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Does Business Debt help me qualify for a Chapter 7 bankruptcy?

Lawyer, Attorney Tony Turner, Grey Suit, Wooden Mallet, Business Debt, Chapter 7 Bankruptcy

Roughly eighty percent (80%) of new businesses fail within the first eighteen (18) months and one-half (50%) of the new businesses fail after the first four (4) years.  Only twenty percent (20%) make it past their five-year (5) anniversary. So, what happens to the business debt of small business owners if their business folds? Business owners who sign personal guarantees can be held liable personally for the debts. However, business debt helps you qualify for a Chapter 7 bankruptcy because the Means Test does not apply in bankruptcy cases where the debts are primarily business-related debts. “Primarily” is defined as 50 percent or more of the total debt owed by the debtor. 

An experienced Florida bankruptcy attorney understands how to help a business owner qualify and file for debt relief under Chapter 7. If you have questions, please contact the Law Office of Tony Turner. Mr. Turner is an Orange Park Bankruptcy Attorney who offers a free bankruptcy consultation. If your business is experiencing cash flow or debt problems, contact The Law Office of Tony Turner by calling (904) 679-2020 for a free bankruptcy consultation with a Florida bankruptcy attorney near me. Bankruptcy lawyer Tony Turner assists businesses and business owners throughout Orange Park, Jacksonville, Lake City, Deland, St. Augustine, Deland, Daytona, and the surrounding areas explore bankruptcy and non-bankruptcy options for eliminating debt problems and other financial issues.

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Bankruptcy Petition Filing Statistics!

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According to the Bankruptcy Petition filing statistics, consumers filing for bankruptcy in 2017 reported total assets of $80 billion and total debt of $105 billion, according to an annual report filed by the Judiciary with Congress. The report, required by Congress under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.  Some notable highlights in the report are:

  1. Sixty-two percent of assets were real property, and the remaining assets were personal property.
  3. Debtors in the Northern District of California and in the Southern District of Florida reported the highest average assets per petition, at $583,000 and $338,000, respectively. Filers in the Western District of Tennessee reported the lowest average assets, $44,000.
  5. The median average income reported by debtors was $2,741 a month, and the median average monthly expenses were $2,645. 
  7. A total of 742,323 consumer bankruptcy petitions were filed in 2017, 1 percent fewer than in 2016.
  9. About 61 percent of the bankruptcy petitions were filed under Chapter 7 of the Bankruptcy Code, in which a debtor’s assets are liquidated and proceeds are distributed to creditors, except for exempt assets.
  11. About 38 percent were filed under Chapter 13 of the Bankruptcy Code, in which debtors make installment payments to a Trustee who distributes it to creditors under court-approved plan.
  13. Debtors were able to successfully pay their debts in 48 percent of the Chapter 13 cases closed in 2017 – slightly less than the 52 percent reported in 2016.

Less than 1 percent of petitions by individuals with consumer debts were filed under Chapter 11, which allows businesses and individuals to continue operating while they make plans to reorganize and repay creditors.

The data for the report is provided by the debtors either at the time they file bankruptcy petitions or within two weeks of filing, which is required by federal bankruptcy rules.

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What are some of the federal consumer protection laws?

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What are some of the Federal Consumer protection laws?

At The Law Office of Tony Turner, attorney Tony Turner is often asked, “What are some of the Federal Consumer protection laws?”

  • The Credit Repair Organizations Act– The Credit Repair Organizations Act is an act that mandates credit repair organizations give you a copy of your rights as a consumer before you sign a contract. The credit repair organization must also give you a written contract that details your rights and responsibilities,  and are not obligated to pay them until they have fulfilled their obligations. 
  • The Fair Credit Reporting Act (FCRA)– FCRA promotes the accuracy, fairness, and privacy of information maintained and reported by credit agencies.
  • The Equal Credit Opportunity Act (ECOA)– The ECOA prohibits creditors from discriminating against applicants based on sex, race, color, marital status, religion, national origin, age, receipt of public assistance, or prior exercise of any rights under the Consumer Credit Protection Act.
  • The Fair Credit Billing Act (FCBA) and Electronic Fund Transfer Act (EFTA)– Established procedures for resolving mistakes on credit billing and electronic fund transfer account statements such as credit and debit cards.
  • The Fair Debt Collection Practices Act (FDCPA) – FDCPA prohibits debt collectors from using unfair, deceptive, or abusive practices to collect
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Student Loans in Bankruptcy. – Pending Legislation 2021

HELPING HAND IN SUIT, STUDENT LOANS, DEBT RELIEF, CONGRESS

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A bill that’s being proposed to help discharge student loans in bankruptcy.

To amend title 11, United States Code, to improve the treatment of student loans in bankruptcy

SECTION 1. SHORT TITLE. This Act may be cited as the ‘‘Fostering Responsible Education Starts with Helping Students Through Accountability, Relief, and Taxpayer Protection Through Bankruptcy Act of 2021’’ or the ‘‘FRESH START Through Bankruptcy Act’’.

 Section 2. EXCEPTIONS TO DISCHARGE. Section 523(a) of title 11, United States code, is amended by striking paragraph (8) and inserting the following: ‘‘(8) for an educational benefit overpayment or loan made, insured, or guaranteed by a governmental unit, or made under any program funded in whole or in part by a governmental unit or nonprofit institution, or for an obligation to repay funds received as an educational benefit, scholarship, or stipend received from a governmental unit or nonprofit institution, unless ‘‘(A) excepting such debt from discharge under this paragraph would impose an undue hardship on the debtor and the debtor’s dependents; or ‘‘(B) the first payment on such debt became due before the 10-year period (exclusive of any applicable suspension of the repayment period) ending on the date of the filing of the petition; ‘‘(8A) unless excepting such debt from discharge under this paragraph would impose an undue hardship on the debtor and the debtor’s dependents, Section 523(a) of title 11, United States code, is amended by striking paragraph (8) and inserting the following: ‘‘(8) for an educational benefit overpayment or loan made, insured, or guaranteed by a governmental unit, or made under any program funded in whole or in part by a governmental unit or nonprofit institution, or for an obligation to repay funds received as an educational benefit, scholarship, or stipend received from a governmental unit or nonprofit institution, unless ‘‘(A) excepting such debt from discharge under this paragraph would impose an undue hardship on the debtor and the debtor’s dependents; or ‘‘(B) the first payment on such debt became due before the 10-year period (exclusive of any applicable suspension of the repayment period) ending on the date of the filing of the petition; ‘‘(8A) unless excepting such debt from discharge under this paragraph would impose an undue hardship on the debtor and the debtor’s dependents, for ‘‘(A) an obligation to repay funds received as an educational benefit, scholarship, or stipend, other than an obligation described in paragraph (8); or ‘‘(B) any educational loan, other than a loan described in paragraph (8), that is a qualified education loan, as defined in section 221(d)(1) of the Internal Revenue Code of 1986, incurred by a debtor who is an individual;’’.

SEC. 3. EFFECT OF DISCHARGE OF CERTAIN STUDENT

LOANS. Section 524 of title 11, United States Code, is amended by adding at the end the following: ‘‘(n)(1) In this subsection: ‘‘(A) The term ‘cohort repayment rate’, with respect to a covered institution of higher education, means the percentage of student borrowers who are making at least some progress paying down their student loans within 3 years of entering repayment. ‘‘(B) The term ‘covered institution of higher education’ means an institution of higher education (as defined in section 102 of the Higher Education Act Act of 1965 (20 U.SC. 1002)) that ‘‘(i) is a participant in the Federal Direct Loan Program under part D of title IV of the Higher Education Act of 1965 (20 U.S.C. 1087a et seq.); and ‘‘(ii) has an enrollment of students that is not less than 33 percent students who have received a loan made, insured, or guaranteed under title IV of the Higher Education Act of 1965 (20 U.S.C. 1070 et seq.)). ‘‘(C) The term ‘covered student loan’ means the original principal of a loan—‘‘(i) the first payment on which became due before the 10-year period (exclusive of any applicable suspension of the repayment period) ending on the date of the filing of the petition; and ‘‘(ii) used by the debtor to make a payment to a covered institution of higher education on behalf of the debtor for the purpose of attaining an educational benefit. ‘‘(D) The term ‘Federal Direct PLUS Loan’ means a Federal Direct PLUS Loan under part  of title IV of the Higher Education Act of 1965 (2024 U. U.S.C. 1087a et seq.) ‘‘(2) If a covered student loan is discharged in a bankruptcy case under this title, the covered institution of higher education to which the debtor of the bankruptcy case made a payment with the covered student loan shall pay to the Department of Education an amount determined in accordance with the following: ‘‘(A) An amount equal to 50 percent of the amount of the covered student loan that is discharged, if the covered institution of higher education, on the date on which the first payment on the covered student loan became due— ‘‘(i) had a cohort default rate (as determined under section 435(m) of the Higher Education Act of 1965 (20 U.S.C. 1085(m)) for each of the 3 fiscal years preceding that date that was equal to or more than 25 percent; and ‘‘(ii) had a cohort repayment rate— ‘‘(I) except for borrowers described in subclause (II), that was equal to or less than 20 percent; and ‘‘(II) with respect to borrowers who were graduate or professional students who received a Federal Direct PLUS Loan for enrollment at the institution, that was equal to or less than 35 percent. ‘(B) An amount equal to 30 percent of the amount of the covered student loan that is discharged, if the covered institution of higher education, on the date on which the first payment on the covered student loan became due— ‘(i) had a cohort default rate (as determined under section 435(m) of the Higher Education Act of 1965 (20 U.S.C. 1085(m)) for each of the 3 fiscal years preceding that date that was equal to or more than 20 percent and less than 25 percent; and ‘‘(ii) had a cohort repayment rate— ‘‘(I) except for borrowers described in subclause (II), that was equal to or less than 25 percent and more than 20 percent; and‘‘(II) with respect to borrowers who were graduate or professional students who received a Federal Direct PLUS Loan for enrollment at the institution, that was equal to or less than 40 percent and more than 35 percent. ‘‘(C) An amount equal to 20 percent of the amount of the covered student loan that is discharged, if the covered institution of higher education, on the date on which the first payment on the covered student loan became due— ‘‘(i) had a cohort default rate (as determined under section 435(m) of the Higher Education Act of 1965 (20 U.S.C. 1085(m)) for each of the 3 fiscal years preceding that date that was equal to or more than 15 percent and 8 less than 20 percent; and ‘‘(ii) had a cohort repayment rate (I) except for borrowers described in subclause (II), that was equal to or less than 30 percent and more than 25 percent; 13 and ‘‘(II) with respect to borrowers who were graduate or professional students who received a Federal Direct PLUS Loan for enrollment at the institution, that was equal to or less than 45 percent and more than 40 percent.’’.

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PLEASE CALL THE LAW OFFICE OF TONY TURNER IF YOU’D LIKE A FREE BANKRUPTCY OR WORKERS’ COMPENSATION CONSULTATION. 904-679-2020