Saturday, June 16, 2012

Chapter 7 vs. 13

Can I file a Chapter 7 or will I be required to pay debt over time through a Chapter 13? While many factors play a role in answering this question, here are two important calculations:
  • If your debts are primarily consumer debts, and your family's income is over the median annual income for a family of its size, you are probably required to file Chapter 13.  Here is a link to the U.S. Trustee's state-by-state table of median income: MEDIAN INCOME TABLE, This table is adjusted periodically. More goes into calculating your eligibility than the median income amount, but the Trustee's table is a good starting point.
  • Have you filed bankruptcy before? You are not eligible for a discharge in a Chapter 7 if you filed a prior Chapter 7 in the last 8 years, or a prior Chapter 13 in the last 6 years (unless you paid most/all of your debt in that prior Chapter 13). Whereas, you can receive a discharge in a Chapter 13 if you filed a Chapter 7 more than 4 years ago. Keep in mind that you can still file a Chapter 13 even if 4 years has not elapsed; you simply would not be eligible for a discharge. You might not care though since having the protection of the Bankruptcy Court may be more important to you than receiving a discharge.

Wednesday, May 2, 2012

Credit Card Company Collection Cases

There is a line of recent Washington cases imposing a burden on credit card companies to offer more than self-generated account statements and unsigned credit card agreements in lawsuits where they pursue debtors on delinquent accounts.  When faced with a debtor/defendant who denies liability on the account, the credit card company must provide evidence of personalized acknowledgment of the account similar to the cancelled checks presented by Discover in Discover Bank v. Ray, 139 Wn. App. 723, 119 P.3d 906 (2007).  Absent such proof though it may be difficult for a credit card company to prevail, particularly at the summary judgment level of a case.  Discover and Citibank found this out the hard way: Discover Bank v. Bridges, 154 Wn. App. 722, 226 P.3d 191 (2010), and Citibank South Dakota N.A. v. Ryan, 160 Wn. App. 286, 247 P.3d 778 (2011).

Tuesday, March 20, 2012

The Senate Addresses the Student Loan Crisis

The Senate Judiciary Subcommittee on Administrative Oversight and the Courts is holding a hearing this morning entitled “The Looming Student Debt Crisis: Providing Fairness For Struggling Students.”  You can view the webcast HERE.

Friday, March 2, 2012

$5 Credit Counseling

Consumer debtors are required to obtain credit counseling from a qualified non-profit agency before filing bankruptcy.  This counseling requirement was imposed by the 2005 amendments to the Bankruptcy Code, and in practice only seems to impose a costly hurdle to people who are otherwise destined to file bankruptcy.  Locally, the cost of such a class can be as high as $90 for a married couple.  A more affordable alternative is the pre-bankruptcy counseling provided by The Tides Center.  They only charge $5 per person:

Friday, February 24, 2012

Student Loans: what to do?

For the first time in history, consumers owe more in student loan debt than they owe in credit card debt. Here's an interesting report from the National Association of Consumer Bankruptcy Attorneys:  The Student Loan "Debt Bomb": America's Next Mortgage-Style Economic Crisis?

Because there are few escapes for consumers who are unable to pay their student loans, the NACBA calls for Congress to restore the bankruptcy discharge of student loans and reimpose a reasonable statute of limitations on student loan collections.  This will be an interesting debate to watch.

Tuesday, February 21, 2012

The Cost of Bankruptcy

The question examined in a recent national study was “whether the 2005 amendments to the Bankruptcy Code improved bankruptcy law and practice or whether the amendments  made the system more cumbersome and costly to use.”  Cumbersome and costly appears to be the answer.  You can view the full report here:  The Consumer Bankruptcy Fee Study

The study found that the 2005 changes increased debtors' costs to file bankruptcy, without generating a statistically significant increase in distributions to creditors.  Nationwide the total cost to file a no-asset Chapter 7 case increased 51%.  Locally, Oregon ranked third nationally with an 85% increase in Chapter 7 fees.  The largest increase in Chapter 13 fees was in Idaho (a 115% increase).

In Washington, there was a 27% average increase in Chapter 13 costs.  The increase was far from uniform though:  fees rose 6% in Eastern Washington and 29% in Western Washington.  The statewide increase in  Chapter 7 fees was 45% (34% in Eastern Washington and 52% in Western Washington).

Another observation gleaned from the data: at $538.27, Eastern Washington appears to have the lowest current average Chapter 7 attorney fee among judicial districts nationwide!

Friday, February 17, 2012

WA Supreme Court's latest exemption ruling

Yesterday, the Washington Supreme Court ruled that money paid to a beneficiary from the Law Enforcement Officers' and Firefighters' Retirement System (LEOFF) loses its exempt status once it is deposited in the beneficiary's bank account.  The deposited funds become a target for garnishment by judgment creditors:  Anthis v. Copland

The Decline of the Median Household Income in the PNW

When I interview new clients, some of the first questions I ask are aimed at determining gross annual household income.  Why?  By comparing their income to the median income for a family of their size in Washington or Oregon, we can usually determine what bankruptcy they should file.  Most above-median income debtors will need to file a Chapter 13 bankruptcy and pay debt for up to five years.  Most under-median income debtors can file a Chapter 7.  Additional calculations come into play later when we complete the means test but median income is the starting point. 

The U.S. Department of Justice publishes median income data from the Census Bureau, which it adjusts periodically:  While it’s hardly surprising, the median household income for families in Washington and Oregon has declined steadily in recent years.  In October of 2008 the median incomes for four person families in Washington and Oregon were $79,397 and $70,046 respectively.  The numbers rose to $82,716 and $72,667 in November of 2009, but income has declined since.  In November of 2011 the median income for a family of four in Washington dropped to $80,404 - close to the 2008 level.  In Oregon the number dropped to $66,616.  It seems counter-intuitive but this decline may lead to more chapter 13 filings for middle income families whose income has stagnated in recent years.

Thursday, February 16, 2012


For starters, it's probably a good idea to introduce myself.  My name is John O'Leary and I am an attorney in Kennewick, Washington. My practice is centered around consumer and business bankruptcy law in Eastern Washington and Oregon.  I will periodically post subjects of interest to clients and fellow lawyers, and I'd love to read your comments.  Also visit my law firm's website:  Take care!