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Understanding Financial Hardship Options in Oregon due to COVID-19

The goal is always to pay the bills each month

Photo: Miguel Á. Padriñán, Pexels

(SALEM, Ore.) - If you are like many of us, you may have been affected negatively financially by COVID-19. You may have to decide which bills you are going to pay each month or end each month with under $100 left in your bank account.

This is an extremely difficult time for many folks in Salem and in Oregon as a whole, so the purpose of this article is to shed some light on different options you have when the bills exceed the income, and it’s impossible to stay afloat.

Here’s what we will discuss:

  1. Chapter 7 Bankruptcy Oregon
  2. Chapter 13 Bankruptcy Oregon
  3. Debt Settlement
  4. Debt Payoff Planning

Chapter 7 Bankruptcy Oregon

You may be wondering about Chapter 7 Bankruptcy. Although the IRS deems a Chapter 7 bankruptcy as a liquidation bankruptcy, there are many times a Chapter 7 bankruptcy Oregon would not result in that due to exemptions. Let’s take a look at Chapter 7 bankruptcy qualification and how the process works.

Oregon Chapter 7 Bankruptcy Means Test

What effect does the result of the Means Test in Oregon have on my Bankruptcy Case? Means Testing in Oregon is an act of calculating your current monthly income (CMI) and your annual median income to determine whether you qualify for a Chapter 7 bankruptcy discharge or not.

Your disposable income is also calculated in the Means Test—this is a major factor in determining what you’ll pay in your Chapter 13 plan, and can also be used to determine your eligibility for Chapter 7 when your income is high.

Calculating Current Monthly Income for the Oregon Means Test

Your current monthly income is the average of what you earned six months before filing for a bankruptcy discharge.

To know your CMI, you’ll have to add your total income within the last six months, except those paid by the Social Security Administration. The total should be divided by six—this will give you the current monthly income.

Here are some things that make up a CMI:

  • Commissions, bonuses, salaries, wages, and overtime pay
  • Total income from rental properties and businesses
  • Annuity income, pension, and retirement
  • Insurance benefits designed for individuals with a disability
  • Alimony payments and child supports
  • Royalty, interests, and dividends payments
  • Money contributed by a roommate, domestic partner, family member, or a non-filling spouse.
  • Unemployment benefits and workers’ comp

You now know the numbers to plug into the Oregon Chapter 7 Means Test Calculator to estimate if you qualify for a Chapter 7 bankruptcy discharge or not.

Calculating the Annual Median Income for Oregon Means Testing Mathematically, the annual median income is the CMI multiplied by 12. As such, if your CMI is $4,000, then your annual median income will be $48,000.

Your Median Income will be a determinant of whether you’ll be issued the discharge certificate or not.

In an instance where your median income is higher than the median income in Oregon, you’ll likely not qualify for a Chapter 7 bankruptcy discharge. However, you still need to complete the other part of the Means Test to know your fate.

It is also worthy of note that you should calculate a five years proposed plan if you’re filing for a Chapter 13 case.

The government adjusts the figures for median income every six months to always capture the present reality. As such, you should always check that you’re calculating based on relevant figures.

Calculating Disposable Income

There are two reasons why it is important to know your disposal income. Those reasons are:

  1. In a Chapter 7 bankruptcy case, it is still possible to qualify for a bankruptcy discharge if your disposable income is below a given amount—this holds even in a situation where your median income is above the median income of Oregon. Your disposable income also has a lot to do with your Chapter 13 plan payment. As such, your chances of getting any type of discharge increases significantly when your disposable income is as low as possible to pass the means test.
  2. Your disposable income is your CMI less required your allowing living expenses and your payroll deductions. In some instances, the living expenses is determined by both the national standard and the number of individual in your household.

You will be required to justify your expenses and submit a proof of payment if you claim an amount that is higher than the national standard. The national standard is only applied to things like food, personal care items, cost of transportation, household items, clothing, and healthcare expenses.

To calculate your disposal income calculation, you should not include luxury items and non-essentials. To estimate whether you qualify for a Chapter 7 bankruptcy discharge or not, you can check a Chapter 7 Oregon Means Test Calculator.

Oregon Bankruptcy Exemptions

Apart from the Means Test, you should also consider the bankruptcy exemptions available for you before applying. A bankruptcy exemption is a law that’s designed to protect some of your equity in a bankruptcy case.

Without bankruptcy exemptions, the bankruptcy court may decide to sell your home and use the proceeds to pay off your debt. The bankruptcy trustee has the power to sell off non-exempt equity to pay off your unsecured debtors. Non-exempt equity will increase the amount that you should pay as your Chapter 13 plan payment. If you want to know more about how bankruptcy exemption works, then you should read on these articles that we’ve written to educate the public on that. One of the articles discusses Oregon bankruptcy homestead exemptions while the other discusses cash exemptions in bankruptcy.

Federal Bankruptcy Exemptions vs. Oregon Bankruptcy Exemptions

Oregon, just like most states in the United States has its bankruptcy exemptions. You have the option of using the Oregon bankruptcy exemption if you’ve resided in Oregon for 730 days or more before the time you filed for the bankruptcy relief. However, debtors are also at liberty to opt for the federal bankruptcy exemptions that are in 11 U.S.C. §562.

You will find the majority of Oregon bankruptcy exemptions in Oregon Revised Statutes Procedure in Civil Proceeding §18.345. It is also in the Oregon homestead exemption in 18.402 and 18.395.

You should always confirm the exemptions from your bankruptcy lawyer or by making some research because the exemptions and amounts are subject to change.

Sometimes, the equity protected in some assets is higher in Oregon bankruptcy exemptions in comparison to federal bankruptcy exemptions. However, this is not always the case.

As such, the debtor must carefully consider the exemptions that are available for him/her, and choose one that offers the best asset protection. It’ll be the responsibility of the lawyer to perform the analysis for you if you hire one.

Chapter 7 vs. Chapter 13 Bankruptcy in Oregon

Choosing if the best type of bankruptcy to file for is a Chapter 7 or Chapter 13 bankruptcy can be a tricky decision. Thus, you should consider both the mean test and the type of asset that is protected to make your choice. There are also other factors you should consider before deciding to file for a Chapter 7 or 13 bankruptcy.

Filing Chapter 7 Bankruptcy in Oregon

Only businesses that are closing and consumers that meet up with the income requirements for a Chapter 7 bankruptcy discharge can get a relief off their debt.

The process of filing for a Chapter 7 bankruptcy is known as “liquidation” or “straight” bankruptcy. The bankruptcy court will assign a Chapter 7 trustee to the case to administer the bankruptcy estate. Some of the things in the bankruptcy estate includes the assets and property of the debtor until the Chapter 7 trustee abandons the assets.

It is the responsibility of the Chapter 7 trustee to decide what to abandon based on the asset’s net equity. If there is insufficient equity to benefit the unsecured creditor, the bankruptcy trustee will opt to abandon the property. Net equity is defined as the market value of an item less than the number of allowable bankruptcy exemptions and the amount of any secured lien.

In the majority of Chapter 7 bankruptcy cases that are filed in Oregon, the debtors usually retain ownership of their property. However, it’s advisable to carry out a careful analysis of the bankruptcy exemption before you file for the discharge at the bankruptcy court.

The Chapter 7 bankruptcy case will get rid of the majority of unsecured debts, which includes personal loans, credit cards, and medical bills. However, the majority of student loans and tax debts cannot be discharged by a bankruptcy discharge.

Child support in bankruptcy, alimony, and restitution can also not be discharged in bankruptcy. Read our Chapter 7 Process Guide for more information on filing for a Chapter 7 bankruptcy discharge in Oregon.

Filing Chapter 13 Bankruptcy in Oregon

Filing for a Chapter 13 Bankruptcy discharge offers you the opportunity to restructure your debt with the help of a bankruptcy court. It is the responsibility of the debtor to propose another repayment plan.

Some of the things included in a Chapter 13 plan includes:

  • Past due mortgage payments that can prevent your home from being foreclosed.
  • Car loan payments, which gives you the opportunity for a much lower monthly payment as it can stretch out the payment for your car loan for another 60 months or by reducing the secured lien amount.
  • Child support, alimony, old tax debt, and other debt must be paid fully.
  • Attorneys’ fees (quiet often, an attorney will include his/her fees in the Chapter 13 payment plan); and,
  • Unsecured debts, although Chapter 13 bankruptcy plan hardly pays off all the owed debt in full. The Chapter 13 bankruptcy plan often requires that only a small portion of the total amount owed is paid. The bankruptcy discharge will clear out any other amount owed.

The payment plan in the Chapter 13 case may increase if the debtor has equity that is non-exempt in a property. Also, you must include disposable income from the means test as a part of the Chapter 13 payment plan to your unsecured creditors. Sometimes you may have to file for a Chapter 13 after a Chapter 7 because of the time between bankruptcies.

Chapter 13 bankruptcy case has been known to prevent repossessions and foreclosures, protect property against being liquidated by the debtor, and lower the amount owed to unsecured creditors.

Debt Settlement in Oregon

Debt settlement is a form of debt relief where a debt settlement company or you would negotiate for a lower debt amount. Unlike debt management which negotiates a lower interest rate, debt settlement companies negotiate a lower amount. For this option, you should check the Consumer Finance Protection Bureau’s website for information about debt relief company legitimacy. You may want to consider reading about the difference between debt settlement vs debt management before pursuing this option.

Debt Payoff Planning

You could say that Debt Payoff Planning became more popularized by the likes of Dave Ramsey. The idea of using debt payoff planning is that you put extra money each month into a specific debt to get out of debt as fast as possible and save as much interest as possible.

For this, you may look for a free debt payoff planner or a free debt payoff app to help you prioritize the debts although you could also just use a pen and paper.

Experiencing Financial Hardship in Oregon

You may be experiencing financial hardship due to COVID-19 and are struggling to figure out how to make ends meet.

The goal is always to pay the bills each month, but if you are unable to do so, there may be some relief that you can get through different solutions such as bankruptcy, debt settlement, debt management and payoff planning.

Each has its own pros and cons, but there may be a good option for you.

Source: Special Features Dept.


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