Benefits of Chapter 13 Bankruptcy Over Chapter 7

Chapter 13 bankruptcy is a Debt Reorganization Plan commonly known as “wage earner” in Tennessee.  All of your debts are combined and the Chapter 13 trustee is paid who disburses the payments.

A common question is why would I need to file a Chapter 13 bankruptcy instead of a Chapter 7?

The first reason is to stop the student loan collectors from garnishing your wages and your tax refund.  Student loans are paid through the plan that usually lasts 5 years.  The student loans accept the amount we calculate for their share of the plan and it prevents them from instituting collection procedures for 5 years and the debt is actually paid down.  Also penalties and late fees stop, however, interest still accrues.  The Chapter 13 bankruptcy can enable you to determine a permanent settlement and be free of garnishments for up to 5 years.

The second reason for filing Chapter 13 bankruptcy is to enable you to retain your residential home and an affordable repayment plan.  Filing for Chapter 13 bankruptcy allows you to place the amount you are behind by into the Chapter 13 repayment plan and the mortgage company will pay the same way as other secured creditors by the Chapter 13 trustee.  At the end of the plan, the mortgage will be current and since the remainder of your unsecured debt will get discharged, you’ll be able to afford to make the monthly payments.

For example, if your house payment is $500.00 a month and you’re behind by $3,000.00.  The $3,000.00 would go into the Chapter 13 debt payment plan, the $500.00, which is your regular payment, would also go into the plan so the trustee would essentially be distributing the $500.00 of your regular house payment plus the amount necessary to repay the mortgage arrearages.

The third reason to chose Chapter 13 over Chapter 7 is to pay delinquent child support. While child support can not be discharged in bankruptcy, the arrerages can be paid over the life of the plan (usually five years). This will prevent collection efforts as long as the case is active.

The fourth most common reason to consider filing for Chapter 13 bankruptcy instead of Chapter 7 bankruptcy is having too high of an income to qualify under the means test, which is required to qualify to file for Chapter 7 bankruptcy.  While you may feel that you need or at least want to file Chapter 7, making a little too much money can disqualify you from this type of bankruptcy.  The other way you can be forced to file Chapter 13 Debt Reorganization is if your income exceeds your expenditures.  It would take an analysis from a bankruptcy lawyer to learn if this is a factor.  The means test is a government calculation, which is allegedly supposed to be a test line.  The government’s calculation is based on your income and Internal Revenue Service created living expenditures depending on family size, then create a determination of a Chapter 7 or Chapter 13.  The means test is a calculation using the financial information and expenditures, is designed to determine based on your income or means whether you should be able to qualify for a Chapter 7 bankruptcy.  However, just because you have too much income to qualify for Chapter 7, does not mean that you are not eligible to file bankruptcy all together.  This is one case where Chapter 13 bankruptcy may be the best option.

It is very important to understand, that even if you do not qualify to file for Chapter 7 bankruptcy due to your income, or you’re behind in your mortgage payment and you want to save your house, filing Chapter 13 bankruptcy can help you save your house, your car and stop wage garnishments.

Guidelines for Filing Long-Term Disability Insurance Claims

This article is provided by the Law Offices of John E. Dunlap, P.C.  to assist you in the insurance claims process.  It is not a substitute for legal representation.  Every claim is different, and only by employing a lawyer do you fully protect your rights.  If you have questions about your long-term disability, please call our office at (901) 320‑1603 or email us on our web site.

Locate the original and any addendums of your policy.  Maintaining good records of your contracts is essential, should you need to go to an administrative appeal or litigation.  Do not rely on your employer’s human resources department or insurance carrier to provide those contracts.

Do not try to represent yourself.  Working with an attorney who is experienced in handling these type of claims could mean the difference between a properly prepared claim and one that gets denied.

Monitor dates and deadlines.  If your policy requires a 90‑day filing of proof of loss, make every effort to be several days or even weeks ahead of the curve.  Filing even a day late could turn a claim into a denial.  Moreover, send all correspondence to the insurance company by certified mail and make certain you keep all copies for your own records.

Medical records are probably the most important part of your claim presentation.  You have a right to have a copy of all your tests, records and reports and you need time to review them.  If there are things you don’t understand, ask your treating physician.  If your doctor does not provide a satisfactory answer, obtain another opinion.  If there is information that does not seem correct to you, insist on discussing it and if necessary, request that corrections be made in the proper manner.

Treating doctors are not insurance professionals or lawyers and do not understand many of the elements in determining claim decisions.  Medical records must clearly indicate limitations and restrictions and relate specifically to your occupation and should clearly describe how these problems prevent you from performing tasks necessary to do your job.

Medical records must include documentation that could also serve as evidence of your inability to perform the necessary task associated with employment, whether it’s physical labor or sedentary employment.  Insurance adjusters often fail to consider the cognitive requirements of work, so you must present these aspects of the job.

Every time you have contact with the insurance company, be careful.  Always make detailed notes on who you spoke with, the date, time and details of the conversation.  If necessary, have a friend or professional on the phone or in the room who could serve as a witness on your behalf.  Tell the insurance company representative another person is on the phone line with you and make a note that this has been made clear to all parties.  After each phone conversation, send a letter that describes the conversation and all details.  In the letter by requiring the insurance company to respond if they disagree with the details.

Protect your claim.

No matter how friendly the insurance adjuster may be, they are not your friends.

Filing a disability insurance claim can often result in the possibility of surveillance and review of any material you post on social media.  If your claim involves being unable to travel to get to work, you may be videotaped if the investigator sees you traveling.  If you call the adjuster from a phone not located in your home, caller ID can be established to prove you are able to travel.  Today’s insurance company watches public posts, forums, bulletin boards, chat rooms, social networking sites and any online sources where information can be gathered.  Our office recommends that people refrain from using Facebook or Twitter while the claims process is ongoing.

Filling out insurance forms is much like a lawyer preparing for trial in that every piece of information is a chance to build or destroy your claim.  Always be honest, but do not leave yourself exposed to evidence contrary to what you have stated.  If you have days where you do not feel sick or disabled, be prepared to state how many days a week you’re able to function.  If the disability leaves you unable to do much of anything except between 10:00 a.m. and 11:00 a.m., state this.  If the forms are not long enough, make a note on that form that clearly indicates more information is on the attached page.

If the insurance company instructs you to go for an Independent Medical Examination understand that you are going to be examined by a doctor who is employed and paid for by the insurance company.

If you are ordered to go for a Functional Capacity Evaluation, review your policy to determine if this test is specifically in the language of the policy.  These tests are not necessarily required, and they are often not accurate.  If you do go for the test then you are asked to perform a task you know you cannot do without pain or discomfort, do not do it.  Be certain to document how you feel following the testing, and consider seeing your treating doctor shortly after the test for further evaluation.

The Importance of Owning Disability Insurance

A large number of Americans believe that they will never become disabled despite statistics to the contrary. An article from the Bureau of Labor Statistics reports that in 2014, only 34 percent of private industry workers participated in their employer’s Long Term Disability Insurance program.

Compare that number to the likelihood of becoming disabled during their working lifetime:

A typical male, age 35, 5 foot 10 inches, 170 pounds, non‑smoker, who works an office job, with some outdoor physical responsibilities and who leads a healthy lifestyle has a 21 percent chance of becoming disabled for 3 months or longer during his career; with a 38 percent chance that the disability would last 5 years or longer and with the average disability for someone like him lasting 82 months.

A typical female, age 35, 5 foot 4 inches, 125 pounds, non‑smoker who works an office job, with some outdoor physical responsibilities and who leads a healthy lifestyle has a 24 percent chance of becoming disabled for 3 months or longer during her working career; a 38 percent chance that the disability would last 5 years or longer, and with the average disability for someone like her lasting 82 months. According to these statistics, 67 percent of American employees are at risk if they should become disabled and unable to work. Our office recommends the following:

  • If your employer offers disability insurance, participate in the program. Social Security disability benefits can take years to obtain in many instances.
  • If your employer offers disability insurance and you have a policy, consider buying a private policy. If you have a certain lifestyle that you would want to maintain, chances are very good that the policy from your employer will not be enough for more than subsistence levels.

If your disability insurance has been denied, delayed or terminated please call our office for a free consultation.

The Dangers Of Representing Yourself In Your Social Security Disability Case

Our office is sometimes approached by disability claimants who have handled their own Social Security claim and have received an unfavorable decision.  These people have waited months (sometimes years) for a hearing to be scheduled.  When appearing before the Administrative Law Judge they were unable to present adequate evidence supporting their inability to work.

Social Security Lawyer Memphis | Atty John E Dunlap

You need a lawyer to represent you in your Social Security disability claim because:

  • Our office will develop the theory to show the Administrative Law Judge exactly how and why you are disabled.  Our office understands the law, vocational issues and medical issues and are able to demonstrate how you are unable to sustain employment.  With more than two  decades of experience in handling claims for Social Security benefits we know how to develop theories in support of recoveries.  The danger of presenting your case without a theory is like not having a plan.  Without a theory, you are unprepared to prove your claim and risk receiving an unfavorable decision.
  • Our office will focus on the issues that are crucial to your case.  We recognize that every individual’s claim is unique.  Our office understands you and your specific medical and vocational issues.  We will focus on what will be the key issues in the case.  Failure to focus on the key issues in your case could result in the denial of benefits.
  • You must be a credible witness.  Our office will help you attempt to avoid the pitfalls so many unrepresented claimants fall into.  There is much you need to know about how to appear in front of a Federal Judge.  Your credibility and consistency are extremely important.  These are two of the most important criteria for many Judges and you will not find them written in the “five step sequential evaluation.”  Our office will assist you with these issues.
  • You will need to be prepared to cross-examine the vocational expert at your hearing.  The fact that the witnesses will be present at your hearing requires the lawyer to assist you.  Do not miscalculate the importance of your right to cross-examine a vocational expert.
  • Without a lawyer, you will not know the questions you will be asked at the hearing.  You will not know what to expect.  Our office will prepare you for all questions that may be asked of you at the hearing.  We anticipate the questions based on years of representing claimants in these hearings as well as our own personal knowledge of the judge assigned to hear your case.  The preparation appointment will help reduce your stress level and enable you to present as a more effective witness in your own claim.
  •  The Social Security Administrative has many deadlines.  Missing a deadline could require you to start the process all over.  You will lose retroactive benefits in the process.  Our office has systems in place to appeal your case before the deadline and protect your claim.  We will also seek to win your case by summarizing and briefing all medical and vocational issues to be presented to the Administrative Law Judge.
  • If our office fails to obtain a favorable decision, we will appeal the case up to the Appeals Council in Virginia and possibly file a federal court lawsuit on your behalf if necessary.

We hope the information on this page will help you regardless of where you are in the process.  If you have questions about your disability case please contact us at 901‑320‑1603.

The Importance of a Correct Earnings Record

A few weeks ago, I conducted a Social Security disability hearing in which the medical proof supported a finding for disability pursuant to the Social Security Guidelines.  Unfortunately, the claimant’s earnings records, which were made a part of the record the morning of the hearing, indicated that the claimant earned well above the “substantial gainful activity” and disqualified him for benefits.

Having an incorrect earnings record can harm the case in many ways.  In Title II (SDS) cases, the claimant needs to be “insured” (have sufficient quarters of coverage from earnings) in order to be eligible to collect disability insurance.  If a claimant’s earnings records do not accurately reflect all of their earnings, they may not be considered insured and therefore lose benefits that they have earned.

Social Security Disability

Disability Evaluation

In both SSI and Title II cases, the issue of earnings arises at the first step of the disability evaluation.  The Administrative Law Judge is required to determine if the claimant is working and if so, to determine whether it is substantial gainful activity.  In 2014 substantial gainful activity was equivalent to earnings of $1,070.00 a month.  It is not uncommon in a Social Security disability case for the claimant to stop working, but then again resume working at fewer hours.  If the person earns above the” substantial gainful activity” level, he or she is not considered disabled.  The Administrative Law Judge will look at the earnings records to make this determination.

The earnings records also comes up at the third step in a disability evaluation when the Administrative Law Judge is trying to determine what kind of work the claimant performed in the past.  The Administrative Law Judge will look back at the last 15 years.  Over the years there have been cases in which employment was listed that the claimant did not perform or  employment was not listed that the claimant had performed.

Obtaining Your Earnings Record

It is in the best interest of all Social Security Disability applicants to obtain their earnings record and check it.  The first step is to go online and set up “My Social Security”.  After creating this account, the claimant is able to obtain an online earnings record.  This will not be a detailed record, but it does show the years of employment and check to see if the amounts listed are correct.  There is no charge to obtain this record online.  If a more detailed earnings statement is necessary, it is necessary to complete SSA Form 750-F4.  It costs $102.00 for this information.  Often a claimant’s Social Security Lawyer will not see earnings information in the record until a few weeks before the hearing if then.  There have been instances where the Judge orders a new report to be run during the hearing.  By then it is too late if there are errors in the record.

With Social Security’s expanded online access, it is now possible to check online and obtain at least the basic information.  The earnings record is one of the most important components of a Social Security disability case and correct information is essential for adequate preparation and favorable decisions.

The Necessity of Non‑Medical Evidence

There is no question that medical evidence is the most important component of a Social Security disability claim, however, non‑medical evidence can play an important role and can persuade an administrative law judge that the claimant is unable to perform and complete for employment.

Often medical records do not contain a complete picture of an individual’s ability to work.  Unfortunately, it is getting more and more difficult to persuade medical doctors to complete functional and mental residual capacity forms. Even if the claimant is able to obtain Residual Functional Capacity evaluation from a medical doctor, other evidence is still useful.   One type of evidence that is important are work records.  These records could show a pattern of absences due to the medical condition or they may show that the claimant tried to stay employed with a series of jobs that were progressively less demanding.

Testimony from co‑workers and supervisors may also assist in proving a claimant’s inability to perform the requirements of the job.  It is important to show that the claimant is applying for disability only because they are unable to perform the requirements of their past employment or any other employment.  In addition to work records, it is also helpful to obtain statements from family members, neighbors, or friends who are familiar with the claimant’s condition and the limitations that it causes.

The Importance of Filing Tax Returns

Failing to file a tax return can prevent the consumer from being able to discharge the debt if they ever seek bankruptcy relief.  As a general rule, taxes that are due 3 years or less from the date the bankruptcy petition is filed are not dischargeable and will still be owed once the individual receives the discharge.  But the return has to have been filed at least 2 years before the bankruptcy case is filed.  The return can even be filed late as long as the 2 years have passed.  And that’s a good reason to file tax returns as soon as possible.  If it’s ever necessary to file bankruptcy, it will be very helpful if those returns were filed at least 2 years ago.

However, if an individual doesn’t file a tax return when it is due and the IRS sees income on a W-2 or 1099, the IRS can estimate the amount of tax they think is owed by preparing a Substitute For Return.  Once the IRS estimates the tax they think you owe on their Substitute For Return, they will send a deficiency notice.

The consumer can then file the real return and will probably owe considerably less than estimated.  But, for bankruptcy purposes, the IRS Substitute For Return does not qualify as a return for that 2-year rule.  Even worse, some bankruptcy courts have held that any return filed by a taxpayer after the IRS has prepared a Substitute For Return does not qualify as a return for bankruptcy purposes.  That means that once the IRS prepares a Substitute For Return for a specific year, it will never be discharged in bankruptcy court. For these reasons ,it is important to  file tax returns even if the consumer owes and cannot pay it.


Working Part Time While Receiving Social Security Disability Benefits

It is possible to work part time and not lose disability benefits.  However, it depends largely on how much you earn and what type of disability benefits you are receiving.  If you are receiving Supplemental Security Income (SSI) and you begin work, the Social Security Administration will reduce your benefits by $1.00 for every $2.00 you earn after the first $65.00.  This means that you could earn so much working part time that the SSI benefits will terminate.  But unless your benefits have stopped because of your earnings for an entire year, the Social Security Administration will start up your SSI benefits again if your earnings decrease.  After a year of receiving no benefits it will be necessary to apply again.

Substantial Gainful Activity

Memphis Substantial Gainful Activity | Atty John E. Dunlap, PCIf you are receiving Social Security disability benefits (SSDI) and your earnings are below what the Social Security Administration calls the “substantial gainful activity” amount your benefits will neither stop or be reduced because of earnings.  That is, you can continue to get your full disability benefits while you work part time.  It is also possible to earn more than the “substantial gainful activity” amount and still receive your full benefits during the nine-month trial work period.

You can earn up to the “substantial gainful activity” amount and still keep your full Social Security disability benefits.  The substantial gainful activity amount is an absolute cut off point if your earnings average more than the substantial gainful activity amount, even $1.00 more, the Social Security disability benefits will stop after you have used up your nine-month trial work period no matter how disabled you are from a medical standpoint.

Trial Work Period Services

If you are going to work part time and you want to avoid problems keeping your benefits period, it is best to keep your income below the substantial gainful activity amount.  In fact, because there are advantages to keeping your income below what the Social Security Administration calls the “trial work period services” amount which in 2014 was $820.00 per month, this is what is recommended if you are receiving Social Security disability benefits.  This way you would not use up your trial work period months; you can save them for later use if you ever decide to go back to work on a full time basis.  If your claim is SSI, the trial work period rules do not apply.  For those people already receiving SSI benefits, the substantial gainful activity amount rules do not apply either.

It is best not to use up trial work periods until you are ready to return to work on a full time basis because the trial work period can be valuable, we recommend that you do not waste it on part time work.  To keep from wasting the trial work period, you need to keep your monthly income below the trial work period service amount.

The trial work period rules allow you to earn any amount of money for nine months and still receive full disability benefits. This allows you to attempt to return to full time employment without losing your disability benefits. If you determine you can not work on a full time basis and stop working prior to the nine month period, your benefits will not be terminated.

Memphis Substantial Gainful Activity | Atty John E. Dunlap, PCUnfortunately, many people use up their trial work period months by working part- time. I have had some clients who worked part time while their claims are pending and used up their trial work period before being adjudged disabled. If your income exceeds the trial work period monthly amount for nine months at any time since you applied for benefits, you will have used up the trial work period. This is true even if the months are not consecutive. Once you use up the nine month trial period, it is gone.

The Social Security Administration counts gross income, not take home pay. There are no deductions that can be taken against your gross income to reduce it below the trial work period monthly amount.

Reporting to the Social Security Administration

If you begin any work, you must report it to the Social Security Administration immediately. But it is not clear when you must provide proof of earnings. This seems to vary from office to office. When reporting employment to the Social Security Administration, ask when you are required to income documentation. Be sure to keep all documents provided to you and get the name of the person you speak with. Make it clear that you are receiving disability benefits, not retirement because the rules are different.



Stopping Foreclosure by Filing Bankruptcy

If a consumer falls behind on their mortgage payments, and the lender accelerates the loan and initiates foreclosure proceedings, a Chapter 13 bankruptcy (wage earner) is often the only realistic way to save the home from a foreclosure sale.

Unless the homeowner can pay all unpaid mortgage payments, late fees, legal fees and foreclosure costs prior to the foreclosure sale, the lender will often proceed with foreclosures while offering loan modification options under HAMP or other programs, which may or may not stop the foreclosure. Many consumers rely exclusively on loan modification programs until it is too late and they are facing a foreclosure sale.

One thing that is very important to remember is that unless the lender agrees to stop the foreclosure by entering into a loan modification, the law firm conducting the foreclosure will be proceeding. This causes a great deal of confusion. It is a good idea to know about Chapter 13 bankruptcy, which can be a viable alternative for many people, even if they wish to attempt a loan modification.

Chapter 13 bankruptcy is the only way to immediately stop a foreclosure process and require the mortgage holder to accept payments on the arrearages over a period of time. In addition to saving a consumer’s home, Chapter 13 provides other benefits of discharging unsecured debts (like medical bills or credit cards), resolving tax problems, and reducing the monthly payments owed on secured debt such as car notes and furniture notes.

Post-Bankruptcy Filing Financial Management Course – What to Expect

After filing a bankruptcy case, the law requires the debtors to take a financial management course, which is done either online, by telephone or in a classroom.  If a debtor does not take this course, the bankruptcy court will close the case without a discharge.  Since the discharge is the motivation for filing a bankruptcy case, it is essential that this course be taken. 

In order to better explain to my clients what to expect, I took this course from a provider called StandSure.  They charged $15.00 for the course, which seems about average for other course providers in this area.  I found the course to be informative. 

The course begins by asking questions about what people already know about finances, such as what a budget is, or about money management.  After that, the course explains that the financial management course requirement and the budget management, the importance of setting goals, how to set goals, the difference between short term, medium term and long-term goals. The course explains the percentage of an individual’s income that should be devoted to each item in their budget. For example, mortgage or rent should be no more than thirty percent of the household income. Then the course provider discusses money management (thinking about what you want as opposed to what you need; the importance of comparison shopping; budgeting your money by tracking your spending, then reviewing your spending, and then creating a budget by taking into account your income; fixed and varied expenses, and learning to balance your checkbook; the importance of avoiding payday loans and title loans; information about insurance and the importance of saving money.  The course provider then goes on to explain all about credit listing the different types of credit; secured and unsecured credit.  The course provider discusses the importance of comparing credit offers and then explains the concept of predatory lending.  Credit discussions then explains FICO and credit scores, as well as the impact of bankruptcy on an individual’s credit report.

The course provider listed several websites that provided free financial information to consumers and then provides a nice summary of consumer protection laws.  Finally, the course gives a thorough summary of the changes of the bankruptcy law since the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.  At the end of course, you receive a Certification of Completion.  I found the course to be very informative and I thought it was a lot more interesting and a lot more useful than the prebankruptcy credit counseling course.

I recently read Dave Ramsey’s book regarding financial management after bankruptcy. I and several lawyers in the West Tennessee area agree that it was rather condescending. This makes me reluctant to recommend that particular course.