Archive for the ‘Bankruptcy’ Category

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.

At What Age is Bankruptcy Most Common?

Filing for bankruptcy has an unfortunate and unfair negative association. Though it is easy for those who are not facing serious debt to sit in judgment, these individuals have no sense of the types of pressures or circumstances that have led to a person’s economic woes. A closer look at the statistical realities of bankruptcy makes clear that in the vast majority of cases, bankruptcy filings are a result of outside issues that have left the filers with no real choice.

If you are considering filing for bankruptcy, it is perfectly normal for you to feel isolated and alone. The truth is that in the year 2020 alone there were more than half a million bankruptcy filings, with over 70 percent of those being Chapter 7 bankruptcies rather than Chapter 13 reorganizations. That essentially means that 7 out of every 10 people filing for bankruptcy are not earning enough money to pay back their debts and have no way to get out from under them than to have them discharged by the bankruptcy courts.

How did these people get into so much financial trouble? According to a study conducted by the American Journal of Public Health, two out of three people blamed medical debt, with some simply buried by medical bills and others facing a combination of bills and loss of income as a result of the illness or injury that led to those bills. Other common reasons for filing include loss of a job and family issues like divorce.

Clearly, each of these are issues that are out of control of the individual: bankruptcy should not be viewed as a personal failure, or as a reflection of a lack of responsibility, education, or experience. The people who file for bankruptcy come from all backgrounds, areas of the country and demographic groups.  Roughly two in three are married, one in 5 is 55 years old or older or 34 years old or younger. The median age for filing for bankruptcy is 45, and men and women are almost evenly split, with women accounting for four percent more filings than men.

There is no such thing as a ‘typical’ bankruptcy filing, and as a result, there is no reason to allow outdated, inappropriate taboos to color your feelings about your own economic situation. For assistance in the best path forward, contact our office today to set up a time to speak to one of our experienced bankruptcy attorneys.

Should I Try to Save Money Before Filing for Bankruptcy?

If you’re getting ready to file for bankruptcy, you may be wondering what will happen to your various bank accounts, and particularly any savings or retirement funds that you may have. While most people know that it is a very bad idea to run up additional debt immediately before filing for bankruptcy, there is less known as to what you will be able to keep.

Putting money in savings may seem like a good idea at first, as once you’ve filed for bankruptcy it will generally preclude your creditors from bothering you. But that doesn’t mean that what is in your bank accounts is exempt from being used to satisfy your debts. Each state has its own exemptions, and the trustee that is assigned to your case will be responsible for distributing any funds that exceed whatever exemption amount applies. You also face the additional possibility that your bank will freeze your funds, making it impossible for you to pay more bills as they come in. Though your bankruptcy trustee will be able to address this, if your balance is kept low then you don’t have to worry about the exemptions and will be able to keep paying your bills and accessing some cash.

Another consideration is whether the bank where you have a savings account is one of your creditors. If you have taken out a loan then you probably agreed to what is known as a “set off” that allows them to take funds out of your other accounts in order to satisfy your debts, even if as a creditor they have been told that they can’t pursue collections because of your bankruptcy status. Adding to savings would likely see those funds applied to your balance as soon as the bank is notified of your filing. The same may be true of utility companies and of automatic payments that you have previously authorized.

Some of your savings accounts will be safe from your creditors. This is particularly true of your retirement savings and pension accounts, but you should be cautious about moving money around in a way that could appear to be fraudulent or deceptive in the eyes of the bankruptcy court. For assistance in navigating your debt and pursuing bankruptcy in the way most beneficial to you, contact our experienced attorneys today to discuss your situation.

 

What Information do I Need to Provide My Bankruptcy Attorney?

Moving forward with a bankruptcy filing can be an emotional decision and one that many people only make when they believe they have no other options. If you’ve just made that decision, or are looking for advice as to whether there are alternatives you’re not aware of, the best thing you can do is to seek help from an experienced bankruptcy attorney who will patiently review your documents, assess your situation and give you their opinion on your best path forward.  To make sure that your bankruptcy attorney has a complete sense of your financial situation, you need to provide them with as much information as possible.

Though you may dread the idea of gathering all of your financial documents, they are what will provide your attorney with the clearest possible picture of which assets you will be able to keep and which you may need to sacrifice, as well as whether you are likely to qualify for a Chapter 7 bankruptcy as compared to a Chapter 13 bankruptcy. They may even be able to help you find a way out of your situation without pursuing a bankruptcy at all.

So what should you bring to your first meeting?

The documents that you provide your bankruptcy attorney for review will serve as a starting point to help them determine whether your debt is indeed too overwhelming for you to overcome. They will serve as the foundation for their presentation to the court. Though there will likely be more information needed in the future, you’ll begin with a complete list of both your outstanding debts and your major assets such as your home, any vehicles you own, and what you have in the bank or investments.  You’ll also want to provide a recent pay stub and a summary of your monthly expenses. Bringing bills and statements is helpful, but as long as the information that you provide is accurate it will be unnecessary for your first meeting. If you choose to move forward you will be given a checklist of all the documents you need, which will include receipts, copies of titles and tax returns, and more.

For assistance in making sense of what you should do in the face of overwhelming debt, contact our bankruptcy attorneys today. We can help.

Will Bankruptcy Ruin My Financial Future?

Though there is no doubt that filing for bankruptcy will have a strong negative impact on your credit score – the most significant negative impact of any single event – to say that it will ruin your financial future is probably overstating reality. The truth is that even though filing for bankruptcy will have a big effect initially, it is probably the biggest step towards improving your credit that a person who is unable to pay their bills can take.

For some people who have gotten themselves into intractable debt, filing for bankruptcy actually raises their credit score. This may sound impossible, but bankruptcy eliminates debt that has previously been weighing your score down.

The reality of the impact of filing for bankruptcy is that it will show up on your credit report for several years, and that can serve as a potent warning to potential lenders. But what is more important is what you do in the months and years between your bankruptcy filing and your new credit applications. To offset the negative impact of a bankruptcy filing you need to prove to the world that you’ve learned your lesson. You do this by applying for new credit cards, even though they are going to offer you less favorable terms. Then you need to pay them off every month.

Having a bankruptcy filing on your credit report is not going to keep you from being able to borrow money in the future. What it is likely to do is to force you into loans that have less favorable terms. You’re going to have to pay higher interest rates and any potential for a grace period is going to be unlikely.  But the same was probably true before you got around to filing for bankruptcy because your debt situation and payment history were probably so bad before you took action to address the situation. If you were behind on your bills before your filing and now you are up to date on your bills, that will be obvious to potential creditors and may offset the bankruptcy itself.

To rebuild your credit after a bankruptcy filing, you should start by applying for a secured credit card and then staying up to date on payments. Doing so will allow you to show potential creditors that you have learned from your mistakes and are deserving of their trust. It’s a building process that is only made possible by taking the step of getting yourself out of your overwhelming debt.

For assistance in assessing the best way for you to approach and deal with your debt, contact our bankruptcy attorneys today to set up a time to talk.

 

Will Bankruptcy Allow My Ex to Stop Child Support Payments?

Filing for bankruptcy is a legal action that seeks the discharge of an individual’s debts. It is essentially a statement that their financial situation makes it impossible for them to meet their obligations, and looks to the bankruptcy court to allow them to start fresh. There are two different types of bankruptcy filing, with Chapter 13 allowing the individual to pay their in a more extended way or reducing the interest charged or amount owed, and Chapter 7 eliminating their debt entirely. In both types of bankruptcy filing, child support is not considered dischargeable and the individual is expected to continue to meet their family obligations.

The bankruptcy courts have acknowledged that certain categories of debt cannot be dismissed, and the obligation to pay child support is one of them. In fact, it is considered so important that a person filing for a Chapter 13 bankruptcy must provide proof to the court that they are up-to-date on all domestic support obligations before a discharge will be granted.

For many ex-spouses of people filing for bankruptcy, the fact that an obligation to pay child support will continue is a point made moot by the fact that their ex has long skipped those payments. That’s why the bankruptcy rules for child support go beyond ensuring that they continue to stand and placing child support debt in front of all other creditors in a Chapter 7 bankruptcy. That means that any assets that your ex is required to relinquish or sell as part of their bankruptcy filing will go towards resolving any shortfall in previous support payments that are owed you. Payments to your child will go in front of credit card companies, mortgage companies, car loans and all other debts. Of course, there is a chance that there are no assets available with which to pay off outstanding debt, but whatever value exists will be distributed to your child first, and if your ex’s filing is a Chapter 13 bankruptcy and they have child support arrears, the back payments will be incorporated into their monthly Chapter 13 plan payment until the debt is satisfied.

It makes perfect sense for a parent to worry that the support their child relies upon would be impacted by their ex-spouse’s bankruptcy filing. For more information on how bankruptcy impacts this and other family issues, contact us today.

How Badly Will Bankruptcy Affect My Credit?

Individuals deal with debt in different ways. For some, the knowledge that they are not going to be able to keep up gives them the freedom to simply stop making payments, allowing their credit rating to fall rapidly. Others work hard to maintain their positive credit to the very end, making payments in a timely way and paying as much as they possibly can in order to prop up their score.  But when you have to face up to the reality that your debts surpass your ability to pay, you are also going to need to deal with the fact that your bankruptcy filing is going to have a terrible impact on your credit.

A bankruptcy — and especially a Chapter 7 bankruptcy – will wipe out your debts and give you a fresh start. Unfortunately, it will also wipe out the credit score that you’ve worked so hard to maintain. Filing for bankruptcy will be reflected as significant downward pressure on your credit score. How long its impact lasts depends on several different factors, including the type of bankruptcy you file for and what you do to rebuild your credit following your filing.

A Chapter 7 bankruptcy will show up on your credit report for as long as ten years from the date of your first filing, while Chapter 13 may only show for around seven years. Within a few years of discharging your Chapter 13 debt, it will disappear from your credit score and give you the chance to start climbing back to fiscal stability. But the longer your bankruptcy is reflected on your credit, the less impact it will have and the more impact timely payments you make will have. The same is true for establishing new credit via small installment loans or secured credit cards and keeping your credit card balances under 30% utilization.

Because under Chapter 13 bankruptcy debtors make payments on their debt, they have less of an impact on credit scores, but that doesn’t change the fact that a bankruptcy filing will have a significant impact. How much of an impact is hard to predict, but it is important to remember that the debts that existed prior to your filing will still show on your credit report, with some persisting for several years.  To offset this effect, apply for credit cards, even if it means putting down an upfront security deposit and then work at rebuilding your credit. It will take patience and diligence, but it is possible and well worth your time to reestablish yourself as worthy of a lender’s trust.

Bankruptcy Tips for the Unemployed

Whether you loved your job or hated it, once you are unemployed you realize how much it meant to you, and how much you relied on it to support the things that are most important to you. Suddenly your checking account can no longer support your debts, and you have no sense for when or whether you’re going to have an income again.  If you are not working and unable to pay your debts, bankruptcy may provide you with the lifeline you need. Here is what you need to know to navigate the process when you don’t have a job.

One of the first things that people who lose their jobs and income turn to when it’s time to pay their bills is their savings, and sometimes even their retirement funds. They find themselves with few options other than pulling money from their IRA or 401(k) in order to hold on to their homes or cars, to say nothing of to pay for their living expenses like food, medication, and utilities.  Unfortunately, taking these steps can create a domino effect of financial woes, as taking early distributions of these funds can lead to penalties and tax liabilities. As tempting as it is, taking an early distribution from these accounts is a mistake that many people make because they believe that they will have to be sacrificed in the course of a bankruptcy anyway – and that is not true. Retirement accounts and qualified savings accounts are exempt from forfeiture in a bankruptcy.

Knowing this, your first step in considering bankruptcy should be figuring out whether you are eligible to file for bankruptcy or not. This is determined through a means test, which determines not only whether you qualify, but also which type of bankruptcy you qualify for. Where a Chapter 7 bankruptcy will allow you to discharge your debts, thus alleviating you of having to pay many of the bills you were previously struggling with, a Chapter 13 bankruptcy will reorganize your bills, giving you more time to pay them off and adjusting your payments to a lower amount.

One of the most important things for an unemployed person to understand about this process is that this means test considers your average income based on the last six months, so applying for bankruptcy right away or in the first few months after losing your job might work against you, especially if you were earning a high income. By the same token, unemployment benefits are included in your income calculation too. It’s also important to remember that without an income, you are required to file for Chapter 7 bankruptcy.

Facing unemployment is difficult enough without having to worry about the ins and outs of applying for or qualifying for bankruptcy. For help, contact our experienced attorneys.

Bankruptcy Tips: How to Take Control of Your Finances in 2021

The new year is always a time for self-assessment and self-improvement, and if your financial situation has led you either to file for bankruptcy or to consider doing so, then making resolutions regarding your money management will be an essential step as you enter 2021. Whether you end up filing for bankruptcy or simply want to improve your saving skills and become more regimented about paying off your debt, here are some tips to consider.

  • Budgeting is often the key to getting your finances under control. Whether you’re trying to avoid filing for bankruptcy or trying to recover from just having filed, there are plenty of budgeting tools available. At its most basic, budgeting is understanding the amount of money that you have coming in and going out, and it requires diligence and practice. Research several tools and choose the one that is easiest for you to use, because that’s the one that you’re most likely to stick to.
  • Think about picking up a part-time job. Even though you may think of yourself as too mature or too accomplished to work as a cashier or a delivery driver or too busy to apply your skills to a consulting job, doing so can put the extra money in your pocket that will make a real difference.
  • Review your subscriptions. In the last few years, the technology that has made our lives so much easier has allowed invisible expenses to creep into our lives. As easy as it is to opt into a meditation app, a cable subscription, an online newspaper subscription or a podcast or streaming music service, these things all add up. Take a look at what you’re paying every month with an eye to whether they are necessary or not, and you will probably find a lot of extra money that you can put into paying down your debt.
  • Consider what you’re spending on fitness or food. Are you a gym member? What do you pay monthly or annually? Can you access the same equipment at a gym with fewer amenities? Are you eating out or spending $4 a day on a cup of coffee that you could brew for yourself at home for far less? Every little bit that you can save can be put to better use, whether to pay down debt or to put into savings.

If you are struggling financially and believe that bankruptcy might give you the fresh start you need, we are here to help. Contact us today to set up a time for us to discuss your options.

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