Category Archives: Bankruptcy

Bankruptcy and the Required Credit Counseling and Debtors’ Education Courses

Bankruptcy and the Required Credit Counseling and Debtors’ Education Courses

All bankruptcies are governed by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. The law requires that every person who files for bankruptcy undergo mandatory credit counseling at least 180 days before they can officially file. The credit counseling must be conducted by an organization approved by the government. Besides the credit counseling, those who file for bankruptcy also need to complete a debtors’ education course before the government will officially discharge their debts.

The U.S. Trustee program is the government agency that approves the organizations that provide the mandatory credit counseling and provide the debtors’ education program. If the group’s name appears on the U.S. Trustee program’s list of approved credit counselors and educators, then they are an acceptable option, if not, then don’t waste your time or money.

Each of these programs follows a specific timeline. The credit counseling course must happen before the debtor files for bankruptcy and the debtors’ education course must take place after the debtor has filed the initial claim. When the debtor files for bankruptcy, he must include in the already mountainous pile of paperwork a certificate of completion for the credit-counseling course. The debtor must also submit evidence that he or she has completed the debtors’ education program before the debts can finally be discharged.

The credit counseling session is meant to involve a thorough examination of the debtor’s complete financial life. The credit counselor is supposed to provide the debtor with some alternatives to bankruptcy and also give the debtor an opportunity to learn how to develop a better personal budgeting system. If the debtor cannot afford the counseling session, the credit counseling organization is required to offer the counseling free of charge. The debtor is responsible for telling the organization that he or she cannot afford to pay the fee before the session begins and will then receive a fee waiver from the organization. If the debtor is able to pay for the session, the charge could be as much as $50 dollars.

Once the debtor has completed the required credit-counseling course and has received the certificate of completion, he can then submit the certificate of completion along with the bankruptcy petition and move the process one step closer to being done. The next step is to complete the debtors’ education course. This course includes instructions for the debtor on how to develop a better budget, how to use credit wisely and how to manage money effectively. There is also a fee associated with this course, but just like the credit counseling sessions, if the debtor cannot afford the fee the education provider should waive it.


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What are reaffirmation agreements?

What are reaffirmation agreements?

Once a debt has been discharged in an Ohio bankruptcy, according to the law, the debtor is no longer obligated to pay that debt. In certain cases, however, the debtor may wish to pay the debt anyway, even though it has been legally discharged as a liability. For example, the debtor (which resides in Dayton Ohio) may want to keep a car that was the secured collateral for an auto loan. For that to happen, the debtor can enter into an agreement with the creditor to pay off the debt even though it has been discharged. This is called a reaffirmation agreement.

A reaffirmation agreement is a voluntary agreement reached between two consenting parties, it is not required by bankruptcy law and is not a necessary part of the bankruptcy process. The newly drafted agreement made between the debtor and the creditor is legally binding on both parties and must be approved by the bankruptcy court overseeing the process. The reaffirmation agreement must comply with certain rules and, if the debtor is not represented by an attorney, there will be a hearing to determine whether the agreement satisfied those rules.

By law, the reaffirmation agreement must:

(1) be voluntary;
(2) cannot place an undue financial burden on the debtor or the debtor’s family;
(3) has to be in the debtor’s best interest; and
(4) can be terminated any time before the court orders the discharge of debtor’s debts or within 60 days after the reaffirmation agreement has been filed with the court, whichever is the longest amount of time.

The reaffirmation agreement represents an entirely new and different agreement between the parties and is NOT included in the bankruptcy proceeding. This means that if the debtor fails to pay the debt that is the subject of the reaffirmation agreement, it will not discharged in bankruptcy and the debtor will then owe the creditor under the terms of the newly reached agreement.

Reaffirming a debt is a undoubtedly a serious financial commitment. It is for this reason that the courts require a hearing when debtors are not represented by an attorney. It is advisable, as with any bankruptcy situation, that debtors consult with an attorney before agreeing to reaffirm a debt.

If you are considering filing for bankruptcy and reside in Ohio, call The Law Offices of John T. Nicholson at 1-800-596-1533 for a free consultation today.

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The Down Low on the Different Types of Bankruptcy

What kind of bankruptcy do I need to file?

The federal government is an excellent source of valuable information when it comes to filing bankruptcy. On the official website for the federal courts,, the federal government provides you with all of the necessary information on bankruptcy basics. The website will provide you with background information on what a bankruptcy is, which chapter may be best for you, and the procedure to successfully accomplish the task. Despite this great source of information, it is still recommended that you consult with an bankruptcy attorney before filing.

The Bankruptcy Code, found in Title 11 of the United States Code, provides for six different varieties of bankruptcies. Some of them are more popular than others, the most common being Chapter 7 and Chapter 13. Chapter 7 is called a “Liquidation” bankruptcy. During this process, the trustee takes possession and control of the debtor’s assets and property. The trustee sells the assets and then pays off the creditors. Some of the property owned by the debtor is exempt from becoming property of the bankruptcy estate.

Chapter 9 is the chapter that allows municipalities, like cities and towns, to reorganize. It does the same as a Chapter 11 only it is reserved for municipalities. Chapter 11 allows business, and some individuals, to stay in business and pay creditors without having to give up the business. A court-approved reorganization plan guarantees that creditors will receive what is owed to them, but the business remains in operation. Several major US companies have recently filed for Chapter 11; General Motors is a prime example.

Chapters 12 and 13 allow debt relief for workers with regular income. Chapter 12 is reserved for farmers and fisherman, whereas chapter 13 is for all other types of employment. These chapters allow an individual to pay off his or her debt over an extended period of time. It allows the debtor to keep some valuable assets and requires that a plan be made to pay off creditors without having to lose his or her entire estate to the bankruptcy trustee. Finally, Chapter 15 provides the procedure for dealing with property that the debtor owns but that is located in a foreign country. These are referred to as “cross-border” cases.

If you’re considering filing for bankruptcy and live in Ohio, call The Law Offices of John T. Nicholson at 1-800-596-1533 for a free consultation today.

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Will filing bankruptcy ruin my security clearance?

Can members of the U.S. military, or civilians that work on bases, such as Wright-Pat here in Dayton, declare bankruptcy without affecting their security clearances?

Members of the U.S. military, as well as civilian personnel and civilian contractors working for the military, often worry that declaring bankruptcy could result in the loss of their security clearances. Although declaring bankruptcy could possibly affect a security clearance, the good news is that this is not automatic.

Suppose that a Staff Sergeant is stationed at Wright-Patterson Air Force Base (near Dayton, Ohio). He is being considered for reassignment to a new unit, and as a result, the Air Force has initiated a security clearance background investigation into the Staff Sergeant character and conduct. An adjudicator will inquire about the Staff Sergeant’s criminal background and financial responsibility (including credit history), as well as his personal attributes, such as honesty, loyalty, reliability and trustworthiness. Bankruptcy, of course, relates to an analysis of financial responsibility.

The adjudicator will consider the circumstances of Staff Sergeant’s bankruptcy when deciding how much of an impact—if any—it should have on the decision about his security clearance. For example, if the Staff Sergeant declared bankruptcy to avoid the debts he accumulated as the result of his compulsive gambling, then the bankruptcy would likely have a negative impact on his security clearance. On the other hand, if Staff Sergeant Nelson’s debts resulted from a sudden medical emergency or other unexpected event, then the bankruptcy might have little or no impact on his security clearance. In other words, the fact that Staff Sergeant Nelson declared bankruptcy is probably less important than the reasons he got into debt in the first place and how he tried to manage that debt prior to filing his bankruptcy petition.

If you are a member of the U.S. military and are considering bankruptcy, then you should consider speaking with an attorney who focuses on bankruptcy law. Your attorney can help you through the bankruptcy process and can explain the circumstances of the bankruptcy to your commanding officer and investigative personnel, pointing out that bankruptcy is a full, legal discharge of all your debts. In many cases, bankruptcy is the most financially responsible means of dealing with your debts.  Call 1-800-596-1533 for a free consultation from an experienced Ohio Bankruptcy Attorney.

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What happens to my Student Loans if I file for bankruptcy in Ohio?

In any Bankruptcy Court, not just in Dayton, Ohio, the court will protect you from student loan creditors.  Once the case is filed, the court issues what is called an “Automatic Stay”, which prohibits any creditors, including student debt collectors, from taking any action to collect the debt.

In most circumstances, the Automatic Stay will keep educational loan creditors from contacting you the entire time that the bankruptcy case is pending.  In Chapter 13 bankruptcies, that period could be as long as 5 years.  In that sense, student loans are treated like all other unsecured debts.  However, whether student loans are discharged at the end of the bankruptcy is a more complicated issue.

It is very difficult, but not impossible, to discharge student loans in bankruptcy.  In order to discharge your student loans in a Chapter 7 bankruptcy or a Chapter 13 bankruptcy, you will need to convince the Bankruptcy Court that repayment of the student loans “will impose an undue hardship on you and your dependents.”

Different federal districts have different tests that they use to determine what the borrower will need to show in order to prove “undue hardship.”  These different tests and the different courts’ interpretations make it more difficult to discharge student loans in some districts.  Student loan discharge in Dayton, Ohio, is very difficult.

In order to discharge the student debt, you will need to file what is called an adversary proceeding.  The issue will be litigated in the bankruptcy court, costing time and money.  Most bankruptcy attorneys offer free consultations, where you can get more information about the treatment of your student loans in bankruptcy.

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