Archive for the ‘Bankruptcy’ Category

Short Sale and Bankruptcy: Weighing the Options for Mortgage Debts

When paying your mortgage debt is beyond your means and you are facing the possibility of foreclosure, there are a couple of options available to you. These include allowing the foreclosure to happen; proceeding with a short sale; and filing for bankruptcy. Deciding which is the best choice for you can be a challenge, especially if you are interested in maintaining or rebuilding your credit score.  Let’s look at the factors that you should consider.

There’s no doubt that choosing any of these options will hit your credit score hard. Most short sales and foreclosures will drop your credit score by between 85 to 160 points, while a bankruptcy filing will drop it by 130 to 240 points.  But consider this: allowing your lender to foreclose on your house is not necessarily the end of the story. They can still go after you for any difference between the outstanding loan and the price at which the house sold at public sale. By contrast, if you choose bankruptcy this difference would be discharged. Another thing to consider is that if you pursue a short sale you will be more likely to qualify for a mortgage loan in the future.

Lenders tend to look more kindly at those whose histories include a short sale, and generally allow those who’ve chosen this route and who have a 20% down payment two years after the short sale takes place. Similarly, those who file for bankruptcy can qualify for a mortgage four years after their date of discharge, but those who have chosen foreclosure are required to wait 7 years from the date of the judgment entered against them, and also have to pay off any deficiency judgment.

Though many people believe that a short sale is more beneficial than bankruptcy when it comes to preserving or rebuilding your credit score, there are other things to remember, including the fact that short sales are not easy and can take a long time. Additionally, banks don’t always approve them, and the borrower can still be left in the position of needing to make up for the deficiency. Bankruptcies can be accomplished quickly and without the fear of being pursued for any shortfall in the amount that you owe the bank. Best of all, without these issues haunting you, you can begin rebuilding your credit quickly.

Contact our experienced bankruptcy attorneys today! 


How to Know if Bankruptcy is Your Best Option

Nobody likes opening their mail (or inbox) and seeing a ton of bills. But for some people, bills evoke more than dislike: they cause actual pit-of-the-stomach, heart-thumping dread. The reason is simple — they are unable to pay. Regardless of whether the reason is financial carelessness or having been through some kind of economic disaster, if you’re in a situation where you see no end to your financial trouble then you are probably considering filing for bankruptcy. The question is, how can you tell whether it’s your best option?

The first thing you need to know is that there are plenty of highly qualified people who can help you come to the conclusion and action that’s right for you, including the skilled attorneys at our law firm. Though bankruptcy is an excellent vehicle for some people with debt, it is not the only way to find relief. Here’s what you need to know.

  • Not every debt is dischargeable. Though credit card debt and medical debt can be erased in a bankruptcy, you will still be liable for alimony, child support, and student loans. Further, if you file for a Chapter 7 bankruptcy and some of your loans have to do with secured debts such as your home, keep in mind that you are probably going to have to sell off some of your assets in order to hold onto them – or face losing them.
  • You can’t cordon off some of your assets as though they don’t count. If you have a pension or life insurance plan, a 401K or other types of savings that you have been hesitant about cashing out, a bankruptcy court is not going to allow you to continue doing so. You’re going to have to end up making some sacrifices.
  • There are different types of bankruptcy. While Chapter 7 means that most of your debts will be discharged but you have to get rid of assets, Chapter 13 gives you more time to pay off your debts and might lower them or the interest rate that you are paying. Many times a debtor will not qualify for Chapter 7 because their income is too high.

There are other options, outside of bankruptcy, that might be a better fit for you. If your biggest problem with your debt is the calls you’re getting from creditors, you can put a stop to that under the terms of the Fair Debt Collection Practices Act, which has established limits on the times and ways that debt collectors can communicate with you, on what they can say and even where they can call you. You can also undergo credit counseling to help you figure out how to deal with your debt, or you might consider debt consolidation or settlement.

For assistance in finding the best way to deal with your situation, contact us today. We have the experience and knowledge you need.

What to do When a Creditor Files a Collection Lawsuit

Most American adults carry some kind of debt, but if your debt has gotten away from you and your creditors are tired of waiting, they’ll first turn to debt collectors and then eventually to filing a collection lawsuit. If your first response to a collection lawsuit is fear, that’s perfectly normal. The best way to move forward is by educating yourself on your rights and what to do — as well as what not to do.

The first thing you need to know is that it’s a big mistake to ignore a collection lawsuit. The notification comes in the form of a summons and complaint. Failure to respond will lead to a default judgment in the form of wage garnishment or capture of money from your bank account, so doing nothing is a big mistake, especially because you could end up liable for additional fees and charges that could significantly increase the amount you end up paying. You need to respond but do so appropriately. That means filing an answer with the Clerk of the Court from which your summons was sent. You don’t need to say that you owe the money, but you do need to respond within the deadline stated in the summons. Make sure you ask the Clerk for a stamped copy of your answer and then send it via certified mail to your creditor so that they know you responded.

Once you’ve acknowledged the claim, you have a few options. You can challenge the creditor’s legal right to file the claim against you. There’s a good chance that the company that filed suit is not the same one you originally borrowed from. If that’s the case, they’ll need to show legal proof that they own the debt. Lots of companies don’t have access to this information (which might include a credit agreement signed by you or documentation of the chain of custody of the debt) and count on debtors not knowing to ask. They also need to prove that you’re responsible for the debt and the exact amount you owe. Many are unable to do so and the claim will be dismissed.

Another important point to remember is that there is a limit to how long creditors have to file a lawsuit over a debt. Check your state’s laws and the date that you were last active on the account because in many cases the statute of limitations will have passed. That date is very important, so make sure you don’t automatically send a payment, as it will start the clock again.

The most important thing to do when facing a collection debt is to get in touch with one of our knowledgeable attorneys, who are experienced in collection lawsuits. We can advise you on your best options, and save you time, stress and money, so contact us today!

How Long Does a Chapter 13 Bankruptcy Take?

A Chapter 13 bankruptcy lets you reorganize secured debts such as car or house payments and some unsecured debts. It lets you repay some creditors at a lower rate and some for a longer period of time or a lower interest rate. The plans usually last from three to five years, but there are a lot of factors that can change the length of time.

When a Chapter 13 bankruptcy payment plan is created, you stop paying your creditors. Instead, sending monthly payments to the trustee who is responsible for administering your bankruptcy. The length of the plan will be determined by several different things, with one of the most important being the average monthly income in your state. Your income will be compared to that number to determine whether a three-year plan or a five-year plan is more appropriate for you. If you earn more than the state median income you will probably have to file for a five-year plan, even if you can go shorter.  The longer your plan, the lower your monthly payment will be,

When you file for Chapter 13, you will have to attend a First Meeting of Creditors where you attest to all of your documents being right and a confirmation hearing. These are designed to present your plan and see if all of those who you owe money to agree to what you are proposing. If none of your creditors object, the process of setting up and getting your plan confirmed usually takes three or four months, and then the actual three- or five-year bankruptcy plan begins, though most people start making payments before the confirmation hearing is held.  If you want to and are able to, you can usually pay off your bankruptcy plan early. If, however, you experience a change in circumstances that makes your sticking to the payment plan a challenge, you can request a modification by filing for a remedy. Typical reasons that are considered valid include losing your job, having another child, or getting divorced. You can also file for a modification if your circumstances improve through a raise or a new job that allows you to pay faster. Once you’ve paid off your repayment plan, all of your debts are discharged.

Filing for Chapter 13 bankruptcy is a good way to regroup and get a fresh start when your debts have gotten out of control. For more information on whether it is right for you, contact our experienced attorneys today.






Does a Bankruptcy Stop Wage Garnishment?

Wage garnishment is a legal action that permits a creditor to have the sheriff or marshal contact your employer and order them to hold a certain percentage of your wages and send it to them. It can have a significant effect on your quality of life and ability to pay for fixed expenses, even though there are limits on how much can be held back. If you are struggling to make ends meet as a result of a wage garnishment imposed by a credit card company or other creditor, filing for bankruptcy is an effective way to have a wage garnishment stop.

There are some types of wage garnishment that cannot be voided by a bankruptcy filing. The most notable of these is child support, though it is also true for the payment of taxes and student loans. But if your wages are being garnished following a legal filing by a creditor, then the automatic stay that is part and parcel of a bankruptcy filing will not only stop debt collectors from calling but will also stop wage garnishment.

Most people who are in debt have found themselves in this untenable position for reasons that are out of their control: they may have suffered a traumatic injury that kept them from work, or an illness that left them with enormous hospital bills. They file for bankruptcy because they have been pushed to the brink by relentless calls from debt collectors and the mounting piles of bills. Many of them have already gone through the headache of fighting with a creditor and having their wages garnished, so the elimination of that reduction in their pay makes the process even more appealing.

As referenced earlier, there are some types of wage garnishment that cannot be stopped. In addition to those set up for the repayment of a student loan or tax debt, or to pay required child support, people who have previously filed for Chapter 7 bankruptcy will only see limited relief from wage garnishment, and if this is your third filing you will not be eligible for an automatic stay. The automatic stay lasts for a much shorter period for a second filing, and as soon as it is over any debt that was not discharged in the bankruptcy can be subject to wage garnishment again. That being said, in most cases a bankruptcy filing will discharge all of those debts.

If you are having a hard time making ends meet as a result of a wage garnishment and you need to talk to a bankruptcy expert, we are here to help. Contact us today to set up an appointment to come in for a consultation.


Are Medical Bills Wiped Out by a Chapter 7 Bankruptcy?

Over the last several decades, medical science has made dramatic strides, and many injuries and illnesses that would once have represented a death sentence are now treated as a matter of course. Unfortunately, astronomical costs have gone hand-in-hand with the improvements in skills and technology, and as a result, many people have found themselves grateful for their lives but saddled with overwhelming debt.

If high medical bills have put you in a position where you are unable to pay any of your bills, you are not alone. Medical debt is among the most common reasons for people to file for bankruptcy. Though filing for bankruptcy may feel unfair if you’ve always paid your bills up until the time that you became sick, the good news is that by taking advantage of this legal process, your medical bills can be entirely wiped out.

No matter what the cause of your overwhelming debt, once you begin the process of filing for bankruptcy your debts will be separated into two separate pots: priority and nonpriority unsecured debt. Medical debt is unsecured, in much the same way that your credit card bills are, and they do not rank as a priority for payment. That category is reserved for things like child support and past-due tax obligations or legal settlements. The real question of how your medical bills will be addressed depends upon whether you file for Chapter 7 bankruptcy of Chapter 13. Though both can wipe out your medical debt, Chapter 7 will simply eliminate almost all of your unsecured debts while Chapter 13 would likely combine all of your debts into one lump sum, then reduce the total and provide you with a payment plan that you can pay off over a prescribed, limited period of time.

The determination of which Chapter you file under may not be up to you: in order to file under Chapter 7, you must meet certain qualifications regarding the amount of disposable income you have available while filing under Chapter 13 will generate a calculation based on income, fixed expenses and your nonexempt assets to determine how much you are able to pay.

Though it may feel uncomfortable to you to consider filing for bankruptcy, you may have little choice in the face of the bills from a catastrophic injury or illness. For information on how to go about determining whether bankruptcy is right for you, contact our office today.

Finance Goals for a New Year after a Bankruptcy

Filing for bankruptcy offers you the opportunity to make a fresh start, so what better time to consider it than the New Year, which is well known as the time for making resolutions and improvements. The New Year is the perfect time to set yourself realistic financial goals that will put you on the path to a better financial future. Here are our top bankruptcy resolutions, for any time of year.

  • Budget

Smart budgeting is key. Maybe you’ve never given yourself a budget, or maybe the budget that you worked with before was not well crafted. Either way, after filing for bankruptcy it is essential that you make a list of all of your monthly expenses broken down into whether they are fixed (like housing or car payments that are always the same and come every month), variable (like food, entertainment and clothing) and irregular (unexpected expenses like gifts you have to buy, or medical bills). The best way to do this is to go through your bank statements to see what you’ve spent in the past. After you’ve made your list, figure out how much you want to save each month. Saving is an important part of your new financial journey.

After you’ve figured all of these things out, look at your fixed expenses and see if you can lower or eliminate any of them, then do the same with your variable and irregular expenses. You can realize savings by cutting down on eating out, by not buying clothes unless you need them or only buying on sale, by cutting out paid channels on your cable bill, and by buying less expensive gifts. Figure out how much your take-home pay is for the month and then compare it to your expenses to make a budget. Make sure that you’re not spending more than you’re making, and if you are, cut more out of your budget.

  • Save What You Can

Save extra money. The budget you set up must set aside money for savings. Once you have the amount figured out, set up an automatic deduction from your checking account to be put into your savings account without you having to do anything. Direct deposit is another smart way to achieve this goal. Having these savings build up will help you build up an emergency fund to prevent you from going into debt in case something unexpected comes up.

  • Be Smart About Using Your Credit

There are great credit options for those who have gone through a bankruptcy. A secured credit card is a great example. this kind of credit option allows you to build your credit by using it to make purchases. The credit card is secured by a deposit, though. This limits your spending ability to what you actually have. You should limit credit usage as much as possible (if not completely) outside of credit and loan options strictly meant for building your credit. Use cash instead.

There are many more things you can do to rebuild your credit and put yourself on a solid financial footing, but these are important first steps and the New Year is the perfect time to introduce them to your life. For more assistance with dealing with bankruptcy, contact us today to set up a time for us to meet.



Does Bankruptcy Ruin Your Credit?

When clients come to us seeking guidance about whether they should file for bankruptcy, they frequently express concern about the impact that doing so will have on their credit score, and their ability to get credit in the future. That is a valid concern. There is no doubt that bankruptcy will cause your credit score to plummet, but the truth is that being unable to pay your bills will do the same. When weighing your options, you need to fully understand the impact that filing for bankruptcy will have, in terms of both immediate impact and the long-term effect, as well as what you can do to counter any negative effects of your decision. Here’s what’s most important for you to know.

  • Your Credit Score Is Definitely Going to Drop

If your previous credit score was solidly at 700 or above, you are going to see it drop by at least 200 points. If your score was lower your drop will not be as precipitous, but you are still going to fall, probably by about 125 to 150 points.

  • The Bankruptcy Will Stay On Your Record For Several Years

By law, filing for a Chapter 7 bankruptcy becomes a matter of public record for a full ten years, and even if you opt for a Chapter 13 reorganization the references to that filing will be out there for seven years. There is no escaping the fact of your filing, even if it discharged your debts, judgments, tax liens.

  • Time Heals All Wounds

As is true of so many other negative events in our lives, the more time goes by, the less impact your bankruptcy filing will have. Even during the years that the bankruptcy is included in your credit report, the erasure of existing debts will automatically help boost your report, and if you begin paying your bills in a timely way that will be reflected and your credit score will rise. And even though ten years sounds like a lot of time, it can go by in a blink of an eye.

There are also steps that you can take to help yourself build new credit and minimize the impact of a bankruptcy filing. For more information on filing for bankruptcy and the positive steps that you can take going forward, contact us today to set up a time to meet.

How to Handle Holiday Spending While Going Through a Bankruptcy

The holidays are the most expensive time of the year for most people. They come right on the heels of other expensive events, from back-to-school shopping and Halloween for those who have children to Thanksgiving with its big food and travel budget. By the time that Christmas, Hanukkah and New Year’s rolls around, the amount that we spend on entertaining and dressing up for holiday parties, traveling to visit family and friends, decorating and gift-giving adds up quickly. And it never seems to end. This is all a challenge for people who are financially stable but it’s a real frustration and source of pain for those who are going through — or about to go through — a bankruptcy.

If you are at the point where your debts are out of control and you are considering filing for bankruptcy, you may be tempted to simply purchase whatever you want for the holidays, thinking that any debt that you run up will simply be discharged once you file. This is a big mistake. For those who don’t qualify for Chapter 7 and have to file for bankruptcy under Chapter 13, your debt will not be waived – instead, it will simply be added to your payment plan, and you’ll have put yourself into an even worse position.  As for those who do qualify for Chapter 7, bankruptcy courts spot this type of accumulation of debt easily and view it as an abuse of the system. You will likely be required to pay or else return all of the things that you purchased.

If you’ve already filed for bankruptcy, then you’re either on a highly restrictive budget tied to your payment plan (under Chapter 13) or have very little disposable income to spend. This means that you are going to have to change your spending habits in order to stay within your means. Spending for the holiday doesn’t have to come to a complete stop, but it does mean imposing discipline on yourself and understanding the difference between want and need. You may also consider speaking to family and friends to come up with a way for you to participate in their celebrations without having to spend money that you simply do not have. Taking advantage of sales and promotions is a good way to cut expenses, and so is setting a budget and sticking to it. Homemade gifts are often appreciated more than those that are store-bought and can save money too.

If you are struggling with debt and need help with filing for bankruptcy, we can help. Contact us today to learn more about the process.

Which Debts are Discharged by a Bankruptcy and Which Are Not?

People seeking relief from debt through bankruptcy do so with the understanding that in doing so their credit card bills will be wiped away, as well as most of their other unsecured debt. But those who don’t spend time doing the research into the ins and outs of the process risk having unrealistic expectations about how they will be impacted, and particularly on what debts they will still have to pay. Some debts are notoriously difficult to discharge through bankruptcy, but others are specifically not eligible for discharge. It is important that anybody considering a bankruptcy filing familiarize themselves with these exceptions so that they are not surprised at the outcome they encounter.

The first thing that debtors need to understand is that even among the debts that are normally dischargeable, creditors may attempt to stop the debtor from avoiding payment. They can file motions to the court to excuse them from the stay that prevents them from pursuing collection actions. Further, student loan debts and income tax debts are generally not dischargeable unless the debtor can provide a significant justification for why they should be relieved of their debt or permitted to renegotiate the amount that they owe.

Beyond these debts that are a challenge to discharge, there are other 21 categories of debts that simply cannot be discharged no matter how desperate the debtor’s financial situation. These debts include:

  • Alimony
  • Child Support
  • Debts obtained through fraud, embezzlement, or larceny
  • Debts where the borrower was acting in a fiduciary capacity
  • Debts for willful injury or wrongful death
  • Unpaid withholding tax, Social Security tax, income tax or other back taxes or tax penalties
  • Mortgage debt
  • Condominium or cooperation association fees
  • Debts not discharged in a previous bankruptcy filing
  • Debt from borrowing against some retirement plans
  • Court fees

It is also important to note that you cannot discharge credit card debt over a certain threshold incurred within 90 days of filing for bankruptcy. There is a long history of people foolishly running up big credit card bills in the days and weeks before filing for bankruptcy under the misapprehension that they would end up getting the things that they purchased for “free.”

Filing for bankruptcy is a big decision and one that should not be made without the proper guidance. To meet with one of our bankruptcy attorneys to discuss your situation, contact our office.


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