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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.

Can I Keep My Home If I File for Bankruptcy?

For most people, the top reason to delay filing for bankruptcy is the fear of losing their homes. Though that certainly happens to some, many people are able to avoid this fate. It all comes down to what you own and what you owe, and a lot will depend on the bankruptcy chapter you file under. Other factors include your state’s rules regarding exemptions and the amount of equity you have in your home. The best way to find out if you’ll be able to protect the things most important to you is to consult with an experienced bankruptcy attorney before you begin the process.

Among the first questions that your attorney will ask will be what assets you have, how much money you make, how much you owe, and whether you’re current on your mortgage payments. The answers to these questions will help determine whether you’re eligible for a Chapter 7 bankruptcy or whether your income is too high and you need to use Chapter 13. While Chapter 7 discharges most of your debts, Chapter 13 is meant to help you stay in your home: it frequently results in revised mortgage terms and reorganizes your other debts, giving you more time to pay them off.

One helpful tool is the homestead exemption. This is an aspect of the bankruptcy process that changes from state to state, but which combines with your equity in your home to provide you with a bit of a boost on what you’re able to protect from being liquidated in a Chapter 7 bankruptcy. There is a federal exemption, and each state also has its own exemption. Some states allow you to use both their exemption and the federal one, while others limit you to what they allow. To apply the exemption to your home, you must have lived there for 40 months. Another possibility is to skip bankruptcy entirely and negotiate a mortgage modification with your lender.

Remember that though bankruptcy is not a ticket to getting relieved of your mortgage responsibilities, the bankruptcy process also isn’t meant to punish you. The goal is to put you back on your feet, eliminating as much of your debt as possible using the assets that you own, while still preserving some aspects of your living standard. Working to preserve your ownership of your home won’t make sense if you’re still not going to be able to afford to pay your mortgage after your other debts have been discharged.

For details on how our bankruptcy attorneys can help you hold on to your home, contact us today.

Can Filing for Bankruptcy Make Your Tax Debt Go Away?

One of the first things you learn when you approach filing for bankruptcy is that it’s not a magic wand. Though it can eliminate a good portion of your debts, doing so comes at a significant cost in terms of your credit rating, and possibly even some of your most treasured assets. It also doesn’t eliminate every debt you’ve accumulated over the years.

While credit card debts and medical bills can certainly be wiped away, other obligations are not dischargeable. You will still have to pay for child support and alimony, student loans, and any compensation that you owe as a result of wrongdoing or malfeasance. These can include fraudulent or reckless acts, or debts assigned as a result of a civil action for personal injury.

Tax debt is an area that is not as clear-cut as other non-dischargeable debt. While some taxes cannot be discharged by bankruptcy, others can. Unpaid federal and state income taxes can be discharged under certain circumstances, while back payroll taxes like withholding for Medicare or Social Security can’t. You also can’t discharge income tax debt that is relatively new. If you haven’t paid your income taxes for the last few years, you will still need to pay them, but if you have income tax debt that is three years old or older and you have filed a valid tax return at least two years before filing for bankruptcy, then that debt can be included in your bankruptcy filing — though even that has qualifications. Your old tax debt must either have been assessed by the IRS at least 240 days prior to your bankruptcy filing or not yet assessed by them at all.

All of the above criteria fall away if your tax debt is a result of fraud. You cannot discharge income tax debt that resulted from trying to fool the government as to how much you owed.  And there’s one more important caveat to the rules surrounding bankruptcy discharge of tax debt: if the government has already assessed a lien on your assets connected to your debts, it’s too late. A bankruptcy filing cannot shut down a tax lien once it’s begun.

What this means to you will depend upon the specifics of your situation. For guidance on the best path out of your debt, contact our experienced attorneys today.

How to Prevent Bankruptcy from Ruining your Holiday Season

Halloween is past, Thanksgiving is upon us, and the gift-giving celebrations are just weeks away. What most people think of as the most joyful and festive time of year can feel like sheer misery when you’re deeply in debt, as every aspect of the holidays seems to have a price tag attached. Whether you’ve just filed for bankruptcy or are about to file your papers, the process creates a shift in the way that you have to think – and in what you’re able to spend. Bankruptcy does represent an adjustment, but it does not have to ruin your holiday season. Here’s what you need to know to make sure that you’re managing things properly, as well as some suggestions for having a happy holiday despite your financial situation.

  • If you’re about to file for bankruptcy, don’t make the mistake of charging a bunch of holiday gifts for your loved ones. As disappointing as it may be to them – and to you – any expenses that you tack on to your credit cards within 90 days of filing are going to be reviewed by your bankruptcy trustee and will be either left off of your list of dischargeable debts or else given back, depending upon what they are. As bad as it feels to have to skip the toy store or forego buying jewelry or other extravagant gifts, it would feel worse to have to retrieve them and return them to the store.
  • Not being able to charge your credit card doesn’t mean that you have to forego gift giving, but it does mean that you’ll need to make adjustments. The best place to start is by making a budget. List all of your gift recipients and assign each a reasonable dollar figure based on the money that you have on hand. Thinking ahead in this way will provide you with the time to get creative, as well as to take advantage of sales, promotional codes, and other ways to minimize your expenses. You also can consider non-monetary gifts based on spending time together or helping your recipient in a way that will be meaningful to them. Perhaps they are about to move and could use your help packing boxes or painting a room, or your loved one may love plants but be unable to do their own gardening. We each have our own talents and abilities that others value.

Filing for bankruptcy is truly a path to a fresh start, and that is something to be thankful for. Enjoy your health and the company of those you love.

Can I Keep a Credit Card If I File for Chapter 7 Bankruptcy?

One of the most frightening aspects of a bankruptcy filing is contemplating the way that it will affect your day-to-day life. Will you be able to keep your house and your car? Will people find out and think less of you? And how are you going to be able to buy things if you no longer have credit and don’t have cash on hand??

The last of these questions is actually a pretty big deal. It’s one of the toughest things for people to get used to as they enter this new phase of their lives. Many even think about paying off one card, bringing it to a zero balance and then just keeping the card. This is a bad idea for a number of important reasons.

One of the first things you do when you file for bankruptcy is to submit paperwork to the court detailing every aspect of your financial life. Among the most important elements in this document is the list of creditors to whom you owe money. Not only will this help the court determine your eligibility for bankruptcy, but that list is used to notify all your creditors of your pending bankruptcy. Paying off one of these immediately prior to your filing can be considered fraud, and will definitely be viewed as a prioritization of one creditor over all of the others. There’s a chance that the bankruptcy trustee would claw back the payments that you’ve made to the credit card company.

As scary as it is to think about having to go into a store without your wallet full of credit cards, it is a part of your life after bankruptcy. Part of the credit counseling that you’re required to go through will help you prepare for this reality. If you feel that you must have a credit card immediately, you can ask a friend or family member to co-sign until you get yourself back on your financial feet. You’ll also be able to apply for new credit cards after the proceedings are over. You may be surprised by how many secured credit card options are available to people who are in the midst of credit recovery.

If you’d like to speak with one of our experienced attorneys about filing for bankruptcy, contact us today.

Can I Choose Whether to File Chapter 7 or Chapter 13 Bankruptcy?

For most people, bankruptcy is a vague notion – something they’ve heard of but know little about. But if you’re one of the hundreds of thousands of Americans for whom debt has become insurmountable, bankruptcy has become a potential lifeline you’re hurrying to learn more about. One of the very first things you’ll want to understand is the difference between Chapter 7 and Chapter 13 bankruptcies, and whether you’re able to choose the one you prefer.

Chapter 7 and Chapter 13 bankruptcy both exist to relieve debt, but the two have significant differences.

Because Chapter 7 entirely liquidates almost all debt, most people find it more appealing than Chapter 13, which reorganizes debt under more forgiving terms but still leaves debtors having to pay back what they owe. But not everybody can qualify for Chapter 7, and those who do qualify run the risk of having to liquidate many of their assets.

The first step to be taken when you are considering filing for bankruptcy is determining whether you are eligible for either type. For Chapter 13 your unsecured debt must not exceed $419,275 and secured debt cannot exceed $1,257,850.  You must have regular income and be current in your tax filings and can’t have filed a Chapter 13 bankruptcy in the last two years or a Chapter 7 bankruptcy in the past four years. By comparison, to qualify for Chapter 7 you can’t have had a previous Chapter 7 discharge in the past eight years or Chapter 13 in the past six and, most importantly, must pass a means test. Even if you prefer to file Chapter 7, if a formula that compares your income, expenses, and family size to others in your area shows that you’re able to pay off some of your debts, you’re not likely to qualify and will be forced into Chapter 13.

Choosing between Chapter 7 and Chapter 13 bankruptcies is a big decision. Where Chapter 7 is faster and erases all eligible debt, it also does not eliminate student loans and taxes, and leaves assets such as your home or vehicle vulnerable. Determining which form of bankruptcy is best for you, as well as which chapter you qualify for, is the first step to putting yourself back on the path to financial health. An experienced bankruptcy attorney will tell you the advantages and disadvantages of each. Contact us today for guidance.

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