Archive for the ‘Bankruptcy’ Category

Will I Lose My Pet in a Bankruptcy?

Bankruptcy is an invaluable tool for those who are facing mounting debts, but the advantages of a fresh start have to be weighed against the loss of the assets that will need to be sacrificed to the bankruptcy trustee for sale. As hard as it is to consider giving up a home, a vehicle, cherished jewelry or heirlooms, those things pale in comparison to the idea of having to give up a family pet. Still, under bankruptcy rules any animals that are owned need to be listed as assets — even your beloved dog, cat, bird, or snake

The good news is that most animals have little value in a bankruptcy proceeding, and even if your animal has a value, it is exceedingly rare for a bankruptcy trustee to do anything but exempt what most Americans view as family members. One thing to keep in mind is that when trustees assume control of an asset, they do so with the idea of selling it – unless your animal is earning large sums of money, the cost and work involved in assuming ownership would far outweigh the value that would be realized by selling it. You still need to list them as an asset but are unlikely to have to give it up.

Though you are unlikely to have to give up your pet, there are a few elements that may complicate this issue. If, for example, you earn income from breeding your animal, through their talent or some other service, you need to include that income on your bankruptcy statements in addition to stating their value.  It is also important to remember that a pet can represent a significant expense, especially if they are older and begin needing constant medical care. These expenses will need to be listed on your filing as well, and it is conceivable that a trustee would look askance at offsetting those costs against what is owed to creditors.  Additionally, if you chose to finance the purchase of an expensive animal, the creditor likely has the legal right to use your pet as collateral and repossess it.

As scary as all of these considerations are, the reality is that bankruptcy is meant to give you and your family a fresh start – and your pet is part of your family. Trustees are aware of this and do not want to take pets away from their owners. Contact our team today to discuss this and other aspects of bankruptcy!

Are the Consequences of Bankruptcy Worth It?

If you’re thinking about filing for bankruptcy, there’s a good chance that you’ve heard all the cautionary tales about how bankruptcy will destroy your credit and economic reputation. The truth is that the naysayers who warn against the bankruptcy process have never been in deep debt themselves. They have no understanding of the impact of piles of unpayable bills and nonstop collection calls. They also fail to recognize that doing nothing and continuing to struggle with debt does nothing to rebuild credit – while filing for bankruptcy eventually does.

The truth is that those who are considering bankruptcy are already looking at credit scores that seem beyond hope, and on top of that their debt isn’t going away. This creates tremendous emotional harm: people facing insurmountable debt often suffer from depression, anxiety, insomnia, and severe stress. As much as filing for bankruptcy may feel like a surrender, it is relieves the sense of panic and despair that comes from not being able to meet existing financial obligations.

In addition to the emotional relief, studies have shown that filing for bankruptcy actually restores credit scores relatively quickly, especially when compared to those who continue to struggle with debt. The Federal Reserve Bank of Philadelphia conducted a study that showed that in the 18 months before filing for bankruptcy, consumers’ credit scores dropped precipitously, where once they filed for either Chapter 7 or Chapter 13 the decline in scores stopped and filers’ credit scores rebounded. Though scores still remained low, the filers effectively stopped digging themselves into deeper economic holes, and at the same time they put a stop the collection calls, wage garnishments, litigation, and other stress-inducing processes.

When you file for bankruptcy, you give yourself the chance to start over economically, wiping out credit card debt, medical debt, and other financial obligations committed to long ago. You also will find yourself eligible to take on small amounts of debt far sooner than most of the naysayers predict – in some cases as soon as 18 months after your debts have been discharged.

To get a better sense of how filing for Chapter 7 or Chapter 13 bankruptcy will change your life, contact our experienced bankruptcy attorneys to set up a time to discuss your situation.

Keeping Your Business During a Personal Bankruptcy

If you are filing for Chapter 7 personal bankruptcy and you are a business owner, there is a good chance that the filing will lead to your business being shuttered. The determining factor is whether you operate as a sole proprietorship, an LLC or partnership, or a corporation.

Individuals who operate sole proprietorships enjoy several advantages for being what is known as “pass through” entities, but when it comes to bankruptcy these benefits generally work against you. That is because there is little to no separation between the owner and the organization. At the very least the bankruptcy trustee will likely ask you to stop operations for a period of time so that they can assess the value of its assets for possible sale as part of the bankruptcy estate. This may not be the case for freelancers or other service providers whose businesses operate without assets, but the trustee will also want to put a stop to incurring liabilities, so that determination – and the determination about selling assets – will be specific to your business.

If you are part of a partnership or LLC with more than one owner, your business will be able to continue operating but your share will be added to your estate. In most cases, the business will be protected from the impact of your bankruptcy, unless you are the majority owner, but it is a good idea for you to seek legal guidance regarding your ownership interest and its role in the business before you file.

If you are the sole or majority owner in a corporation, your business will be at risk of the trustee assuming control of your shares or interest and then voting to sell or liquidate the business for distribution to your creditors.  That determination will be based on how much the assets can be sold for and whether or not they are exempt. If it makes financial sense to liquidate then the trustee will do so. If, however, the corporation has other members, then personal bankruptcy is unlikely to impact it.

Every bankruptcy situation is unique, but owning a business can complicate the process. For help navigating the challenges of filing for bankruptcy and understanding all of its potential outcomes, contact our experienced bankruptcy firm today to set up an appointment.

Can I Transfer Savings or Property to Family Members Before a Bankruptcy?

Filing for bankruptcy is an intimidating, scary process, and when you are anticipating doing so, it is natural to try to protect assets that are important to you and to provide for those who are closest to you. Before you do anything, it’s important to make sure that you know what you’re allowed and not allowed to do, as paying debts to friends or family members, or transferring savings or property out of your name and into a family member’s can lead to charges of fraud or preferential treatment. Your best bet is to seek advice from an experienced bankruptcy attorney before making any significant financial moves.

The first thing you need to know is that when you file for bankruptcy, you will be assigned a bankruptcy trustee who will oversee the process. That person will identify unprotected assets that can be sold and determine the value of the bankruptcy estate based on the paperwork that you provide. This “statement of financial affairs” generally lists your bank accounts and any property you own, have sold or transferred within approximately two years. This list needs to be complete and must reflect all details, including value of property and what was done with any proceeds.

If you made a decision to sell a piece of property to a family member for its fair market value, you should be safe – especially if you can show that you used the money to pay for basics like rent or food. You are also able to transfer something that would have been considered exempt. But if you transfer the property in order to try to keep it from being included as a salable asset, or process a sale that is far under fair market value either to get it out of your name or to satisfy a debt to somebody close to you, it can be considered fraudulent, and the sale can end up being voided by the trustee.

Selling property but retaining control over it is another questionable transaction that – at best – will require explanation. The most important thing to remember in approaching a bankruptcy is that you must be honest about everything that you do. If you try to conceal an activity or an asset it will be sure to come back to you and work against you.

For more information about what financial actions you should and should not pursue in a run-up to filing for bankruptcy, contact our experienced attorneys today to set up a time to meet.

Should I Exhaust All Other Options Before Filing for Bankruptcy?

When past-due bills and calls from debt collectors have you dreading the mailbox and the phone, bankruptcy may feel like your only way out. While filing for Chapter 7 or Chapter 13 provides one answer, that doesn’t mean that it’s the only one – or even the best one for you. Before moving forward with a decision that would impact you for years, take the time to explore your particular situation and what other options might make more sense.

While filing for bankruptcy has the benefit of immediately halting credit collection actions, it does not necessarily eliminate all of your debts. Specifically, if student loans, alimony, child support or property liens represent large portions of your outgoing funds, filing for bankruptcy will not help you at all. While credit card debt, medical bills, business debts and personal loans can be discharged, these other obligations will survive a bankruptcy filing. If this describes you, then investigating alternatives makes even more sense. So what are those other options?

  • If you have credit card debt, home mortgage debt, or car loan debt, you may find your lenders are open to working out a new payment plan. Though this possibility may seem remote, consider the alternative that your lenders face if you file for bankruptcy. They would have to forgive your debts entirely, leaving them with nothing to satisfy your debt rather than being paid off over a longer period of time, or at lower interest rates.
  • Take a good look around and determine what you can sell. As hard as it may be to give up assets, remember that filing for bankruptcy will leave you with little choice about what gets sold, while taking matters into your own hands may find you able to satisfy some of your debts and avoid the bankruptcy process entirely.
  • Examine your spending habits to see what you can eliminate. Dining out or having food delivered, paying for multiple cable stations or subscriptions, and constantly buying clothes and shoes are examples of lifestyle choices that may be costing you more than you realize. When faced with the choice between eliminating luxuries and affecting your credit rating for years, those conveniences may become a lot less necessary to you, and what you are spending on them can easily be used to pay off your debts.

Examining your debt dispassionately can be a real challenge. For assistance, contact our bankruptcy attorneys to discuss your options.

What Happens to Alimony Payments During Bankruptcy?

Deciding to file for bankruptcy is a momentous decision. From one perspective it represents a significant step toward an improved quality of life and a future free of stresses your friends, colleagues and family may have been unaware that you were living with. On the other hand, it represents an embarrassing admission that things have gone terribly wrong. In both cases, it is similar to filing for divorce, which is ironic because one of the most frequently asked questions about bankruptcy is about how it will impact the arrangements that agreed to when a couple has split. The short and simple answer is that your bankruptcy will have almost no impact on those arrangements, as neither child support payments nor alimony payments are dischargeable.

When you file for bankruptcy you have the opportunity to discharge many of your debts — but not all of them. There are certain types and categories of debts and creditors that are notable exceptions, and one of these is family obligations. If you have agreed to an alimony payment or spousal support to your ex, your obligation to pay them support will continue, no matter how dire the financial situation that you present to the bankruptcy court. In fact, if you have past-due spousal support the court may use assets liquidated in the course of bankruptcy to ensure that your ex-spouse is made whole.

There are some situations where a dependent spouse’s alimony payments may be paused during the automatic stay that a bankruptcy filing enacts, but this would be a temporary impact, and it would not affect any court-ordered wage garnishments that are used to pay child or spousal support.  This is particularly good news for those who are on the receiving end of alimony payments, who may fear that their ex would use bankruptcy as a means of escaping their obligation. By the same token, a dependent spouse who receives alimony payments and who chooses to seek bankruptcy is required to report those payments as income as part of their filing.

If you are considering filing for bankruptcy and have additional questions about how doing so would affect your ability to uphold your other obligations, our experienced attorneys can help. Contact us today to set up a time for us to meet and discuss your situation.

Filing for Bankruptcy if You’re Self-Employed

Many people dream of becoming entrepreneurs, and not all of those who take the leap will be successful. When a self-employed person finds themselves facing insurmountable debt – whether as a result of business failure or for an entirely unrelated reason – they frequently believe that filing for bankruptcy will be harder without paycheck stubs or other income documentation. Though earnings history is an important part of the information required when filing for Chapter 7 or Chapter 13, bankruptcy courts have recognized that self-employed business owners and independent contractors will need to provide different types of information.

If you are self-employed and you need to file for bankruptcy, you will rely on your previous years’ tax returns, your bank statements, and the types of documents you have used to seek credit in the past. You will also need both monthly and annual profit and loss statements and receipts from any expenses you’ve incurred for the last several years. That means that one of the first things that you need to do is to get those documents together … and if you haven’t generated P&L statements, it’s time to put them together.

An experienced bankruptcy attorney will be able to answer your questions and calm your concerns about the special approach that the self-employed will need to adopt during a bankruptcy proceeding, but you can anticipate needing the following:

  • Your account statements for both your business and your personal accounts dating back three years
  • All contracts, documentation of cash payments, invoices and receipts, and check stubs from the previous three years
  • Federal and tax returns from the previous two years for those filing for Chapter 7 bankruptcy and for four years for those filing for Chapter 13 bankruptcy (the extra years of documentation is necessary to address and confirm the amount of back taxes owed)

Those same documents should be used to put together profit and loss statements if your business hasn’t already had them prepared by an accountant. These statements will prove helpful at the creditors meeting that is required as part of the bankruptcy process. You should anticipate needing two years’ worth of these statements reflecting monthly and annual financial activity.

Though self-employed individuals pursuing bankruptcy may have to work a bit harder to document their financial situation, the extra steps required should not prove a significant hardship if you have help from an experienced bankruptcy attorney. Contact us today to set up a time for a consultation.

Should I Sell My Home Before Filing for Bankruptcy?

Insurmountable debt leads people to stress and frustration. Bankruptcy is an option that can help, but it is a process that few people fully understand, and most people view as a type of surrender. In trying to find the best solution to alleviate the situation, many people contemplate selling their home, especially if they have a significant amount of equity in it: After all, they assume that they are going to have to give it up anyway, and if that is the case then they think they will probably get a better price if they sell it themselves, and then be able to use the money or find a way to shelter it.

The truth is that if you are even contemplating a bankruptcy filing you should not make any major financial moves until you’ve spoken with an experienced bankruptcy attorney. Not only is there a very good chance that your home is one thing you will be able to keep, but there is also a chance that if you sell your home and go about it the wrong way you will end up losing any profit you realize and might even be in jeopardy of being accused of fraud.

The first and most pertinent and important question you need to ask yourself is whether you want to move out of your home or not. If you would prefer to stay but feel like your financial situation is preventing you from doing so, bankruptcy might help. By eliminating your other debts via bankruptcy, you may find yourself able to afford the costs of your home. If, on the other hand, you were planning on moving anyway, then it is important that you know how to time the sale and what to do with the proceeds. If you use the money to pay for things that are necessary for your health and welfare then you will likely be fine, but you will need to keep all records in order to prove that is what you did rather than trying to shelter the money from your creditors.

It is vitally important that you keep a paper trail of any financial transaction that you pursue within six months of filing for bankruptcy. That includes depositing money into the bank upon receipt and keeping records of all purchases that you make. Failure to do so can result in your bankruptcy filing being denied or your being accused of trying to hide money. For help navigating the complicated rules surrounding bankruptcy, contact our experienced, compassionate attorneys today to set up a time for a consultation

Steps to Take Before Filing for Bankruptcy

Bankruptcy is a legal proceeding that most people have heard of, but until you’ve actually gone through it you don’t know what to expect or how to prepare. Like anything unfamiliar, filing for bankruptcy can be intimidating to anticipate, but if you take the following steps one at a time, you can feel confident as you move forward.

  1. Complete credit counseling – These courses are required prior to filing for bankruptcy. They only take about an hour and can be taken online or over the phone. The cost of this class is generally about $25.
  2. Pull together all of your financial papers in preparation for meeting with an attorney. You’ll need your bank statements, your taxes for the past two years, proof of your income, a credit report, and all correspondence regarding any legal claims or collection letters against you. If you have a mortgage or car loan, be sure to include those statements.
  3. If your bank is also one of your creditors, it would be a good idea to open a new bank account. That is because once you file for bankruptcy, your creditor/bank might close your account.
  4. Once you’ve selected an attorney, start referring all collection calls to them. You will be amazed at how quickly these annoying and threatening calls and letters stop.
  5. Make a list of questions you can ask your attorney, making sure you let them know if any of the information on the paperwork that you’ve assembled has changed.

In addition to following these steps, there are a few things that you should avoid doing for fear of making your situation worse or ruining your chance at being approved for bankruptcy. These include:

  1. Even if you owe your family members or friends money, now is not the time to pay them back, and do not transfer any assets to any of them in order to try to protect them. In fact, if you’ve repaid loans to any close associates in the last year, make sure that information is included in your documentation.
  2. Leave your retirement accounts untouched. Their holdings will be safe from liquidation.
  3. Don’t charge things on your credit cards or take on any new debt on things like financing a car. The only exception to this rule is unplanned medical debt.

For more information on the bankruptcy process, contact our experienced, helpful bankruptcy attorneys today to set up a time for a consultation.

Will I Lose My Work Tools During Bankruptcy?

One of the scariest aspects of filing for bankruptcy – and particularly for Chapter 7 bankruptcy – is the knowledge that the court has the right to sell your assets to satisfy your creditors. As stressful as this is for the average person, if your ability to earn a living is dependent upon items that you’ve invested a significant amount of money in, it is perfectly reasonable to fear that these items will be sold, leaving you with no way to support yourself unless you spend that money all over again. Fortunately, there are certain exemptions to asset sales that apply specifically to work tools. Known as “tools of the trade exemptions,” these rules are meant to protect sole proprietors and tradespeople who depend upon these valuable assets.

Though business assets belonging to sole proprietors are not protected from bankruptcy asset sales, there is a difference between those assets and items that are considered essential occupational tools. An auto mechanic may have spent years accumulating expensive tools to allow him to continue working on a specific brand of vehicle, or a wedding cake baker may have invested in professional quality mixers, blenders, and baking molds. The tools of the trade exemption may be in place as a result of either federal or state bankruptcy laws that define them as exempt from seizure and sale. Though this may frustrate creditors, who understand that these assets would command a significant sum at auction, the rules have been created to provide those filing for bankruptcy with a chance at recovery from their economic woes. These rules are specifically available to sole proprietors and individuals rather than to corporations or LLCs, and they apply to anything that an individual would need to continue operating their business or earning their specific living.

The items that can be included in a tools of the trade exemption are limited only by the stated occupation of the individual filing for bankruptcy and their honest expression of what they need to continue earning a living. Tools of the trade might include computer equipment and the software upon which they rely; tools of all kinds, ranging from hand tools and power tools to landscaping equipment or ladders and scaffolding for painters; even vehicles such as limousines or delivery vehicles can be exempted if they enable the individual to continue earning their existing occupation, with the caveat that their use is limited to the earning of income or continuation of the bankruptcy filer’s earning capacity.

For more information on how filing for bankruptcy would directly impact you, contact our experienced attorneys today to set up a time to speak with us.

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