When your debt is growing and you’re living paycheck to paycheck, it can be overwhelming. Many people who’d like to file for bankruptcy protection hesitate out of fear that the legal process will cost money that they just don’t have, but there are several bankruptcy options and financial relief programs specifically designed to help low-income individuals.

One of the most common bankruptcy options for low-income individuals is filing a Chapter 7 bankruptcy, also known as “liquidation bankruptcy.” A Chapter 7 bankruptcy filing lets qualified individuals eliminate most of their unsecured debts, including credit cards, medical bills, and personal loans. The process is typically fast—usually completed within three to six months—and provides a fresh financial start.

Chapter 7 is particularly helpful for those in lower income brackets. It is not available to everybody: You must pass what’s known as a means test that compares your income to the median income in your state. If your income is below the threshold, you may be eligible. While there’s some risk of certain assets being sold to repay creditors as part of the filing, many essentials—like clothing, household goods, and sometimes a car or home—are protected by exemption laws.

If your income doesn’t fall below the state median, you can still file for Chapter 13 bankruptcy.  This type reorganizes your debts into a more manageable three-to-five-year repayment plan, allowing you to catch up on missed payments while protecting assets like your home from foreclosure. Chapter 13 is generally a better fit for those who don’t qualify for Chapter 7 or who want to keep non-exempt assets that would otherwise be sold.

As for the actual cost of filing for bankruptcy, there’s no question that fees and legal costs can be a problem for low-income filers. The good news is that many courts allow for fee waivers or payment plans when legal fees would be a burden. Additionally, there are many legal aid organizations and pro bono attorneys who are there to assist with bankruptcy filings at little or no cost.

No matter what your income, before filing, you’re required to complete a credit counseling course provided by an approved agency. Though most of these courses have a fee to attend, some agencies offer free or sliding-scale services based on income. If you’re not comfortable with filing for bankruptcy, debt management plans or negotiating with creditors are low-cost alternative forms of relief.

For many low-income individuals, filing for bankruptcy can be the clearest path to financial stability. Debt relief is possible—even on a tight budget. Contact our bankruptcy attorneys today for more information on your best route forward.

If you’re overwhelmed by debt, filing for Chapter 7 bankruptcy holds the promise of a fresh financial start: Though you may need to liquidate some non-exempt assets to pay creditors, the action also allows you to discharge most of your debt. However, not everyone qualifies for Chapter 7 relief. The Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005 introduced a means test designed to determine whether debtors are eligible to file under Chapter 7 or if they instead must file under Chapter 13 bankruptcy, which mandates agreeing to a repayment plan rather than a discharge.

The means test’s goal is to ensure that only those who truly can’t repay their debts can file to have their debts discharged. It does this by assessing a debtor’s income and expenses to calculate how much disposable income they actually have. If that number is too high, they may be steered toward Chapter 13 instead. The test has two parts:

• Comparing Income to the State Median – The means test first compares your household income to the median income for a same-sized household in your state, which is determined by the U.S. Census Bureau. If your test shows that your income is below the median, you automatically qualify for Chapter 7 and do not need to proceed to the second step.
• Assessing Disposable Income – If your income exceeds the state median, you then go on to complete a more detailed analysis of your income and allowable expenses, including housing, food, medical costs, and transportation. These are deducted from your income calculation to determine your disposable income. The Internal Revenue Service (IRS) has issued guidelines for many categories, but some actual expenses may be considered.

If, after deducting these expenses, you have little to no disposable income, you can still qualify for Chapter 7. If you have enough disposable income to repay a portion of your unsecured debts, you may be instructed to file for Chapter 13 and have a structured repayment plan created.

If you are a disabled veteran or your debts are primarily business-related, you may be exempt from the means test. This is also true if your financial situation changed suddenly because of a job loss, unexpected medical expenses, or a similar scenario. If you can present evidence of your inability to repay your debts, you may still be able to pursue a Chapter 7 filing.

The means test is an essential part of determining your eligibility for Chapter 7 bankruptcy. If you need more information or guidance, contact our experienced bankruptcy attorneys today.

Choosing to file for bankruptcy is the first step in restoring your financial health, but it’s far from the only decision you’ll need to make.  Homeowners who want to sell their home need to analyze the right way and time to do so. This important decision will impact your legal options, your ability to protect your assets, and the course of your financial recovery. Below, we’ll provide guidance to help you through this complex situation.

The first thing you need to know is what type of bankruptcy you’re going to pursue. The two options are Chapter 7 and Chapter 13. Which one you choose will make a big difference in how you should approach your home sale.

• Chapter 7 Bankruptcy: Known as a “liquidation bankruptcy,” people who file under Chapter 7 may result in an order to sell their non-exempt assets to repay their creditors. Though you may fear being forced to sell your home, many states offer homestead exemptions that protect a certain amount of home equity. This allows you to keep your property as long as its value falls within the exemption limit.
• Chapter 13 Bankruptcy: This type of bankruptcy involves the court creating a repayment plan for your debts over three to five years. It often involves changing the terms of loans or debt through reduced interest rates or other means. When filing under Chapter 13, debtors are generally able to keep their homes, but they must demonstrate the ability to stay current on their mortgage.

Depending on the specifics of your situation, selling your home before a bankruptcy filing may make sense, especially if you’re struggling to pay your mortgage or need to reduce your liabilities. The benefits of doing so include:

• Asset Liquidation: You can use the proceeds of the sale to help settle debts or to fund your transition to more affordable living.
• Avoiding Complications: Selling your home will simplify your financial situation, potentially streamlining the bankruptcy process.

If you’re considering a home sale, it’s a good idea to speak with an experienced bankruptcy attorney before either the listing or beginning the bankruptcy process: Selling a home too close to your filing could trigger scrutiny under bankruptcy laws. That’s because all transactions within a specific period before filing are reviewed for fraud or asset concealment. If the court believes you are trying to hide assets or avoid paying creditors, your bankruptcy application could be denied.

If you file for bankruptcy before selling your home, the bankruptcy court will supervise the process.  The benefits of selling after bankruptcy include:

• Debt Discharge: Your bankruptcy filing will likely reduce or eliminate your unsecured debts. This will allow you to sell your home without excessive creditor claims against the proceeds.
• Homestead Exemption: Your bankruptcy filing may preserve the equity you’ve built up in your home if it falls within the exemption. This will protect it from being used to satisfy creditors.

Every homeowner’s situation is unique, and the best approach depends on your state laws, financial circumstances, and goals. Consulting a bankruptcy attorney will make sure you’re making informed decisions and avoiding legal pitfalls.

Debt restructuring and bankruptcy proceedings are different approaches to the same or similar problem: they are applied when businesses or individuals are facing acute financial distress. Each has its advantages, disadvantages, and appropriate contexts, and choosing the right option is dependent upon your specific situation.  To get a better understanding of both, let’s look at what each represents, as well as their pros and cons.

• Debt Restructuring

Debt restructuring involves renegotiating the original terms agreed to with creditors to make debt repayment more manageable. Options include reducing the interest rate that the creditor charges, extending repayment periods, or reducing the principal amount owed.

Pros: Debt restructuring will allow your company to keep operating without disruption or the stigma that often comes with a bankruptcy filing. It also is less costly than filing for bankruptcy, as it involves less administrative and legal intervention or support, and can help maintain your relationship with your creditors.

Cons: Choosing debt restructuring is a two-way street. You’ll need cooperation from your creditor for the process to be successful, and that is not always available. The process is also only a partial solution, as it may only address a small portion of the financial problems that you are facing. It also does nothing to address operational inefficiencies or other issues that led to your initial financial stress.

• Bankruptcy

Bankruptcy is a formal legal process conducted under the supervision of the courts. There are multiple types of bankruptcies, including Chapter 7 (liquidation) and Chapter 11 (reorganization) for businesses and Chapter 13 for individuals.

Pros: Bankruptcy is a structured process that provides comprehensive debt relief, discharging many debts entirely and providing a fresh financial start. It also stops all creditor actions immediately upon the filing of papers, thus putting a halt to lawsuits, foreclosure actions, and wage garnishments.

Cons: Filing for bankruptcy does not necessarily require legal representation, but in most cases having an attorney makes a big difference in the success of your application. This expertise comes with costs. Bankruptcy also has the potential for harming your reputation, and will definitely damage your credit rating for a significant period. Depending on your situation, you may find yourself facing the sale or liquidation of assets that are important to you, and that may even mean ceasing business operations entirely.

If you’re trying to decide between debt restructuring and bankruptcy, it may be helpful to remember that debt restructuring is generally appropriate for individuals and organizations whose financial stress is manageable and who have a higher likelihood of getting cooperation from their creditors. Bankruptcy, on the other hand, is more appropriate when comprehensive debt relief is the only way to maintain financial liability, and where creditors are less likely to negotiate new terms.

Whichever option you choose or if you need help seeing which is most appropriate for your situation, contact our experienced law firm today for guidance.

The New Year is traditionally a time for a fresh start, and if you’ve just gone through a bankruptcy, it’s the perfect time to rebuild your financial health. As you turn to a new calendar year, think about establishing some new habits, setting financial goals, and adopting strategies that will help you achieve financial stability. Here are a few ideas to help you along the way.

• Start by creating a realistic, reasonable budget.

Everybody talks about sticking to a budget, but few people actually sit down and write one up. Financial experts say that doing so can make a big difference, and it’s not hard to do. Start by analyzing your income and your expenses. Write down what you spend on necessities like housing, utilities, food, and transportation, and how much money you have coming in. If the two don’t balance, then you’ll need to figure out where you can cut. Look at unnecessary expenses like subscriptions. Ask yourself whether you need something or want it. There are plenty of budgeting apps that can help you go through this exercise. If possible, try to prioritize savings and debt repayment.

• Build an emergency fund.

Things come up, and you need to be ready – otherwise, you’re likely to try to pull out a credit card and get yourself back into trouble. You don’t have to save a lot to make a difference. Set aside a manageable amount that you’ve included in your budget and stick to it.

• Work on rebuilding your credit score.

Bankruptcy will hit your credit score hard, so rebuilding your credit is important. Apply for a secured credit card or credit-builder loan and be responsible about using it to make small, regular purchases that you’ve already included in your budget and paying off the balance in full each month. Making timely payments is important to show that you’re reliable and worthy of future trust from creditors.

• Ask for help

There is no shame in bankruptcy and none in asking a financial advisor or credit counselor for help. That’s what they’re there for. They can provide you with advice on the decisions you’re making and can also help you avoid predatory lenders.

It’s easy to fall into the trap of feeling anxious or depressed about your financial condition after a bankruptcy filing, but the New Year is a great time to adopt a positive mindset. You can definitely do this! If you need guidance, don’t hesitate to contact our experienced bankruptcy attorneys. We’re here to help.

It’s that time of year again. Holiday sales are ramping up and calling all of our names. While it’s tempting to take advantage of holiday bargains, if you’re experiencing financial difficulties – and especially if you’re considering bankruptcy — you’re much better off staying away from the stores and stepping away from the keyboard. As much money as you could save by taking advantage of deep discounts, you’re far better off taking a more conservative approach to shopping right now. Those prices — no matter how much you save — can get you into big trouble down the road.

Maybe it was a job loss that got you into financial trouble, or a pay cut, or a medical emergency. Maybe credit card debt put you in a financial hole. Whether it was one of these things, a combination of factors, or something else, now is the time when you need to exercise financial discipline because adding debt on top of debt will exacerbate the problem.

The truth is that the items that you see on sale are probably not essential to your life, and if you add them on top of your already existing financial stress, you’re going to end up doing nothing but paying interest on your credit cards. You may even be forced to take advantage of payday loans. All of these choices put you in the position of paying more for the items you thought you’d saved money on – it’s just spread out over time.

Not falling prey to discount temptation is especially important if you’re considering filing for bankruptcy. Even if buying on sale is well-intentioned, the fact that you accumulated more debt before filing could be viewed as fraud by the court and the trustee managing your case, and you could end up unable to have your bankruptcy case heard – or worse yet, you could find yourself in legal trouble.

The holidays are a time for happiness, and though giving gifts is part of it, the big sales offered by stores can blur the line between need and want. Rather than adding to your financial stress, spend your time focusing on what truly matters. Your family does not need expensive gifts as much as they need you to be present, in a positive emotional state.

If you need professional guidance on managing your financial situation, we can help. Contact us today to learn more.

When you’re considering a bankruptcy filing, you may feel like you’re alone, but in truth, there are plenty of people in the same boat that you are: most years see about half a million people filing for personal bankruptcy, with years of economic stress leading to over a million filings.  Working with a bankruptcy attorney and knowing what to expect can alleviate a lot of the stress. Here’s a summary of the process from start to finish.

• Initial meeting – A bankruptcy attorney will assess your financial situation and explain all your options — including debt consolidation and negotiating with creditors — based on your income, debts, and assets. Your responsibility will be to provide the detailed information that they need.
• If you opt for a bankruptcy filing, you must attend a credit counseling session with an approved agency. The sessions take 1-2 hours and ensure that you are making an informed decision. You will receive a certificate of completion at the session’s end. This document is required for your filing.
• Identify whether you will be filing for a Chapter 7 liquidation bankruptcy that discharges all of your debts or a Chapter 13 bankruptcy that creates a new repayment plan. This is determined by your income and debt.
• File the bankruptcy petition. The paperwork will include information on your income, expenses, assets, and debts.
• The automatic stay goes into effect, stopping creditors and collection actions, including wage garnishments.
• Meet with the bankruptcy trustee and your creditors to review the bankruptcy filing. Your attorney will attend this meeting with you.
• Take a debtor education course that teaches you about budgeting and avoiding future financial problems. This is a requirement. After the course, you will be given a certificate of completion that must be submitted to the court to receive a discharge of your debts.
• Agree to the liquidation assets to satisfy debts as ordered by the trustee or agree to the Chapter 13 repayment schedule (usually a 3-5 year plan).
• Discharge of all debts releases you from the obligation to pay most creditors. You will still be obligated to pay child support, some taxes, student debt, and other non-dischargeable debts.

This summary is meant to give you a rudimentary idea of what to expect from a bankruptcy filing. For more detailed information that is specific to your situation, contact us today to set up a time to meet.

It’s common for individuals who are having financial trouble – or who have an insufficient credit history – to ask a friend, family member, or colleague to co-sign a loan. It’s also common for married couples and family members to be joint account holders on checking and savings accounts. But when someone who is financially healthy is a co-signer or joint account holder with a person who files for bankruptcy, it puts the financially healthy person in a precarious position. Here’s what you need to know about protecting yourself in this type of situation.

• Co-Signer and Joint Account Holder Liability

When you co-sign a loan or have a joint credit card account, you are agreeing to be responsible for the debt if the primary borrower defaults. If that person files for bankruptcy, they are automatically protected from creditors, but you won’t be. You will have full liability for the outstanding debt.

• Chapter 7 vs Chapter 13 Bankruptcy

If the person you’ve co-signed for files for bankruptcy under Chapter 7, the debt may be discharged for them but not for you, and the creditor can pursue you for the full amount of the debt. If they file under Chapter 13, you may have some protection, as a co-debtor stay may be implemented pending the repayment plan that is agreed to. Still, if the debtor fails to make their payments, you will be responsible.

• Credit Score Impact

A co-signer’s credit score will not be impacted by the other individual’s bankruptcy filing unless they fail to make payments.

If you find yourself in this situation, there are certain steps you can take to protect yourself. You can try negotiating with the creditor to restructure the debt or refinance it into a single loan to reduce the financial burden. You can pay off the debt to avoid collection actions. Or, in some cases, you can request a co-signer release to remove yourself from responsibility after the primary borrower has made some on-time payments.

You can be put in an uncomfortable and often untenable position when a person who has asked you to co-sign ends up filing for bankruptcy. To understand your legal options and responsibilities, contact an experienced attorney who can help you manage this difficult situation.

There are so many rewards of being self-employed that individuals who set it as a goal often forget or dismiss the downsides. Just as applying for a mortgage is more complex when you don’t have a W-2 to prove your income, the same is true for a bankruptcy filing. If you’re self-employed and you’ve found yourself pondering a Chapter 7 or Chapter 13 filing, there are special considerations you’ll have to weigh, particularly surrounding income verification and asset valuation.

When you’re self-employed, you’re responsible for your own financial records, accounts payables and receivables, and tax payments. Though entrepreneurs are incessantly advised to keep their business finances separate from the personal, it is easy to blend the two, and this can complicate the documentation process when it comes to a bankruptcy filing.

Whether you pursue a Chapter 13 bankruptcy that lets you keep your assets while you repay your reorganized debts or a Chapter 7 bankruptcy that involves liquidating non-exempt assets to repay creditors, you’ll need to document your income. This means collecting at least 6-12 months of bank statements to show deposits related to business income; copies of invoices, client contracts, and payment receipts; two years of up-to-date tax returns; profit and loss statements showing income, expenses, and net profits; and a cash flow statement.

This is a level of documentation and financial tracking that many self-employed business owners may not have, but taking the time to gather, organize, and put this information down on paper will make a significant difference to their filing being successful. The bankruptcy court will also expect a comprehensive asset evaluation that includes the value of your home and real estate, vehicles, and other personal property as well as business assets including equipment and tools, inventory, accounts receivable, and intellectual property.

Working with an experienced bankruptcy attorney will make all the difference in your ability to navigate this path with confidence. They can guide you through decisions on exemptions, help you arrange for mandatory credit counseling, prepare and file your petition and all the needed forms, and even counsel you on the best steps for rebuilding your credit.

Filing for bankruptcy carries many additional impacts for the self-employed. Make sure that you’re well prepared and understand what lies ahead by working with our experienced bankruptcy attorneys before you begin the process.

Moving forward with a bankruptcy filing is a very big decision. Not only do you need to worry about the impact on your credit, but there are also very real concerns about being able to hold on to your most valued assets. While it is absolutely true that a Chapter 7 bankruptcy filing carries the risk of asset loss, it is also true that going into the process with the guidance of an experienced attorney will ensure that you have a strategy in place that maximizes your ability to protect what matters to you most. Below you’ll find information on exemptions and the kind of planning you can do to put yourself in the best possible position.

The first thing you need to understand is that there are both federal exemptions and state exemptions that allow you to protect certain property. Each state has its own set of exemptions that may be selected in lieu of the federal option. The exemptions that are most commonly applied are the homestead exemption that protects a certain amount of equity in your home; a vehicle exemption that allows you to shield equity in one or more of the vehicles you own up to a certain amount; the personal property exemption that covers items like clothing, furniture, and appliances; and the wildcard exemption, which allows you to pick out whatever property you want to protect, up to a specific value. You are also able to exempt the tools on which you rely to make a living, and your retirement accounts.

With this in mind, pre-bankruptcy planning applies a strategy that converts non-exempt assets into exempt ones in a legal way.  It may involve paying down your mortgage using non-exempt cash to boost the exempt equity or transferring property to another person, though if this is clearly being done to evade creditors, it may be reversed by the bankruptcy trustee. Other options include setting up irrevocable trusts that protect your assets, but this type of action must be pursued a significant amount of time before you file for bankruptcy to avoid the assets being clawed back or the debtor being accused of fraud.

There are additional protections that can be put in place for businesses. What’s most important is that you don’t enter into a bankruptcy filing without guidance and preplanning. For more information on the options available to you, contact our experienced bankruptcy attorney today.