As bankruptcy filings in Ohio continue to rise, a growing concern among individuals we consult is that they may be fired or face other retaliation by their employer for filing for bankruptcy protection.
In the State of Ohio, like most other states, employment is considered to be “at will.” This means that an employee can generally be fired for any reason or even no reason, as long as it is not done in violation of certain public policy protections (more on this below). Likewise, an employee is free to quit their job with or without notice to the employer.
However, various state and federal laws limit an employer’s ability to fire employees or take any punitive or retaliatory action based on the employee’s membership in a protected class. These protections include age, disability, gender, marital status, race and national origin. Most individuals are unaware that the bankruptcy code also protects against employment discrimination.
The Bankruptcy Code Prohibits Discrimination Based on Bankruptcy Filing…
The Bankruptcy Code, at 11 U.S.C. sec. 525(b), states that "No private employer may terminate the employment of, or discriminate with respect to employment against, an individual who is or has been a debtor under this title, a debtor or bankrupt under the Bankruptcy Act, or an individual associated with such debtor or bankrupt."
The law further specifies that a person can qualify for the protections of this provision if:
1. The person is or has gone through a bankruptcy proceeding;
2. The person was insolvent, either before filing for bankruptcy or while the petition was pending; or
3. The person had not paid a dischargeable debt.
The purpose of this protection is to ensure that people seeking a “fresh start” through bankruptcy are able to maintain their employment.
Your Employer is Unlikely to Know You Filed Chapter 7 Bankruptcy Unless You Tell Them…
Although the aforementioned protections are important to ensure that employers do not discriminate against individuals seeking a fresh start through bankruptcy, it is unlikely your employer will know that you have filed unless you tell them.
Generally speaking, during your bankruptcy proceedings your employer will not be notified that you have filed a Chapter 7 bankruptcy and, therefore, will not know unless you decide to tell them (or unless they are a creditor of yours in any capacity).
However, please note that if you are filing a Chapter 13 bankruptcy then your employer will most likely be notified of your filing through a wage order prepared by your attorney and served upon your employer by the bankruptcy court. The purpose of the wage order is to fund your bankruptcy repayment plan in the Chapter 13. For more information on how a Chapter 13 bankruptcy works, contact an experienced bankruptcy attorney.
In summary, your employer will probably not know that you are filing for Chapter 7 bankruptcy protection unless you decide to tell them. Furthermore, if your employer does somehow learn of the filing or attempt to retaliate against or fire you because of the bankruptcy, you can avail yourself of the protections provided by the bankruptcy code. Individuals that are subjected to unlawful bankruptcy discrimination may receive back pay, including fringe benefits and reinstatement, and may also recover damages for emotional distress.
The automatic stay is a powerful provision in bankruptcy law that immediately stops nearly all collections and creditor actions against a debtor. The automatic stay is invoked automatically with the filing the case. There is no hearing is necessary, the stay arises automatically by operation of law upon filing the bankruptcy petition. This powerful injunction against collections is even effective against creditors that may have no actual knowledge of the bankruptcy filing!
Congress has stated that the public policy behind the automatic stay is to provide the “debtor a breathing spell from his creditors, stopping all collection efforts, all harassment, and all foreclosure actions. It permits the debtor to attempt a repayment or reorganization plan, or simply to be relieved of the financial pressures that drove him into bankruptcy.” See Notes of Committee on the Judiciary, Senate Report No. 95-989. That “breathing spell” is a welcome relief to individuals and families facing overwhelming financial burdens.
The automatic stay provides significant and immediate relief upon filing because it strictly prohibits a creditor (with a claim that arose before commencement of the bankruptcy case) from taking any action to collect the debt including:
• contacting the debtor to request payment (stops collection calls)
• initiating or continuing a lawsuit against the debtor (stops lawsuits)
• enforcing a judgment against the debtor (stops wage garnishments)
• repossessing personal property or foreclosing on real estate (stops repossessions and foreclosure)
However, the automatic stay is a temporary injunction. The stay can be contested by a creditor through bankruptcy proceedings and lifted by the bankruptcy court after notice and a hearing if there is a justified reason for doing so (see a bankruptcy attorney for more information on this process). There are some exceptions to the automatic stay, for instance: the automatic stay does not prevent criminal prosecutions. Additionally, the automatic stay does not stop lawsuits to establish or modify alimony, maintenance, or support. If you would like more information about what actions a bankruptcy stay will stop, you should contact an experienced bankruptcy attorney.
Individuals that file for bankruptcy protection receive the powerful protections provided by the automatic stay immediately upon filing. However, the automatic stay is just one benefit of using bankruptcy to your advantage. Other benefits of a bankruptcy filing may include debt relief, stopping a garnishment or foreclosure and getting a fresh start (free from credit card and unsecured debt). If you are considering bankruptcy, a bankruptcy attorney can help you make the best decisions to use the benefits provided bankruptcy law to make the best decisions for you and your family.
Ohio businesses will not receive the same benefit as consumers under the new Credit Card Accountability Responsibility and Disclosure Act that will take effect in part this August, with the rest of the provisions kicking in next February (see Help for Ohio Credit Card Holders: Fed Approves Rules to Help Consumers for more details on the changes included in the Act).
The new law actually amends the Truth in Lending Act (TILA) and, because the TILA only applies to consumer loans, traditional corporate credit cards will not receive the various protections provided by the new changes. However, the law should apply to company cards that are guaranteed by the business owner and tied to their personal credit (such as those of sole-proprietors).
What does this mean for Ohio businesses? Unfortunately, traditional orporate credit cards will still be subject to the unscrupulous practices of some credit card companies that have recently caused outrage among consumers and legislators alike. This includes practices such as imposing retroactive rate increases on existing balances (even for consumers in good standing), the notorious "double-cycle billing" and universal default (a rate hike imposed when a consumer is late on a payment for an unrelated account). Two senators did propose an amendment to extend the new protections to businesses with fewer than fifty employees, but the amendment was defeated. Instead, the bill simply directs the Federal Reserve to conduct a study of credit use by small businesses. Ohio business owners should continue to closely monitor their credit use and scrutinize any notices they receive regarding their credit accounts to avoid increased fees, higher interest rates or any other unwelcome change to their accounts.
Ohio residents considering filing for bankruptcy should give serious thought to hiring an experienced bankruptcy attorney. Although it is possible to file your own bankruptcy petition, there are many risks to doing so and you will probably find that the peace of mind you get from having an attorney to guide you through the process is well worth the legal fees you pay. Some important reasons you should hire an attorney include:
1. Hiring an attorney is more affordable than you might think. Our firm charges a flat fee and offers payment plans to our clients so we can usually make arrangements that will work for just about anyone.
2. An attorney can protect you from creditor harassment. For example, once our firm is retained you can refer your creditors to us when they call. Our firm will field the phone calls from your creditors and verify that we have been retained to represent you. After this, your creditors will stop contacting you and, instead, contact our firm for progress updates on the filing of your case. Once your case is filed creditors are prohibited by federal law from contacting you. To some debtors distressed by relentless creditor calls at all hours, this relief from creditor harassment alone may be well worth the legal fees you pay.
3. Hiring an attorney will protect you from making mistakes. Your attorney will make sure you comply with the often confusing bankruptcy laws, requirements and deadlines so you do not risk having your case dismissed or your discharge denied. Certain aspects of the new Bankruptcy Abuse and Consumer Protection Act, such as the "means test," can be extremely difficult to navigate alone and even a little mistake can result in dismissal of your case.
4. Your Attorney will make sure your bankruptcy paperwork is completed correctly. Many people make incorrect assumptions about how to prepare their bankruptcy petition. One of the most common assumptions is that you simply leave out things you want to keep, such as car, instead of properly scheduling it. In fact, a mistake like this could actually result in loss of the car or even dismissal of your case. It is important to realize what you do not know and, unless you have a strong understanding of bankruptcy practices and procedures, you probably should not risk filing your own case.
5. You may have to go to court. In some instances a bankruptcy case will involve motions, such as a motion for relief from stay, that will be set for hearing before a bankruptcy judge. If you do not understand the motion, the customs and procedures of the court or the legal arguments necessary to protect your interests, you could find yourself losing your rights to property, money or your discharge. An experienced attorney can make sure this does not happen and can handle most routine hearings (other then your meeting of creditors) without you even needing to be present.
6. You will need to understand how bankruptcy procedures, such as reaffirming a debt, will impact your rights and responsibilities so you do not get yourself into trouble or undertake an obligation you cannot handle, which defeats the purpose of filing for bankruptcy protection. Additionally, if you do not properly prepare your paperwork then a judge may not approve your reaffirmation and you could end up losing property you wish to keep such as a house or car.
In summary, I believe most people will find that the time you save, the relief you will get from creditors and the peace of mind that comes with knowing your interests will be protected and your case will proceed smoothly will more than make up for the reasonable legal fees you will pay for an attorney to handle your case. If you would like to learn more about how an attorney can help, please feel free to contact our law firm for a free consultation.
Prospective clients often ask how long they have to wait to file for bankruptcy protection under the Bankruptcy Abuse and Consumer Protection Act if they have previously filed. Here is a quick guide to the time periods that apply to re-filing:
• You cannot file Chapter 7 until eight years from the date of the previous filing
(not the date of discharge) of the previous Chapter 7.
• You cannot file a Chapter 13 unless you received a discharge under Chapter 7
more than four (4) years ago or under Chapter 13 more than two (2) years ago.
The above timelines refer to discharge dates (cases that were completed).
If you are currently in an active Chapter 13 bankruptcy that you cannot or no longer wish to complete, then there are provisions for converting a Chapter 7 to a Chapter 13. This might occur, for example, if you lose the job that is funding your Chapter 13 plan or decide that you no longer wish to keep your house.
To learn more about re-filing or the differences between Chapter 7 and Chapter 13, you should contact an experienced bankruptcy attorney.
Last week Fair Isaac Corporation began offering what they claim is a new and improved FICO credit score dubbed "FICO 08." TransUnion, LLC (one of the three major credit bureaus) also announced it will begin offering the new FICO score with the two other major credit bureaus expected to follow soon. The FICO score is a score developed by the Fair Isaac Corporation in an attempt to evaluate a borrower's likelihood of default.
Fair Isaac claims the new FICO 08 score will give lenders a "predictive boost where lenders need it most." The score will retain the same credit range, from 300 to 850 (the higher the better). However, according to the Wall Street Journal, the new score is supposed to be more forgiving to those that have just one slip-up or late payment and significantly harder on repeat offenders. Fair Isaac also claims the new score is also supposed to provide a more thorough or "deeper" analysis of poor credit borrowers and borrowers with little or "thin" credit history. Fair Isaac has said that consumers with accounts in good standing may see their score rise slightly and that the overall accuracy of credit decisions should increase by up to fifteen percent.
Ultimately, the new FICO 08 will probably not have a significant impact on most Ohio consumers for quite some time. The Wall Street Journal reports that it could be "months or even years before the score is widely available to consumers" because most lenders will want to take time to evaluate the score and determine how well it works with their processes before implementing it and some lenders may even choose not to use the new score.
To learn more about your credit score, please see the prior entry Get to Know Your Credit Score Ohio. For information on where and how to get your credit report, please see the prior entry Ohio Credit Concerns: How Long Will a Bankruptcy Filing Stay on My Credit Report?
You live in Ohio, perhaps Cleveland or Akron. On a random Tuesday you get a credit card offer in the mail, probably one of dozens you get regularly. The card promises a great rate on balance transfers so you decide to apply online for a "sixty second decision." You wait anxiously for what seems like far more than sixty seconds while staring off into space and thinking about what you will use your new card for. Sadly, when you look back at the screen you see a notification saying "I'm sorry, you could not be approved at this time."
Time to check your credit score and find out why. For information on where to get your credit report, check out this earlier blog entry Ohio Credit Concerns. Next, when you get your report, you will need to know what is bringing down your all important credit score.
The most widely used credit score is a "FICO score," named after the Fair Isaac Corporation that created it. The FICO score is a three digit number (ranging from 300 to 850) intended to gauge a person's creditworthiness when they apply for credit.
The FICO score, according to Fair Isaac Corporation, is composed of several different factors that are weighted as follows:
• 35% is based upon timely payment to a lender that reports to one of the three
major consumer credit bureaus.
• 30% is based upon the amount you owe or the amount of available credit you
have vs. the balances you carry (i.e., if your credit cards are all “maxed-out” this
part of your score will be low).
• 15% simply reflects the length of your credit history, with a longer history being
preferable because it shows lenders your track record.
• 10% represents the type of credit used, such as student loans, credit cards, car
loan, mortgage, etc.
• 10% represents new credit, how many accounts you've applied for and/or
If you are denied credit, you will be mailed a written statement citing the reasons you were declined. The notice will also state that you can obtain a free credit report and you should take advantage of the opportunity to review your credit report. When you do, use the information above to see what you can do to improve your score. You should also check for any inaccurate information such as accounts that are more than seven years old that should be removed, closed accounts that are still being reported as opened, or information that does not pertain to you. In general, it is a good idea to review your credit report at least once a year so you are not unpleasantly surprised when you need credit. You can obtain a free credit report once a year at AnnualCreditReport.com.
Ohio, like most of the nation, is likely to see an continuing rise in the number of mortgages in default in 2009. The Wall Street Journal reported that nationwide, the number of defaults is expected to rise from 4.67% in 2008 to as high as 7.17% in the fourth quarter of 2009. Adjustable rate mortgages are mostly to blame. Many of the notorious "teaser" rates that lured homeowners and new buyers in are expiring, causing the loan to adjust to a higher interest rate and a new higher payment that the homeowner can no longer afford. The Journal reported that there are a lot more loans that will reset in 2009 through 2011, so the level of defaults is likely to continue to climb for several years. Unfortunately, even when the economy rebounds it will take some time for consumers to respond. This is because even if business improves or an unemployed consumer finds a job, it will still take time to build up the funds to start repaying.
If you are in an adjustable rate mortgage and are no longer able to make your payment there are options available. If you decide you are simply unable to afford the mortgage and your situation is not likely to improve, you can use a Chapter 7 bankruptcy to cancel the mortgage, return the house to the lender and end your responsibility for payments on the first mortgage as well as a second mortgage or home equity line of credit. If you have significant equity in your house and would like to keep it, but need a way to catch up on payments that have fallen behind and prevent foreclosure, a Chapter 13 bankruptcy will help. If you are behind on your mortgage or your mortgage has adjusted and you are no longer able to meet your payment you should contact an experienced bankruptcy attorney right away to discuss your options.
In July of 2010, Ohio credit card holders will see some changes that may help them bring their credit card debt under control. On December 18, 2008, the Federal Reserve Board approved rules designed to help protect credit card holders from the unfair acts and practices employed by many credit card companies. The changes are also aimed at making credit card statements and billing practices more straight-forward and easier for customers to understand. The changes were adopted under the Federal Trade Commission Act. Along with other changes, the rules will:
• Forbid banks from imposing interest charges using the confusing “two-cycle” billing method (a method of calculating a customer’s average daily balance by using two billing cycles instead of one. This typically causes finance charges to be higher and eliminates grace periods for customers that carry a balance. In this method, if the bill is not paid in full at the time of the first billing, interest becomes retroactive all the way back to the first purchase date).
• To stop creditors from imposing unexpected interest charges or increasing the interest rate during the first year the account is open or increasing the interest rate charged on pre-existing credit card balances.
• To require creditors to provide customers with a “reasonable” amount of time to make their payments.
• To prevent creative payment allocation methods that maximize interest charges to the detriment of customers.
• To combat predatory subprime credit card practices by limiting the fees that can be charged to reduce the available credit.
The Federal Reserve Board has indicated that these reforms, the "most comprehensive and sweeping reforms ever adopted by the Board for credit card accounts" according to Federal Reserve Chairman Ben Bernanke, are intended to increase transparency, fairness, competitiveness and to help consumers better manage their credit accounts and avoid unnecessary costs. These changes take effect July 1, 2010. For more information you can visit the Board of Governor's of the Federal Reserve System. If you are struggling with credit card debt, making only the minimum payments and carrying high balances you should contact a consumer bankruptcy attorney to learn your options and find out how you can eliminate credit card debt and get a fresh start.
There may be hope on the horizon for Cleveland homeowners. Cleveland, Ohio was cited in the November 2008 issue of SmartMoney Magazine as one of twenty-five major cities in the United States that is poised to see its housing market rebound. Part of the reason is that Cleveland "sat out" the skyrocketing home prices seen in other major cities across the U.S. that are now coming back to haunt those markets.
Cleveland ranked fifth on SmartMoney's list of twenty-five major cities. As the credit freeze begins to thaw, interest rates fall and people are once again able to refinance, there may be light at the end of the tunnel. Despite this positive news, however, Cleveland and Ohio are still experiencing a significant rise in the number of bankruptcies filed, which include many homeowners for whom this rebound comes too late and who were forced to abandon their homes (see prior entry Ohio is Not Alone: Bankruptcies Continue to Rise Across the Nation). If you are facing foreclosure or considering bankruptcy, be sure to contact an experienced attorney to learn your options.