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Bankruptcy Options for Individuals: Chapter 7 vs. Chapter 13

Filing for bankruptcy is a decision people reach when they’re at the end of their financial rope. But even those who feel they have no more choice will find that they have options available to them. The most important of these is the question of whether to file for Chapter 7 or Chapter 13.

Chapter 7 and Chapter 13 are each different sections of the U.S. Bankruptcy Code, and there are significant differences between the two, and different outcomes. Let’s take a quick overview of the two.

Chapter 7 is also known as liquidation bankruptcy because it is the type of process in which the debtor sells off non-exempt assets to repay their creditors. The biggest advantage of a Chapter 7 bankruptcy is that almost all debts can be discharged, meaning that you no longer will owe on whatever you borrowed. In exchange for not having to repay your debts, your credit rating will take a significant dive, and you will have a hard time borrowing money in the immediate future.

Not everybody is eligible for a Chapter 7 bankruptcy: you must take a means test that gauges the amount that you owe against your income and assets to determine whether you can pay. The criteria for the means test is based on the median income in the state.

Chapter 13 is known as a reorganization bankruptcy because rather than having your debts forgiven and discharged, they are restructured in a way that makes it easier for you to pay them back. This may mean that you are given more time to pay, lower interest rates, or some other revision that ends with you paying your creditors off in a way that is more in keeping with your earnings.

One of the biggest advantages of a Chapter 13 bankruptcy is that the person who files for bankruptcy protection under Chapter 13 can keep all of their assets and that after the bills included in the repayment plan are paid, their debts are completely discharged.

Though debtors who prefer a Chapter 7 bankruptcy will have to prove that they are eligible, having the choice between the two different categories of filings allows you to choose the answer that is best for your family. For assistance in moving forward or to get answers to your bankruptcy questions, contact us to set up a time for us to chat.

Bankruptcy and Foreclosure: Navigating the Intersection of Real Estate and Debt

Being notified of a foreclosure action is one of the most chilling things that a homeowner can face. This legal process is not something that happens randomly or that a lender wants to pursue: it generally takes repeated missed mortgage payments and warnings before a lender moves to take action.

If your debt has resulted in you missing so many payments on your real estate loans that the bank is looking to repossess it, then filing for bankruptcy may offer you temporary respite, but the type of bankruptcy you file for and the timing of your filing will both play an important role in how it goes.

One of the biggest ways that filing for bankruptcy can help a person facing foreclosure is the automatic stay. This is a legal action that takes place as soon as a bankruptcy filing is received. It stops all creditor actions, from collection calls to foreclosure proceedings, until the bankruptcy is resolved. At the least, this will allow you to buy time and figure out your next best steps.

The best way for you to figure out what you should do next and what your options are is to speak to an experienced bankruptcy attorney, but here is a basic overview:

  • If you file (and qualify for) a Chapter 7 bankruptcy, there is a chance that you will have to liquidate all of your assets as part of the discharge of your debts. If your home doesn’t qualify for exemption and/or you can’t catch up on your missed payments, there’s a good chance that the foreclosure is going to go through after the bankruptcy process is over.
  • If you file for a Chapter 13 bankruptcy, the court will craft a repayment plan that helps you catch up on missed payments, usually with more advantageous terms. This may mean a more extended period for paying your debts off or a reduced interest rate. A Chapter 13 bankruptcy gives you a much better chance to repay what you owe and stop a foreclosure action.
  • Loss mitigation or loan modification are both possibilities, but to make this work you’ll need to be able to agree to challenging terms that show that you will be able to make payments in the future.

Foreclosure is a frightening prospect. An experienced bankruptcy attorney can help you understand whether filing for bankruptcy is the right move for you, and explain all of your options. For more information, contact us today.

Bankruptcy and Foreclosure: Navigating the Intersection of Real Estate and Debt

Being notified of a foreclosure action is one of the most chilling things that a homeowner can face. This legal process is not something that happens randomly or that a lender wants to pursue: it generally takes repeated missed mortgage payments and warnings before a lender moves to take action.

If your debt has resulted in you missing so many payments on your real estate loans that the bank is looking to repossess it, then filing for bankruptcy may offer you temporary respite, but the type of bankruptcy you file for and the timing of your filing will both play an important role in how it goes.

One of the biggest ways that filing for bankruptcy can help a person facing foreclosure is the automatic stay. This is a legal action that takes place as soon as a bankruptcy filing is received. It stops all creditor actions, from collection calls to foreclosure proceedings, until the bankruptcy is resolved. At the least, this will allow you to buy time and figure out your next best steps.

The best way for you to figure out what you should do next and what your options are is to speak to an experienced bankruptcy attorney, but here is a basic overview:

  • If you file (and qualify for) a Chapter 7 bankruptcy, there is a chance that you will have to liquidate all of your assets as part of the discharge of your debts. If your home doesn’t qualify for exemption and/or you can’t catch up on your missed payments, there’s a good chance that the foreclosure is going to go through after the bankruptcy process is over.
  • If you file for a Chapter 13 bankruptcy, the court will craft a repayment plan that helps you catch up on missed payments, usually with more advantageous terms. This may mean a more extended period for paying your debts off or a reduced interest rate. A Chapter 13 bankruptcy gives you a much better chance to repay what you owe and stop a foreclosure action.
  • Loss mitigation or loan modification are both possibilities, but to make this work you’ll need to be able to agree to challenging terms that show that you will be able to make payments in the future.

Foreclosure is a frightening prospect. An experienced bankruptcy attorney can help you understand whether filing for bankruptcy is the right move for you, and explain all of your options. For more information, contact us today.

Why Should You Consider Bankruptcy in The New Year?

The new year means different things to different people. Depending on your family’s traditions, your culture, your beliefs, and your experiences, it might be a time for reflection and resolutions or a time of religious significance. No matter who you are or where you’re from, most people associate this time of year with renewal and fresh starts. If you’re facing crushing financial challenges, the new year may be the perfect time for you to wipe the slate clean and file for bankruptcy.

Filing for bankruptcy, whether a Chapter 7 discharge of all your debts or a Chapter 13 reorganization, allows you to leave the past behind. For some, bankruptcy may be part of a resolution to do better with your finances and avoid profligate spending. For others, a bankruptcy filing can free you of the burdens associated with a job loss or significant illness or injury and hospitalization. Either way, even if your filing means you have to rebuild your credit history, it is still a chance to embrace new possibilities and start over with renewed hope.

If you’re uncertain about the impact of filing for bankruptcy, here are a few things for you to know:

  • When you apply for bankruptcy you will need to submit a comprehensive list of your income, assets, and liabilities. Using this, the bankruptcy court will conduct a means test to determine whether your income qualifies you to file for a Chapter 7 bankruptcy which will discharge your debts, or a Chapter 13 bankruptcy which will reorganize your debts into more manageable payments, usually with more attractive terms.
  • When you file for bankruptcy, it activates an automatic stay that will stop your creditors from attempting to collect the money that you owe. It will also temporarily stop any foreclosure actions.
  • Filing for bankruptcy will also stop wage garnishments other than those for child or spousal support, tax payments, or debts associated with personal injury claims.
  • Filing for bankruptcy does not automatically mean that you will lose all your assets.
  • Though filing for bankruptcy will negatively impact your credit score, it was probably low as a result of your debt, and once you’ve gone through the process you can begin rebuilding.

Bankruptcy is a chance for a fresh start, but it’s also a big decision. For assistance in understanding how a bankruptcy filing will impact you, contact us today.

Can Holiday Debt Be Included in Chapter 7 Bankruptcy?

Debt can be all-consuming, and especially so when you’re anticipating additional expenses. When you’re struggling to make minimum payments on your credit card and watching the amount you owe increase, the idea of charging more for holiday gifts just adds to the stress.

If you’re tempted to charge up a storm on your Thanksgiving celebration and presents and then wave them away with a bankruptcy filing, you should think again — and talk to an experienced bankruptcy attorney about the repercussions of doing so.

Though consumer debt – debt on credit cards – can be discharged in a Chapter 7 bankruptcy, that does not give you free rein to charge up a storm in the days before your filing. Bankruptcy laws were written to provide debt relief and give people a fresh start in a way that keeps creditors on an even footing — not a blank check for last-minute spending.

To prevent people from taking advantage of dischargeable debt, there are rules for what can and can’t be included as a bankruptcy debt. The timing of when a debt is incurred is a key consideration of the bankruptcy courts: If cash advances or significant charges for luxury goods or services occur within 90 days of the filing, there’s a possibility of a presumption of abuse.

When there’s a question about the timing or intention of specific debts, your credit card company has the right to object to those charges, and the result could be that the court decides to exclude them from the amount that’s discharged in the bankruptcy. Even worse, your holiday debt could be considered fraudulent behavior that precludes your entire bankruptcy filing from being approved.

Here’s what to keep in mind: If you run up credit card charges of $725 or more within 90 days of filing your bankruptcy, and the items or services you purchased are considered non-essential or luxury items, there will be a strong presumption that they are non-dischargeable. The same is true of cash advances totaling $1,000 or more. This framework is specifically designed to prevent people from trying to abuse the bankruptcy program. If you can show that the charges were for essential items, the debt may be deemed dischargeable, but holiday gifts are not considered essential.

We are empathetic to the needs of people who are in debt and understand the frustration and stress that the holidays can add to your situation. For guidance on how best to manage your cash woes, contact us today to set up a time to talk.

Should You Tell Creditors That You’re Filing for Bankruptcy?

As is so often true of making big and difficult decisions, your decision to file for bankruptcy will probably provide enormous emotional relief.  Despite its taboos and challenges, filing takes matters out of your hands and puts you on the road to healing your financial health. Still, you have decisions to make about how you want to approach the process, and that includes deciding whether to tell your creditors about your plans.

The answer to whether you should give your lenders a ‘heads-up’ is a matter of your own personal approach and comfort level, as well as your goals. What do you hope to accomplish by telling them?

  • If your goal of notifying creditors about your impending filing is to get them to stop pestering you with collection calls and letters, you can save yourself the time and trouble. Once the paperwork has been filed, they will receive an official notification that puts an automatic stay of their efforts into place.
  • If your goal is to encourage them to work with you to improve the terms of your current loan, there are some advantages to doing so. Since a bankruptcy – and especially a Chapter 7 bankruptcy – would leave them with no repayment at all, it may be advantageous to them to work with you to stop the process and find a way forward.
  • If your goal is to collect information and make sure that you’re providing the bankruptcy court with accurate records ahead of your filing, there’s no reason to necessarily provide your reason for requesting your paperwork. You can just ask the lender’s customer service department to submit the account information that you need, without going into detail.

The process of filing for bankruptcy is extremely well-established and regimented, and as long as you are working with an experienced bankruptcy attorney and you are presenting honest information about your assets and your debts, you can rest assured that all of the people who need to be alerted to the filing will receive their notification in the correct form and at the appropriate time.

To learn more about the bankruptcy process and how our experienced attorneys can help, contact us today to set up a time for us to speak.

Why You Should Hire a Bankruptcy Lawyer

If you’re so deeply in debt that you’re considering filing for bankruptcy, opting out of hiring an attorney may seem like a smart and practical choice. After all, why spend money on a legal action that you can probably look up online, right?

The truth is that once you get to the particulars of your personal situation, bankruptcy filings are far more complex than you’re likely to see on any how-to page. Additionally, there are limits to how much a bankruptcy attorney is permitted to charge. Here are our top reasons for why you should hire a bankruptcy lawyer.

  • Identifying whether your qualify for a Chapter 7 or Chapter 13 bankruptcy requires experience and some complicated calculations. An experienced bankruptcy attorney will be able to immediately help you assess which is most appropriate for you, and explain the implications.
  • A bankruptcy attorney is highly familiar with the paperwork and associated deadlines required for a bankruptcy proceeding. Most of the bankruptcy filings that are denied are occur when people represent themselves, and result from misfiled paperwork, improperly filed paperwork, or deadlines that have been missed.
  • Dealing with creditors is an intimidating but necessary aspect of a bankruptcy proceeding. Though a filing will automatically prevent them from continuing to pursue your outstanding debts, you will still need to communicate with them about your discharge. A bankruptcy attorney will take care of that for you, representing your best interests and standing up for your rights.
  • Not only is there a limit to how much an attorney can charge you for bankruptcy representation, but in the long run using one will probably end up saving you money. This may sound counterintuitive, but your attorney’s familiarity with the process will translate into you not having to spend your valuable time or money doing research, and you won’t end up spending extra time having to correct mistakes. They’ll get it right the first time, and it will be done efficiently.

When you work with an experienced bankruptcy attorney, you’ll have the peace of mind of knowing that your case is in the hands of people who are knowledgeable, experienced, and dedicated to putting you on the road to financial recovery. To get a sense of what a bankruptcy proceeding will involve and cost, get in touch with our experienced firm today.

What is the 180-day Rule in Bankruptcy?

Even in the face of mounting debt, most people put off a bankruptcy filing until they simply are unable to do anything else. There are plenty of reasons for this. For most people, filing for Chapter 7 — or even for Chapter 13 bankruptcy — takes an emotional toll: right or wrong, people view bankruptcy as a black mark against them, and a sign of failure. Others may be hoping for some kind of windfall that will help to ease their financial woes. If you are anticipating coming into money and putting off your filing because you’re hoping to get your hands on an inheritance or some other kind of lump sum of cash, it’s important for you to understand the 180-day rule in bankruptcy.

When you file for bankruptcy, one of the first things you’re required to do is to provide the bankruptcy trustee with a comprehensive list of all of your assets and your debts. This includes your home, your vehicle, any jewelry or collectibles, as well as any savings, investments, and the like. The trustee needs this information so that they can determine what can be distributed to your creditors and what is protected and will stay with you.

Though the information you provide is meant to be a snapshot of your financial health, that doesn’t mean that things can’t be added to the list. Specifically, if you receive any money over the next 180 days, that will be added to your list of assets and – if non-exempt – will become available for distribution to pay off your debts.

In most cases the 180-day rule is applied to inheritances, but there are other types of monies that qualify, including:

  • Property from a divorce settlement
  • A bequest
  • Life insurance payouts
  • Lottery winnings
  • Compensation from a personal injury settlement
  • Death benefit payouts

The question of whether you’ll be able to keep a windfall of this type is answered by when you became entitled to receive the money rather than when it is actually in your hands. If that date is within 180 days before or after your filing then the property becomes part of your bankruptcy estate (unless it is exempt). If the monies or property become available more than 180 days after you file for bankruptcy, you are free and clear to keep it, whether it is exempt or not.

If you are considering filing for bankruptcy and there is a possibility that you are going to come into an inheritance or something similar, it is important to let your attorney know about it immediately. They will provide you with guidance on the right way to approach your situation.

How Does Bankruptcy Effect Child Custody Payments?

Your bills are mounting — credit cards, mortgage, auto loans, and child support too. If you’ve concluded that bankruptcy is your only way to get out from under, then a brighter, less stressful future is ahead. Still, despite the promise of a fresh start free of calls from bill collectors, it’s important for you to understand that a bankruptcy filing does not eliminate every debt that you owe: most importantly, you need to know that the amount that you submit each week in child custody payments are not going to be affected at all.

Whether you qualify for Chapter 7 or Chapter 13 bankruptcy, a bankruptcy filing will either discharge your debts or realign them so that you have more time to pay, usually with better terms. But child support payments are considered an entirely different category of obligation and responsibility that bankruptcy will not discharge. The good news is that by discharging your other debts, you will be better able to make the payments that the family court has deemed appropriate for the support of your children.

Many debtors who have missed multiple child support payments have accumulated significant arrears. These past due child support payments are not dischargeable: you owe those monies to the parent who has custody of your children, as well as any arrears that you owe for spousal support or alimony. But child support is considered the highest level of obligation — even higher than taxes — and no bankruptcy court will forgive or eliminate that debt. A bankruptcy court is also not able to adjust the amount that is owed. Only the family law court is able to do that, and that requires a separate petition and legal action in that court.

The good news is that filing for bankruptcy puts an automatic stay in place for all debt collection from your other creditors. Not only will the calls and bills stop being sent, but any wage garnishment being sought by others to whom you owe money – other than those for your child support – will also stop. This should free up more money for paying for the care of your children.

Though filing for bankruptcy will not lower or eliminate your child support payment obligations, and will not eliminate any child support arrears that you have accrued, it can help you get control of your finances so that you are better able to meet those obligations and move forward to rebuild your credit and financial health. For information on how to move forward with a bankruptcy filing, contact our office today.

Are You Personally Liable for Business Debts?

Owning your own business is a life’s dream for many people. Whether you’re a sole proprietor, part of a partnership or LLC, or a shareholder of a corporation, your goal is for the business to be successful and profitable, but that isn’t always the case. If you’re facing a situation where bills are coming due that the business can’t pay, your creditors are going to look to you – and that leaves you wondering whether you’re legally on the hook. The answer to that question is less than straightforward.

Most business owners know that sole proprietors and partnership members are always responsible for the debts that their business accrues. But if you set your business up using a structure that you hoped would shelter you from liability, you may be disappointed. That’s because the protection that an LLC or corporate structure provides is limited by individual circumstance, as well as standard business practices such as contract terms that include personal guarantees.

A personal guarantee is exactly what it sounds like. If you signed a contract that extended you credit and the agreement includes a personal guaranty, then even if your business is an LLC or a corporation, if the company fails to pay then you have agreed to step up. And before you rue the day that you signed that contract without having your attorney review it, keep in mind that most established banks and lenders are going to automatically include this language, and are unlikely to extend credit without it – especially if the company is newly established.

The other thing to keep in mind is that, even in situations where your business structure was purposely chosen to protect you from personal liability, most attorneys are able to pierce the corporate veil on behalf of their clients who are seeking payment. If you are a shareholder in an S corporation or C corporation, you will definitely be liable for debts if you cosigned or personally guaranteed them, as well as if personal and business funds were comingled. The same is true of limited liability companies.

If you are being pursued for business debts that you believe you should not be liable for, your best first step is to consult with an experienced attorney. For guidance in navigating this complex situation, contact our office today to set up an appointment.

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