Archive for the ‘Bankruptcy’ Category

How Long After I File Will My Bankruptcy Take Effect?

Many people who’ve filed for bankruptcy say that though reaching the decision was hard, once it had been made, they felt that an incredible burden had been lifted from their shoulders.  While the promise of a fresh start represents an enormous psychic shift, the process is not automatic. In most cases, a Chapter 7 bankruptcy will take between four and six months from the point that you file until the discharge of debts finally takes place.

Of course, bankruptcy does not begin with the filing itself. Before the filing, there are several steps that you’ll need to take, including:

  • Collecting all of your financial documents, ranging from bills and loan information to bank statements and investment accounts, to two years of tax forms, to pay stubs from the previous 6 months
  • Sign up for and complete a credit counseling course
  • Fill out all of the bankruptcy application forms and print them out
  • Obtain the money to pay the filing fee or – if you are unable to afford it – complete a fee waiver application

Once you have completed all of these steps you or your bankruptcy attorney can file the paperwork with your local bankruptcy court. The application forms and fees will be submitted directly to the clerk, who will scan all the paperwork and assign you both a case number and a trustee. You will be given a date for your meeting with that person and told to submit the rest of your financial documents to them for review and processing. Once you’ve completed these steps, you’ll be required to take an additional credit counseling course that will help you with money management in the future.

The best news for you is that once you’ve filed your paperwork the automatic stay will be put into motion, and that will stop any calls or dunning notices you’ve been receiving from creditors. About a month after you’ve filed your paperwork, you’ll have a meeting with the trustee assigned to your case. Your information will be verified, and your creditors will have the opportunity to question you. After this meeting, a series of deadlines will be set for things like creditor objections, discharge of debts, and management of secured debt. Objections may delay the process, but usually only if you’ve provided incomplete information.

Every bankruptcy is different and takes its own path, but the best way to ensure that the process goes smoothly is to work with an experienced bankruptcy attorney. To set up a time for us to meet, contact our office today.

What Can I do to Improve My Credit Score After Bankruptcy?

The pressure of insurmountable debt is enormous and so too is the sense of relief that you feel after moving forward with a bankruptcy filing. It’s perfectly normal. But that feeling of having a great weight lifted off of your shoulders is quickly followed by the realization that you are back to square one — actually below square one — when it comes to your credit rating.  Though it can take time, and the bankruptcy filing will remain on your credit history for several years, there are several steps you can take to start rebuilding your financial health and improving your credit score. Here are our top recommendations.

  • If you have accounts that were not discharged in the bankruptcy, make sure that you continue to pay down their balances, providing at least the minimum each month, and a bit more if you can.
  • If possible, establish (or continue) a stable job history, staying with a single employer for a minimum of two years.
  • Though you may find it difficult to establish new credit via traditional routes, opening a secured credit card or a credit builder loan and then paying your debts quickly will help prove that you have learned money management skills and are creditworthy. Gas company cards, retail store cards, and others that are easier to qualify for will help too.
  • Ask a family member or trusted friend whether they will cosign your loans or contracts. Doing so provides lenders with greater confidence and willingness to provide you with a loan and gives you the opportunity to establish a better credit rating.
  • Minimize the number of credit applications you submit, as frequent applications trigger hard inquiries that lenders view as a negative.
  • Once you have obtained new credit opportunities, use them sparingly but regularly, and make sure that you pay them off promptly. Working to keep your balances low is important.
  • Periodically check your credit report to make sure that it is accurate and that discharged debts have been removed.

Remember that improving your credit score is a rebuilding process, and every positive thing that you do helps. By pursing as many of the recommendations above as possible, you should start seeing your credit score climb back up. For further assistance, contact our experienced bankruptcy attorneys today to set up a time to meet and discuss your situation.

Is Bankruptcy the Best Solution for Credit Card Debt?

For some, the idea of filing for bankruptcy is an absolute taboo subject, something that they associate with failure and work hard to avoid at all costs. For others, bankruptcy represents a life preserver when they feel like they’re drowning – a way to get their feet under them again and return their lives to some semblance of normalcy.

Just as there’s a wide range between those two extremes, there’s a huge range between levels of credit card debt and how it impacts an individual consumer. The national average credit card balance hovers somewhere between $5,000 and $6,000. For some, paying that off represents a bit of belt-tightening and choosing to skip some unnecessary purchases. For others that is an insurmountable amount. Where you fall between the two determines whether bankruptcy is your best solution to credit card debt, and that’s because you need to weigh the positive outcome of eliminating your liabilities against the negative impacts that are attached to filing for Chapter 7 or Chapter 13 bankruptcy.

If you have been receiving harassing phone calls, see no way to pay your debts and fear losing your home or other assets, then the relief offered by bankruptcy is a huge quality of life issue. It will put you back on the road to economic health, regardless of the negative consequences attached. If, however, you have the option of finding a way to pay your credit card debts down, you need to consider that you may not actually qualify for the Chapter 7 bankruptcy that would discharge your debt (only those who pass a “means test” showing that their median income over the last six months is under that of the same sized family in your area qualify) and that those who successfully file for bankruptcy are stuck with its impact on their credit rating for several years. If you are considering making a big purchase, such as buying a house or a vehicle, you may find that your filing will work against your ability to borrow money at a competitive interest rate until the filing has cleared your records.

If you are carrying credit card debt and considering filing for bankruptcy, it’s a good idea to look at all of your options, as well as your own long-term goals. For help understanding all potential impacts, contact our office today.

Will Bankruptcy Affect My Tax Debt?

Bankruptcy, and especially Chapter 7 bankruptcy, offers a fresh start for those who have racked up insurmountable debt. Though debtors may be vulnerable to some of their assets being liquidated, the filing can wipe away unpaid medical bills and credit card bills and allow the possibility of moving forward without the burden of debt collectors and past-due notices. The same is true for tax debt, but only in certain circumstances. Here’s what you need to know about how bankruptcy will affect your tax debt.

The first thing – which is often the most important to taxpayers – is that once you have filed for bankruptcy you will no longer be on the receiving end of IRS collection efforts. Just as is true with other agencies, once you have filed your bankruptcy paperwork the automatic stay will put an end to the notices that you have been receiving.

Not all tax debt can be eradicated through a bankruptcy filing. If you have unpaid property taxes or trust fund taxes, you will continue to be responsible for them. However, your personal income taxes can be erased if they meet certain criteria.

The most important qualifier for having tax debt erased is having been diligent about filing your income taxes over the previous two years and the tax debt being at least two years old. Returns that the IRS filed on your behalf do not meet this requirement. The debt must be a minimum of three years old in order to be discharged through bankruptcy, but the assessment from the IRS cannot be older than eight months old.

If you do not meet these requirements and you have outstanding tax debt that you are unable to pay, you still have options available to you. The IRS will allow taxpayers who are unable to meet their tax obligations to set up a payment plan or installment agreement, and in some cases, they will even compromise in the amount that the individual is responsible for based upon their unique circumstances. The most important thing for you to know is that the longer you wait to explore your options, the more challenging your position becomes.

To learn more about the best way for you to move forward in the face of tax debt, contact our experienced bankruptcy attorneys. We are here to help.

What Are the Most Common Reasons for Bankruptcy?

Bankruptcy offers a financial lifeline for those who are unable to pay their debts, but the people who could most benefit from the process are often hesitant, stymied by the taboo that has been attached to seeking economic help. Many falsely believe that those who file for bankruptcy are simply undisciplined or irresponsible in their spending habits This is unfortunate and reflects a lack of understanding of the most common drivers of overwhelming debt. Let’s take a look at the most common reasons that people seek bankruptcy protection.

  • Medical bills – When people filing for bankruptcy are asked what drove them to the point of economic emergency, more than two-thirds point to medical issues. For some, this is simply the bills that have been attached to illness or accident, but there are additional expenses related to medical circumstances, including being unable to return to work in order to pay either mounting treatment expenses or the costs of daily living.
  • Employment – Whether an individual resigns, is laid off, or is fired, losing a job means losing income. Unfortunately, though money isn’t coming in, the bills don’t stop. A recent survey revealed that 51% of Americans have less than three months’ worth of savings to help get them through a financial emergency, and when an individual loses their job they also lose their health insurance, creating the potential for a catastrophic cycle.
  • Overreliance on or misuse of credit cards – Many people simply do not understand the dangers of overreliance on their credit cards. They charge more than they can afford to pay back on time, and then their debt increases as interest rates and late fees get added on to the amount that they initially charged.
  • Changes in marital status – Marriage represents more than a relationship. For many it is the key to financial stability, and when a divorce or separation occurs one or both spouses may find themselves unable to pay bills that had previously been shared. In addition to existing debts and obligations, divorce may introduce additional costs such as alimony or child support.
  • Other emergencies – Beyond the events listed above, natural disasters, household repairs, costs related to lawsuits, and other unexpected events can create financial turmoil.

If you are considering bankruptcy, it is important for you to know that you are not alone. For assistance in navigating this challenging process, contact our experienced attorneys today.

How Deeply Do I Need to Be in Debt to File for Bankruptcy?

If you’re overwhelmed with debt and struggling to pay your bills, there’s a good chance the idea of bankruptcy has crossed your mind. Bankruptcy is something that everybody has heard of, but few understand well, and you’re not alone if you’ve told yourself that it’s only for people who are in financial straits that are far more dire than yours.

The truth is that there is no specific threshold for how much you need to owe to qualify for bankruptcy or even a ratio of debt to income or a benchmark for how long you have been in debt. Rather, the time to file is determined by a combination of factors that include:

  • Your ability (or inability) to pay your creditors while still affording basic living expenses
  • Whether your existing creditors are willing to work with you on a payment plan or have moved to collection actions
  • The type of debt that you carry and whether it can be discharged in a bankruptcy
  • Any other circumstances that may apply, including illness, inability to work, etc.

Though there are no specific criteria for being in enough debt, there is a limitation to how much debt you can carry and have discharged in bankruptcy. Debtors cannot qualify for Chapter 13 bankruptcy if they owe more than $465,275 in unsecured debts or $1,395,875 in secured debts in 2022.

Though there is no definition for the level at which you qualify to file for bankruptcy, there are rules regarding the kind of bankruptcy that you are eligible for. Chapter 7 bankruptcy, which discharges most debt and wipes the filer’s financial slate clean, is only available to those whose average income over the previous six months falls below the median income for households of the same size in their state. Those whose earnings exceed that amount will still be able to file for bankruptcy but will be required to file under Chapter 13, which reorganizes debts rather than erasing them.

There are so many ways that a person can fall behind on their bills, and once there it can be extremely difficult to recover. If you are struggling with debt and being pursued by bill collectors, filing for bankruptcy may be the right answer for you. For help understanding your options, contact our experienced bankruptcy attorneys today.

Is it Hard to Qualify for Bankruptcy?

Nobody likes paying bills, but if your financial situation has made it feel impossible for you to do so, then you may consider filing for bankruptcy. Most people know that bankruptcy can eliminate many of your debts, wiping the slate clean and providing a fresh start, but few know that the process has strict requirements that must be met. The two types of personal bankruptcy are Chapter 7 and Chapter 13. Where Chapter 7 discharges most debts while liquidating many of the debtor’s personal assets, Chapter 13 reorganizes debts to make them more manageable. Though you may prefer Chapter 7, not everybody meets the requirements, and end up having to choose Chapter 13.

The best way to determine which type of bankruptcy is best for you is to consult with an experienced bankruptcy attorney, but below you will find preliminary information on the criteria for each.

Chapter 7 Bankruptcy:

  • Six months of monthly income that averages less than the median income for the same-sized household in your state
  • Cannot have filed for Chapter 7 bankruptcy in the previous eight years or for Chapter 13 in the previous six years
  • Must complete an approved credit counseling course within 180 days before filing

If you have previously applied and been rejected, you are required to wait a minimum of 181 days before refiling. Any attempt to defraud creditors will make you ineligible.

Chapter 13 Bankruptcy:

  • Must have enough income to make the payments detailed in your bankruptcy plan
  • Unsecured debts cannot be more than $419,275 and secured debts cannot be more than $1,257,850
  • Must provide proof of having filed both federal and state income taxes in each of the last four years
  • Must complete an approved credit counseling course within 180 days before filing

If you have previously applied and been rejected, you are required to wait a minimum of 181 days before refiling.

Though you may believe that you qualify for a Chapter 7 bankruptcy, there is a means test that you will need to pass in order to be able to proceed with your filing. If the supporting documentation that you provide does not meet the criteria, you will be able to proceed with a Chapter 13 bankruptcy filing. For more information, contact our team today!

Can Bankruptcy Save My Home from Foreclosure?

Debt is insidious. It creeps up on you until suddenly what was just a skipped payment or two turns into your bank sending you a notice that they’re beginning a foreclosure action. You may fear filing for bankruptcy, thinking it would be a mistake because of its long-term effect on your credit rating. But keep in mind that bankruptcy will give you the chance of forestalling or stopping foreclosure while at the same time eliminating or lowering your dischargeable debt, while just letting a foreclosure happen leaves you with all your unpaid bills and will still put a black market on your credit history. We know the decision can be overwhelming. Here’s what you need to know.

Foreclosure is a process that the bank or lender won’t take until several mortgage payments have been missed. Once you’ve missed enough payments, they are required to send you a notification that they are about to begin the process of selling your home at a foreclosure auction. If you have received this type of notice it does not mean that the process is unalterable. The steps required can take months, and in this period of time, you have the opportunity to take steps to stop it, or at least slow it down. Filing for bankruptcy is one of the most effective ways of doing this.

When you file for bankruptcy it puts an automatic stay on all bill collection actions that your creditors are taking, and this includes foreclosure. The automatic stay buys you at least three or four months, and during that period you may be able to negotiate with the bank or investigate other options, including a short sale or renegotiating the terms of your loan.

The type of bankruptcy that you file (and qualify for) will have a big impact on your ability to fight a foreclosure. Only a Chapter 7 bankruptcy will fully eliminate your dischargeable debt, but it does so at the cost of having to give up most of your assets. If you are willing to walk away from your home, this may be your best option. Alternatively, if you truly want to keep your home, filing for Chapter 13 will allow you to restructure your debt, giving you more time to pay and possibly improving your terms. You may even be able to eliminate loans that were secured by the value of your house.

To fully explore how filing for bankruptcy can help you hold on to your home, you need the help of an experienced bankruptcy attorney. Contact us today to set up a time to discuss the specifics of your situation.

Can Bankruptcy Help with My Student Loans?

Overwhelming student loan debt has become a hot topic of conversation, and such a national problem that the CARES Act that was signed into law in response to the global pandemic specifically paused payments and involuntary loan collections on federal student loan debts. Originally intended to last just six months, the deferral is approaching its two-year anniversary and is now set to expire on May 1 of 2022. With payments set to start again soon, struggling student loan borrowers are facing significant uncertainty. Though it is widely believed that filing for bankruptcy will not provide student loan relief, it is possible to have these loans discharged but it can be difficult, and may not be your best option.

The challenge of having your student loan discharged in bankruptcy is that you need to prove to the court that repayment is posing a real and undue hardship on you, and each court has its own definition of what is required to meet that bar. Many use the Brunner test, for which you have to establish three points:

  • That you can’t pay both your student loans and maintain a minimal standard of living based on your current income and expenses for yourself and any dependents you may have.
  • That your current financial situation is likely to continue throughout the period of time that you are expected to pay your debt.
  • That you have truly tried to repay your student loan debt before turning to bankruptcy.

If you are able to establish these three conditions then it is possible that the judge in your bankruptcy case will approve the loan’s discharge. But that doesn’t mean that bankruptcy is the best option for you.

Bankruptcy does more than simply erase your debts. It remains a black mark on your credit history for years, and will have a debilitating effect on your ability to qualify for a home or other personal loan. It will even show up on your background check when you apply for a job. For this reason, it may make more sense for you to avail yourself of some of the other options available to student loan borrowers, including contacting your loan servicer about an income-based repayment plan, deferment or forbearance.

For assistance in finding the answer that works best for you, contact our experienced and knowledgeable bankruptcy attorneys. We can help you find the right solution.

Bankruptcy Tips for the New Year

Whether your mountain of bills is the result of bad luck, an injury or illness, or spending habits that got out of hand, the start of a new year offers the promise of a fresh start. If your debt is insurmountable, this may be the perfect time to break free and file for bankruptcy. But make sure that you do it the right way. Here are our top bankruptcy tips for the new year.

  • Don’t purchase luxury items right before filing.

If you spent a ton on Christmas gifts with the idea that you’d be able to discharge all of that debt, you might want to wait a few more months. That’s because any purchases you make with your credit card within 90 days of filing for bankruptcy are unlikely to be included in your list of debts to be discharged. The only exception is purchases made for necessities like food.

  • Don’t give assets away to family members or friends before filing.

Knowing that the bankruptcy courts can sell off assets to satisfy creditors, plenty of people make this mistake. When you have items of value and you owe people money, those assets are fair game. If you’re trying to keep them for yourself and think that putting them in other people’s hands will protect them, you’re wrong – and might be accused of fraud.

  • Be honest about your assets.

It’s very tempting to be less than forthcoming about how much you earn or own, especially if you are trying to qualify for a Chapter 7 bankruptcy that will discharge all of your debts. Doing so is a mistake, as the means test that you have to pass requires give the bankruptcy trustee access to all of your financial records and most information is so accessible to creditors that it’s hard to hide.  If you don’t qualify for Chapter 7 and have to pay off your debts under Chapter 13, you’ll still be better off than you are today.

  • Don’t try going it alone.

Plenty of debtors tell themselves that they can handle filing for bankruptcy without the help of a bankruptcy lawyer. Though it may feel like throwing good money after bad to pay attorneys’ fees, the laws surrounding bankruptcy are extremely complicated and the statistics on filing success make it clear: only about 5% of people who go it alone are successful in having their bankruptcy filings approved.

If you’d like knowledgeable guidance on getting yourself out of debt by filing for bankruptcy, we are here to help. Contact our team today! We wish you and yours a happy and healthy New Year.

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