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.

Unlike a Chapter 11 bankruptcy filing, a Chapter 13 bankruptcy does not discharge all of your debts: Instead, it reorganizes them and allows you to repay all or part of them over an extended period, usually three to five years. Chapter 13 is sometimes referred to as a wage earner’s plan because it is offered to those whose income is sufficient to – eventually – meet their liabilities. Still, even though your debts will be paid off, it can have a significant impact on your credit score, often lowering it by 100-200 points or more, being noted on your credit report for seven years, and impacting your ability to obtain credit in the future. It can also impact the rates you are charged for financial vehicles like insurance and the interest you’ll have to pay on loans. Here are some tips for how to counter that effect and rebuild this essential financial metric.

• The most important thing you can do is to stick to the repayment plan. Always make payments on time and in full.
• Check your credit reports regularly to make sure that the information they contain is accurate. All discharged debts need to be shown as closed.
• Apply for a secured credit card or credit builder loan to help you rebuild your payment history. Again, make sure all payments for these and any other bills are on time and in full, and avoid running up big credit card balances. Your credit use should always stay below 30% of the card’s limit.
• Avoid applying for multiple new credit accounts. You want to avoid hard inquiries on your credit report, as these temporarily lower your score.
• Learn about personal finance and credit management to avoid getting into trouble again. The more you understand about how credit works, the better off you will be. If you need help, get financial counseling.

In addition to these short-term strategies, it also makes sense to invest time into rebuilding trust with your existing lenders. You can do this by being responsible about your payments, whether for old debts or new credit accounts. The most important thing you can do is to be consistent and careful. Over time, your score will improve.

It’s easy to see the attraction of taking out student loans: the money they provide can make all the difference. Unfortunately, the assumption that with a degree, these loans will be easily paid back doesn’t always pan out, and borrowers find themselves mired in unmanageable debt.  If this has happened to you and you’re considering filing for bankruptcy, here’s what you need to know about the legal challenges of trying to discharge student loan debt, and about the other options available to you.

• Bankruptcy offers the advantage of discharge, but only if you are successful In the past, student loans have specifically fallen outside of the types of debt that could be discharged in bankruptcy, but that has changed in the last year. To discharge student loan debt, you need to pursue a different process from the standard bankruptcy process known as an adversary proceeding. This is a request based on undue hardship that repayment places on you and your dependents. Though the bar for qualifying for this has historically been extremely high, a recently established partnership between the Education Department and the Department of Justice made it easier for federal student loan borrowers to request and obtain a student loan discharge in bankruptcy.
• Loan Forgiveness Programs – There are several federal student loan forgiveness programs available to those willing to work in service professions like teaching or nursing for a limited period, and others that allow you to modify your loan to an income-driven repayment plan that forgives the remaining balance.
• Legal Action Against Lenders and Loan Servicers – If you believe that your student loan was made or is being serviced in a way that violates consumer protection laws, you can take legal action that may result in debt relief.
• Try Communicating with Your Lender – Some lenders are willing to modify student loan repayment plans to make your payments more manageable. This may involve extending the term or negotiating a settlement that reduces your balance.

Every situation is different, and it can be hard to know which answer best suits your situation. For assistance, contact our debt and bankruptcy attorneys today.

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.

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.

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.

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.

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.