on two issues:

  • Whether your state allows you to claim an exemption on an inheritance—the law varies from state to state
  • When you received the inheritance—if you have already received the inheritance when you file, or if you receive the inheritance within 180 days of filing, it must be included in a Chapter 7 proceeding

Retirement Plan Assets and Bankruptcy

As a general rule, money put into a retirement plan is exempt from access to pay creditors in a bankruptcy proceeding. This includes profit-sharing plans, defined benefit plans, 401(k)s, IRAs and money purchase plans. The only retirement assets that may be taken by the bankruptcy court are Roth and traditional IRA plan assets in excess of $1,245,475.

Gifts to Friends or Family or Items Recently Sold

A significant gift to a friend or family member within two years (under federal rules) of a bankruptcy filing can qualify as a fraudulent transfer. Some states will look back as far as seven years. As a general rule, if the bankruptcy court finds a transfer to be fraudulent, it will require that the property or its value be returned to the bankruptcy estate. It may also prohibit you from completing the bankruptcy.

Items sold at fair market value typically don’t qualify as a fraudulent transfer, but a sale for less than market value may have the same consequences as a gift.

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 Property Can I Keep In A Chapter 7?

New Jersey is one of 19 states which allow Chapter 7 debtors to choose between federal and state exemptions. If property is exempt, you get to keep it in a bankruptcy. What are some of the differences between state and federal bankruptcy exemptions on some commonly held property items?

Homestead

New Jersey does not have an exemption for your home.

However, the federal exemption is a bit more straightforward. Up to $22,975 of equity is exempt. After the real estate crash, fewer and fewer people have equity in their homes and as a result find that they can easily protect their homes in a bankruptcy filing.

Vehicle

New Jersey does not have a vehicle exemption, but does allow up to $1,000 of personal property to be exempt. This personal property exemption can be used on a vehicle.

If using the federal exemptions, you can claim up to $3,675 in equity for a motor vehicle.

Retirement Benefits

IRAs, 401(k)s, Social Security benefits, pension plans and other retirement benefit plans are exempt under both state and federal bankruptcy laws. So, bankruptcy will not disturb your nest egg. However, if you have borrowed money against your retirement savings, you will still be required to repay those loans.

The Wildcard

Federal exemptions provide for a “wildcard” of $1,225 plus up to $11,500 of unused homestead exemption to use on anything that you want. This wildcard exemption can be used to protect extra equity in a car, cash at home, money in the bank, or extra equity in a home, boat, investment property, timeshare… you name it!

On a practical basis, New Jersey state exemptions are very meager and infrequently chosen, especially since the federal exemptions under the Bankruptcy Code are so generous. As a result of the federal exemptions under the Bankruptcy Code, the vast majority of people who file a Chapter 7 bankruptcy are able to keep everything that they own, while shedding their 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.

The Two Most Common Personal Bankruptcy Options

Your Personal Bankruptcy Options

If you are considering filing for personal bankruptcy protection, you can easily be confused about the different options available to you. Here are the basic options for obtaining personal bankruptcy protection.

Chapter 7 Case

In a Chapter 7 bankruptcy proceeding, you are allowed to replace with most debts certain debts in exchange for the sale of some of your assets. There are some limitations on the debts you may discharge. Customarily, you cannot discharge the debt on secured assets—homes or cars—and still keep the property. Additionally, child support and alimony arrearages cannot be wiped out in bankruptcy, and student loan and tax debts are very difficult to discharge.

With respect to things you are financing like your car or home if you want to keep it you have to continue to make the payments. If the thing you are financing is work less than what you owe, you have the option to give it back to the lender and owe them nothing or keep it but continue with the payments.

Under the revisions to the federal bankruptcy laws in 2005, you must now qualify for Chapter 7 by submitting to a means test, where the bankruptcy court determines if you make too much money to be in Chapter 7, in which case your options are to file Chapter 13 or no bankruptcy.

Chapter 13 Reorganization

In a Chapter 13 petition, you work out new payment arrangements with your creditors, agreeing to settle your debts over a three-to-five year period. Often, you will be able to get late fees and penalties waived. As long as you honor your new commitments, your creditors cannot make any additional efforts to collect on a debt.

The Automatic Stay

Whether you file for protection under Chapter 7 or Chapter 13, you are immediately entitled to the protection of the automatic stay, which prevents your creditors from calling, writing or taking any legal action outside of the bankruptcy proceeding to collect a debt from you.

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.

Recovering From Chapter 7

In most cases, a Chapter 7 Bankruptcy is discharged only a few months after the filing debt. So, an experienced bankruptcy attorney in Camden can get your family a fresh financial start almost immediately. Once you’re free of the obligation to repay many outstanding debts, what should happen then?

Why People File, and How Bankruptcy Helps

Some people file Chapter 7 in the wake of a short-term financial crisis, such as a job loss, a divorce or a serious illness. 76 percent of American families live from paycheck to paycheck, so most lack savings to weather these rough fiscal storms. Once you’re back at the starting line, you’re in a position to resume the spending and money management patterns that you exercised before.

Other people file bankruptcy because of a financial reverse. Perhaps income from a stock portfolio dried up due to the economic downturn, a home mortgage became unaffordable or a small startup business never really got started. Bankruptcy eliminates the debts that you cannot pay, which generally solves these problems.

Still others have made poor financial decisions. They’ve overspent on luxury items or amassed gambling debts. Bankruptcy, and especially the debtor education class, is a good way to reassess spending habits and get on the right track.

The truth is that most people file bankruptcy due to some combination of all these issues; for example, a family might have been barely able to service its credit card debt, and then a few days in the hospital put them permanently in the red.

Moving Forward

It’s very important to stay current on secured debts, like your car note and home mortgage. Paying your bills on time is the best way to build your credit score.

Once you receive a Chapter 7 discharge you may be inundated with credit card offers. That’s because the lenders know that you cannot file another Chapter 7 for another eight years. While there’s no need to go overboard, talk to your attorney about the best card for you. Charge something every month and pay off the balance every month, and your FICO score will go up even further.

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.

Should You File For Bankruptcy?

One of the crucial reasons that individuals file for bankruptcy is to receive relief from their creditors. The initial relief arrives in the form of an automatic stay. The automatic stay goes into effect immediately upon filing for bankruptcy. In general, the stay prohibits collectors from continuing collection activities unless and until the Court gives them permission to continue.

Bankruptcy advertisements often claim to:

The automatic stay, applied when applicable, ceases all of these actions.

Chapter 7 Bankruptcy

Chapter 7 is a “liquidation” bankruptcy. If an individual receives a discharge in their bankruptcy, the Debtor’s personal liability to pay for most of their debt is removed. Therefore, a chapter 7 can bring relief from creditors and resolve the debt issues. However, there are many exceptions, so it is vital to seek an experienced attorney.

Valid reasons to file under chapter 7 include:

  • Relief from the collection process when left with no other alternatives
  • In order to deal with the debt that has become unmanageable (outside the assistance of bankruptcy)

Whether you have reached the threshold in the above areas is the determining factor for whether or not to file.

Is Bankruptcy Right for You?

Learn whether bankruptcy is the right choice for you. Talk your debt-relief options over with an experienced attorney at the southern New Jersey law firm of John Hargrave and Associates. We offer free confidential consultations. Call 856-547-6500, or contact us online.

“Meaningful Review” by Collections Attorneys

U.S. District Judge Kevin McNulty, in the District of New Jersey, ruled last week in Bock v. Pressler & Pressler that a debt collection law firm violated the FDCPA (Fair Debt Collection Practices Act). The law firm apparently did not conduct a “meaningful review” of a collection claim filed against a consumer.

Bock had filed a federal court action against Pressler, alleging that Pressler had filed their State complaint against Bock without meaningful review by an attorney. His case work (Pressler employees working on behalf of the debt holder – Midland Funding LLC) was carried out by non-attorneys (a non-issue), but when it came time for the attorney review prior to filing the case with the State, the firm’s computer system shows a file accessed for review for only four seconds.

The standards set forth in the case Lesher v. The Law Offices Of Mitchell N. Kay in 2011 played a role in Judge McNulty’s decision. McNulty wrote that Lesher “establishes that it is false and misleading, within the meaning of FDCPA, for an attorney to send a debt collection letter without having meaningfully reviewed the case.”

Credit Card Debt HELP When You Need it Most

Regular, hard-working people get in over their heads with credit card debt and collections for many reasons. No matter how you got into deep credit card debt, there is a way out. In this country we do not put people in debtor’s prisons. Rather, our Constitution, as originally written in 1797, provides people the opportunity for a fresh financial start. Eliminating credit card debt can seem next to impossible when you don’t know your options. Our debt-relief attorneys can help you understand your options so you can make an informed decision about filing for bankruptcy and eliminating credit card debt.

Contact John Hargrave and Associates

The law firm of John Hargrave and Associates in Barrington, New Jersey, can help you regain your financial footing. Contact us online or call 856-547-6500 to schedule a free consultation with an attorney who has been helping people resolve difficult financial issues since 1977.

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.