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Across the State of Nebraska, you could have heard a collective groan of debtor attorneys as the Nebraska Bankruptcy Court issued a new ruling limiting the ability of debtors to avoid liens in motor vehicles.  In the case of In re Cardwell, the Court ruled that a debtor may not utilize the “Tool of the Trade” exemption of Nebraska statute 25-1556 to avoid such liens unless the vehicle is actually used in the debtor’s trade.

The debtors owned a 2006 Pontiac Montana worth $1,200 and a 1992 Ford F-150 pickup truck worth $800, and they pledged both car titles to First State Bank for a new loan.  After the bankruptcy case was filed, their attorney filed a motion seeking to avoid the liens since Bankruptcy Code 522(f) allows debtors to void liens.
The problem in Cardwell is that neither debtor was self-employed and although they used the vehicles to commute to and from work, they did not use the vehicles to perform their jobs.  As the court noted, the vehicles were used solely for personal purposes and to commute to work.  Therefore, the Court ruled that the vehicles did not qualify as “tools of the trade.”
This is a devastating ruling for debtors who have pledged their vehicle to acquire high interest rate Title Loans.  For decades, Nebraska bankruptcy attorneys have used this statute to return car titles, but now they will have to limit this procedure to cases where a debtor can show the vehicle is actually used in their trade.

the Court did not state is how much a debtor must use a vehicle in their job to enable them to avoid these liens

At first glance it appeared the lien avoidance power was completely abolished for everyone but the self-employed, but a more careful reading of the opinion reveals that debtors may be able to avoid liens in many cases. It is important to note that the Court did not state is how much a debtor must use a vehicle in their job to enable them to avoid these liens.  For example, paralegals in our law firm frequently use their vehicles to make trips to the Post Office or to file documents in the courthouse.  Is that enough use to invoke the avoidance power?  Nebraska bankruptcy attorneys will need to emphasize how a debtor utilizes their vehicle in their job to gain access to the lien avoidance power.  
 
 
 

A California woman was sentenced to six months in prison after giving false statements in court that resulted in committing bankruptcy fraud.  Patricia Bonavito, 59, pleaded guilty to charges related to making false statements under penalty of perjury, while trying to get hundreds of thousands of dollars in debt discharged by the bankruptcy court. Bonavito [...]

Most Burlington, Wisconsin residents who file for a Chapter 7 Bankruptcy will be able to have most, if not all, of their debts discharged, or “wiped out”. This means you will not be liable for the debt. Any collection attempts from the creditor will be prevented. To many, this means peace of mind and peace and quiet from collection phone calls and letters. You will be legally free of all debts that are discharged after a successful Burlington Chapter 7 Bankruptcy.
Who Can File a Burlington Chapter 7 Bankruptcy?
Of course, first you must be eligible to file a Burlington Chapter 7 Bankruptcy. You cannot file a Chapter 7 Bankruptcy if you have already received a bankruptcy discharge in the last six to eight years (length of time varies) or if you are able to complete a Chapter 13 Repayment Plan (based on your income, expenses, debt, and more). To determine if you are eligible to complete a Burlington, Wisconsin Chapter 7 Bankruptcy, please contact my bankruptcy law firm to discuss further.
Which Debts Can Be Discharged in a Burlington, Wisconsin Chapter 7 Bankruptcy?
After you have been proven eligible to file for a Chapter 7 Bankruptcy, next comes the big question: Which debts can be wiped off your “Due and Owing” list?
To begin, only debts that occurred before your date of filing a Burlington Chapter 7 Bankruptcy can be eligible for discharge. Therefore, filing for bankruptcy at just the right time is paramount. However, do not believe you can rack up credit card debt on luxuries right before you file for Chapter 7 Bankruptcy. If you do, you can rest assured those debts Will Not be discharged. Honesty is key.
Learn which debts can be wiped out after a successful Burlington, Wisconsin Chapter 7 Bankruptcy
Scroll through the list below to learn about the most common debts discharged in a Burlington, Wisconsin Chapter 7 Bankruptcy.
• credit card charges and fees
• medical bills
• utility bills
• department store cards
• business debts
• past due rent or any other money owed under a lease agreement
• payday loans
• civil court judgments
• auto accident claims
• unpaid IRS taxes and penalties
• attorney fees
• government benefit overpayments
• personal loans from family and friends
• amounts owed to bank from “insufficient funds” checks
• repossession balances
Of course, there are special circumstances for almost each of the items listed above. To learn which of your debts can be legally discharged or “wiped out” in a Burlington, Wisconsin Chapter 7 Bankruptcy, please contact me, Shannon Wynn, by phone at 262.725.0175 or by email via my contact page.

*The content and material on this web page is for informational purposes only and does not constitute legal advice.

 The New York Times recently ran an article in its business section entitled The Risk of Transferring a Car Loan to a Credit Card.  The Times reported noted that several credit card issuers now promote programs in which you can transfer the outstanding balance on your car loan to a credit card. At first blush, this seems like an interesting concept.  Car loans are secured debts, while credit cards are unsecured loans.  If you default on a car loan, you run the risk of repossession, whereas a credit card issuer would have to sue you to collect a default, thereby giving you months to refinance or find additional money. Further, some of the credit card lenders are offering teaser rates such as zero interest for up to 18 months. Credit card issuers are desperate for new business.  The great credit crunch of 2008 and new federal consumer protection laws have resulted in a significant decline in consumer credit.  Credit card lending is an extremely profitable business but it depends on numbers – specifically, it depends on borrowers who pay, but who sometimes pay late, thereby racking up late fees and interest charges. And these late fees and interest charges are exactly why trading your car loan for a credit card balance may not be such a good idea. If you are extremely disciplined and can pay off the transferred balance in full when interest rates are zero or very low, you could save hundreds or thousands of dollars of interest charges. However, credit card agreements usually contain “gotcha” provisions that jack up interest rates if you are late, along with hefty late fee charges.  A $10,000 loan at zero percent is one thing, but a $10,000 loan with a 25% interest rate is something else entirely.  You could find yourself making minimum payments for years and never see the principal balance go down. Further, the psychology of credit card debt works against you.  When you have a car loan, you know that if you start missing payments, you car or truck is going to be repossessed.   Repossession is costly and embarrassing and if you are facing a cash flow shortfall you are likely to do what is necessary to protect your transportation. By contrast, credit card debt does not have the same urgency.  Since you have the option to pay a minimum payment, and you know that losing the vehicle is months away, it is far more likely that you will end up with a large, high interest credit card debt. I have not seen these debt transfers yet in a bankruptcy context but one of these transfers would be considered recent use of unsecured debt and could be deemed non-dischargeable if you filed bankruptcy within a few months after making the transfer. My sense is that this type of transfer deal could make sense for a person with excellent credit, steady income and financial discipline.  Such a person could also, presumably, pay off his car loan early anyway, which makes the credit card transfer option less likely anyway.  My gut tells me that there are no free lunches in life and this looks like a “free lunch” proposal.  So I say “stay away.”The post Debt Consolidation Not Always a Good Idea appeared first on theBKBlog.