Archive for the ‘Bankruptcy’ Category

Can I File for Bankruptcy if I Live with My Parents?

If you’re facing insurmountable debt, living with family can eliminate many expenses and provide significant economic relief. But if you’re considering filing for bankruptcy, it can also introduce a level of complexity to your process, and possibly derail your ability to qualify for a Chapter 7 bankruptcy. Here’s what you need to know.

There are two types of personal bankruptcy filings that people pursue: Chapter 7 bankruptcy discharges debt, while Chapter 13 redistributes it, creating a payment plan that may reflect reduced interest rates, a more extended payment period, or other favorable terms meant to make the debt more manageable. Chapter 7 is only available if the debtor passes a means test. The means test calculates how much you owe and what your income and living expenses are.  If the test shows that you have enough money to make monthly payments and to support yourself then you will not qualify for Chapter 7. The complexity that could arise when you are living with your parents is that there’s a good chance that their income will be factored into your means test calculation.

The means test compares your household income to the median income in the state where you are filing for bankruptcy, and median income is calculated by how much money is coming in and how many people are living in the household. You are required to provide this information, as well as household expenses. If you are trying to escape your debt, even if you aren’t personally earning income, your parents’ income may be counted in the median household income calculation and may effectively put you well above the threshold that would qualify you for having your debt discharged under Chapter 7.

Every bankruptcy court operates differently, and there are three possible ways that they can calculate household income.

  • The Census Bureau Approach counts everybody who lives in the household and their income.
  • The Dependent Approach calculates the debtor and their spouse if they have one, as well as any dependents that could be written off under IRS rules. Financial support given or received to or from anybody else living in the home does not count.
  • The Economic Unit Approach recognizes different living arrangements and dependencies within a household.

To ensure that your situation is treated fairly and to understand what your options are, you need to speak to an experienced, qualified bankruptcy attorney. Contact us today to set up a time for us to chat.

Will Bankruptcy Affect My Retirement Savings?

Saving for retirement is one of the greatest gifts you can give your future self. The more diligent you are about putting money away, the more easily you’ll be able to enjoy life after you stop working. But while you’re planning for the future, present circumstances can get out of control. Medical emergencies, job losses, rising prices and indiscriminate spending can all lead to insurmountable debt, leaving you with few options. If you’re considering bankruptcy and are concerned that it will deplete the money you’ve worked so hard to save, there’s good news: in most cases, you will be able to hold onto pension and retirement funds, even when filing for Chapter 7 or Chapter 13. Here’s what you need to know.

When you file for bankruptcy, you can protect the property that you need to work and live through bankruptcy exemptions. You are also able to protect almost all ERISA-qualified retirement accounts from your creditors as long as the monies remain in your account. This includes 401(ks), 403(b)s, IRAs, Keoghs, profit-sharing plans, money purchase plans, and defined-benefit plans. General savings accounts, stock option plans, and investment accounts are not protected.

If you cash those accounts out – which many people are tempted to do – the funds are no longer considered part of your retirement, and the trustee may attempt to use them to pay some of your debts. If, in the face of financial trouble, you’ve opted to withdraw retirement funds, you’ve probably already paid a penalty or fees for early withdrawal. It is possible to protect the cash that you’ve withdrawn by using a wildcard or cash exemption, but these are not widely available and are often limited in the amount that can be exempted. Monthly payments disbursed from retirement accounts are also not exempted: they are considered income and will be used to calculate your eligibility for Chapter 7 bankruptcy or for your payment plan under Chapter 13.

Be aware that if your retirement savings are in a traditional or Roth IRA, there is a limit to the amount that can be exempted. The first $1.5 million that you have in the accounts, in total, will be untouchable, but amounts above that can be taken by the bankruptcy court to pay off those to whom you owe money.

For information on how bankruptcy will specifically impact you, contact our bankruptcy attorneys today to set up a time for us to talk.

Should I Sell My Home Before or After Filing for Bankruptcy?

For most people, their home is their biggest purchase and most valuable asset, so it comes as no surprise that it is also the biggest concern when considering filing for bankruptcy. If you are in this position, then you may be considering selling your house, even though you may not want to actually leave it. It’s just that the idea of having it sold out from under you by a bankruptcy trustee feels unacceptable.  Though it is possible to sell your home before filing for bankruptcy, it is not recommended, and if you do so you need to make sure that you go about it in the right way to avoid being accused of trying to evade your debtors.

Though the law allows you to sell your property before a bankruptcy, if the sale occurs too close to your filing it is likely to be carefully reviewed to see whether you sold it in order to avoid paying creditors. If you can show that you sold property in order to pay for necessities like medical care or food or clothing for your children, that is permitted. You are also permitted to sell real estate while in the midst of a bankruptcy proceeding but doing so requires permission from the bankruptcy court.

If you are planning on filing a Chapter 7 bankruptcy and you are concerned about the trustee selling your house to pay off your creditors, be aware that this usually only happens when there is substantial equity in the home – otherwise it is not considered worth the time or effort to satisfy the creditors. But you need to wait until the trustee makes this decision before you move forward to sell the house yourself. This confirmation comes in the form of a Notice of Abandonment of Property. Once this has been filed with the court you will be free to either keep the house or sell it.  In a Chapter 13 bankruptcy, the sale of your home would never be considered by the court.

It is generally easier to sell your home after your bankruptcy is over and all of your debts have been discharged. This voids the need for a court order, but keep in mind that if your bankruptcy was filed under Chapter 13, proceeds from the sale over $25,250 will need to be used to pay off the creditors that were included in your bankruptcy plan.

For guidance on moving forward with a bankruptcy filing, contact our experienced attorneys today to set up a time to discuss your situation.

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!

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