After 40 years as an attorney, John has now retired. If you were one of John's clients and have a question
about your case, your question may be answered below. Otherwise, email email@example.com or leave a voice message at
The questions listed below cover:
(1) mortgage reaffirmation,
(2) credit reporting of mortgages,
(3) student loans,
(4) old debt included in the bankruptcy that someone is trying
(5) dealing with the IRS if a creditor sends a 1099,
(6) credit reports and
client files are kept for six years after the case is closed and are then shredded. However, some information about
bankruptcy cases is available even after the file is destroyed.
(1) Why did I not reaffirm my mortgage?
Sometimes my clients' mortgage company
will tell them that they should have done what is called a "reaffirmation" in their Chapter 7 bankruptcy.
In fact, people can keep their homes and continue paying their mortgages after bankruptcy whether the mortgage is reaffirmed
or not. A reaffirmation is a procedure that benefits the mortgage company and is rarely in the homeowner's interest.
What it does is reinstate the mortgage so that the homeowner becomes liable for the mortgage debt in spite of the bankruptcy
even if they lose the home in foreclosure. Because reaffirmation is almost never a good idea for the homeowner, the
bankruptcy judges in the Middle District of North Carolina will hold a court hearing if someone tries to reaffirm a mortgage.
In most cases the judges here would disallow the reaffirmation. In some other bankruptcy courts outside North Carolina,
it is more common for judges to allow a reaffirmation even if it is not in the homeowner's interest, and some mortgage companies
in these other states mistakenly think that reaffirmation of the mortgage is required. In fact, reaffirmation is not
required and is not even allowed by our local bankruptcy judges, except in extremely rare cases. I can recall only two
cases of mine where we reaffirmed a mortgage in the last 20 years. In these cases the mortgage company drastically reduced
the interest rate and the outstanding balance, and so it made sense for those two clients to reaffirm the new deal.
For everyone else I represented, the mortgage companies refused to offer a better deal and so there was no reason to reaffirm.
The chief judge of the Middle District Bankruptcy Court published an opinion in 2006 explaining why our court does
not approve mortgage reaffirmations. The case is In re Bennett (Case No. 06-80241) 05/26/2006 and can be read by clicking on the case name. If the link doesn't work, the Bennett opinion can
be found by going to the Middle District website, www.ncmb.uscourts.gov and clicking on "Opinions."
(2) Why doesn't my mortgage show on my credit report?
Because mortgages are not reaffirmed in bankruptcy cases filed in Greensboro or Winston-Salem, the banks or mortgage
companies are not required to report the mortgage to the credit bureau. If you filed Chapter 7 bankruptcy, your personal
obligation to pay the mortgage debt is discharged in bankruptcy just like your credit cards and other debt. The reason
you are paying the mortgage is to keep the house.
(3) Were my student loans affected by
people could file Chapter 13 bankruptcy, pay as much as they could afford toward their student loans in a five-year plan and
get a discharge of the remaining balance at the end of the case. Since 1990 it has been almost impossible to relieve
government-guaranteed student loan obligations through bankruptcy. The judges in the Middle District of North Carolina
use the so-called Brunner test. Between 1990 and 2005 only one of my clients was able to get a discharge of his student
loan. After the law was made even worse in 2005 I had no clients who were able to discharge their student loans
using the Brunner test.
(4) What if a creditor tries to collect
a debt included in my Chapter 7 Bankruptcy?
If you get a collection
letter, fax it to (336) 379-0079 or scan it and email to firstname.lastname@example.org. If someone calls you, give them your bankruptcy
case number and try to get their name and address.
Some companies buy bad debt and
try to collect it. If the debt was included in your bankruptcy, it is still discharged even if a debt buyer now owns
the right to collect it.
If a legitimate collection agency has made a mistake and is trying to
collect a discharged debt, they will give you time to check with your bankruptcy attorney before demanding payment.
If someone demands money immediately or asks for your bank account or credit card number, you are probably dealing with a
scam artist. Some criminals have been known to get public bankruptcy records and use the information to scam people
out of money. Some of these scammers will even impersonate bankruptcy lawyers or paralegals to convince their victims
that they owe money in spite of their bankruptcy. If somebody claims to be from John's office, please hang
up and call or email us to let us know. If you have given your bank account number to anyone, go to your bank immediately
and change your account number.
Do I owe tax to the IRS for debt discharged in bankruptcy?
You do not owe
tax for debt discharged in bankruptcy. Creditors listed on your bankruptcy should not send an IRS Form 1099 notifying
the IRS of "forgiveness of debt." However, if you get a 1099 form claiming that the creditor "forgave"
or "cancelled" your debt, you will have to deal with it. If you get a 1099 from a creditor, attach IRS
Form 982 to your tax return. If you have already filed your tax return for the year listed on the 1099, you should file
an amended tax return and attach the Form 982 to that. On the Form 982, check Box 1a that says "discharge of indebtedness
in a Title 11 case" (Title 11 is the Bankruptcy Code), write in your bankruptcy case number, and on Line 2 list the amount
of the debt shown on the 1099 form. If your usual tax preparer does not know about Form 982, check around and
find a new tax preparer.
(6) What if a debt listed in my bankruptcy
shows up on my credit report?
For 10 years after you file bankruptcy, your
credit reports should show each included creditor with a zero balance and a note that the debt was "included in bankruptcy."
If the entry shows a balance or late payments, follow the instructions on the credit report to file a dispute. If the
debt isn't corrected on your report, email email@example.com and attach a copy of your credit report and your correspondence.
If it becomes necessary to reopen the bankruptcy to deal with this, John will find a lawyer to help you. After 10 years
(and sometimes before) the debts should drop off entirely.
(7) Do you have an original will that
your office prepared for me (or my parents) in the 1990's?
Prior to 2000 I prepared wills and similar
documents, and on rare occasions I kept my client's original will in my safe deposit box. Most of my clients retrieved
their wills by 2009, but at this time I still have a few original wills. If you believe we have a will on deposit,
please send an email to firstname.lastname@example.org. In the unlikely event that we have the will, John will meet you and give
you the will after you have provided him with sufficient identification.