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Collection Threats: What’s real?

When you think about debt collectors, you usually think of someone that isn’t very nice.  They call, they harass and they threaten.  In reality though, what threats to take seriously and what threats to ignore is something most people don’t understand.

The reality is, most of them are empty threats.  

  1. You’re not going to jail.  Debtors prisons are a relic of the distant past.  
  2. They’re not going to send people to pick you up.  That’s kidnapping and that’s illegal. 
  3. Chances are, they’re not going to “ruin” your credit. 
  4. So what if they, “refer it to an attorney to look at.”

 

The three threats with teeth

There are only three things you really need to be concerned about.

  1. They have a court judgement against you and they know where you work.  They can then file a garnishment and take your pay. 
  2. There is a lien against your house by your Homeowners Association or your  mortgage lender and they are threatening to foreclose on your house.  You need to be concerned about that and you need to take action to stop it.
  3. You’re behind on your car and they’re threatening to repossess it.

 

That’s what you need to be concerned with.  The rest, well, is just crap. Let’s be honest, the lender would really just rather make a deal. It’s cheaper, cleaner and keeps everyone happy.  

The debt collector who is legitimate will reach out to you in writing or dials you from a number that is from a real debt company. That said, just because they are from a “real company” doesn’t mean they won’t lie to you, call you at work, tell your loved ones about your debt or do other illegal things

If you find yourself drowning in debt and being harassed by legitimate debt collectors, reach out to us at Harmon and Gorove.  We can help you get your finances in order and bring some peace to your life.  Contact us today to learn how bankruptcy can help you achieve financial freedom and peace.  

Credit score increases rapidly after bankruptcy, says by the CFPB.

Our clients are often so very concerned about their credit score.  That’s natural, and frankly, we are too.  I check my credit score at least once every two weeks.  It’s a point of pride for many people.  For others however, it can be the difference in being able to get ahead in life or not being able to afford those things we need. 

We have some very good news to report for people who are worried about the impact that bankruptcy will have on their credit score. The good news is, and I say it boldly;

AFTER BANKRUPTCY, CREDIT SCORES GO STEADILY UP

That’s right.  All these years you’ve been lied to by people who have no idea what they’re talking about.  Telling you that if you file bankruptcy your finances are toast and you’re dead in the water. You’ll never get another loan again.  We’ve all heard it and it’s usually coming from the slime ball that charged you 97% interest on a $2,500 car loan.

We didn’t just make this up either, although we already knew this to be true, this is a report from the Consumer Financial Protection Bureau.  The study, which you can read here is completely legitimate and has been researched over the last 17 years. Another finding from the study is 

A PERSON’S CREDIT SCORES START IMPROVING THE SAME YEAR AS YOUR BANKRUPTCY FILING

Take a minute and absorb that.

How Creditors Use Fear

Creditors and all their hack buddies scream from the rooftops about bankruptcy trashing your credit score.  The data shows just the opposite.  In fact, there’s usually no dip in your score after filing.  The overwhelming amount of people who file bankruptcy see an IMMEDIATE increase in their score. Don’t believe us, just read what the CFPB says: 

Median credit scores increase steadily from year-to-year after consumers file a bankruptcy petition.

Median scores for Chapter 7 filers recover more quickly than those for Chapter 13 filers possibly due to the much quicker and more likely discharge of Chapter 7 filings.  

Bankruptcy improves your Financial Health

When it comes to your financial health, let’s get one thing straight. Your credit score is a vastly inadequate indicator of your financial health.  What really matters is your balance sheet.

A credit score is a distraction

In the grand scheme of loans and credit, lenders look at your balance sheet as much or more than your credit score.  In essence, they look at your net worth which is comprised of assets minus liabilities.  If you eliminate the liabilities you have via bankruptcy, your net worth looks even better. 

A credit score is just a number, most banks prefer a measure called the Debt to Income ratio or DTI.  If you wipe out unsecured debts, your DTI goes down as well, improving your likelihood of getting approved for a loan.  

Boost your credit score

You can take actions that can boost your score.  One of the best ways to do that is to check your credit report.  Not just your score, but what’s listed on your report.  When you look into credit reports, you’ll find that credit reports are notoriously inaccurate. Nearly 1 in 4 credit reports had factual inaccuracies that could negatively impact your credit score. That’s why its very important to check your credit report often, even more so than your score itself.  

Is bankruptcy right for me?

Just because you can file bankruptcy, doesn’t mean you should. It’s just one of the things you should consider if you find yourself needing to file.  Lots of different factors influence whether you should file bankruptcy.  We discuss those factors in one of our recent blog posts

If you’re ready to discuss filing bankruptcy with an experienced bankruptcy attorney, contact our office today for a free, no obligation consultation.  

 

 

Hold it, fold it or run

You’ve got to know when to hold ’em,

know when to fold ’em;

know when to walk away,

know when to run…

Thus is the advice that is given to a young protege of the Gambler in the hit Kenny Rogers song. This advice is also good for people who are facing problems with debt to consider.  One of the toughest things for people who are facing uncertainty about their finances is knowing when to fold and get the financial help they need. 

We often play a bad hand

Almost everyone wants to repay their debts. We feel like it’s the “right” thing to do.  Paying your debts fits the narrative of the hard working hero who scrimped and went without to pay your debt in full.  Lord knows the creditors who push these massive debt loads onto people with the false assumption that they’ll be able to pay want you to think that not paying your debts will be the financial ruin of you until the end of the world. 

If you’re in debt, it’s hard to know what your choices are and to know which debts are the best to get rid of and which ones you need to keep. 

The problem is that no one talks about the actual cost of paying off burdensome debt.

Nobody talks about people who have such a strong commitment to pay burdensome debt, get blinded to other needs and other financial pitfalls.

Certainly, no one mentions good people who sacrifice and still fail to find a way to pay off their debts.

Nobody seems to care about the elderly; drowning in debt with no hope of better times ahead.

So how do you know how to play your hand, so to speak, when choosing the best way to succeed at getting out of debt?

Just like the cards you have, the decision about what to pay (hold) or file bankruptcy on (fold) depends on a number of factors. 

What’s the amount you owe?  

HOLD:  the lower your total debt, the more likely you can succeed in paying it off.

FOLD:  If you have a very large amount of debt it will take longer to pay off and will likely cause other events to interfere.

What’s your age?

HOLD: If you’re young, you have more time, theoretically, to pay off your debts due to the amount of time you have left in life to work. 

FOLD:  If you’re close to retirement, now’s the time to seriously start looking at cleaning up your finances

Do you have critical debts?

HOLD:  Do you owe taxes, have a mortgage or owe some kind of domestic support? These critical kinds of debts should take priority over unsecured or other debts that could be discharged. If you don’t owe these types of debts, a payment plan for other debts can often succeed.

FOLD:  paying unsecured bills when you owe these critical types of debt is EXTREMELY risky.

What does your retirement savings look like?

HOLD: IF you have a pension or a substantial amount of money saved for retirement, you can try to get your debts paid.

FOLD:  If you’re way behind on saving money for your golden years, wouldn’t it be better to use that money to save for retirement instead of paying back unsecured creditors?

Do you have an emergency savings fund?

HOLD:  If you have a big enough cushion to sustain a loss of income, try to pay off debt.

FOLD:  If you’re like the majority of Americans and have very little saved, you make yourself even more vulnerable diverting money to existing debt.

How to succeed

The number one thing you want to avoid is spending money you don’t have on old debts when you have no reasonable chance of succeeding.  Living paycheck to paycheck with no savings isn’t a good way to live and it makes life very tough. The young protege got some good advice for that taste of whiskey.

Kenny Rogers’ gambler told him:

That the secret to survivin’

Is knowin’ what to throw away

And knowin’ what to keep

Keep paying on old debts only if you have the ability to succeed.  Otherwise… well you know how the rest of the song goes. 

If you feel lost and are unable to find a way out of debt, contact the attorneys at Harmon and Gorove.  We have helped tens of thousands of people get the help they need in order to get the fresh start they so desperately need.  

 

Business after COVID-19

There will come a time when the coronavirus becomes a treatable disease.  Human patients will be recovered and we will have a treatment.  That’s just the inherent optimist in me.  However, many businesses will still be struggling long after the human toll has been realized.  These small businesses will have to make some tough decisions, including whether to continue in business or not.  I’m reminded of the Kenny Rogers song, “The Gambler.” In the song he sings about knowing when to hold ‘em and knowing when to fold ‘em. That’s what every struggling business owner has to consider.  

Here are some things to think about as you consider the future.

Do you even want to continue

The most important part of the small business is the owner of the business themselves.  They drive the business, create the products and supply the vision to make the business successful. If you’re drained and don’t feel like you can go on, now’s the time to look long and hard at whether you should continue operating the business.  

If you’re up for the challenge, there are more questions.

Can your business continue

Once this is over and we arrive at whatever “normal” is, we need to determine whether there is still a demand for the product or service you provide via your businesses. If there is a demand for your product, how long before that demand ramps up to the point that you can bring the business back to profitability.  How will you survive financially in the meantime? Because of these questions, you’ll need to look at the following instructions. . 

Reorganize your business to survive

COVID-19 has forced all of us to look at our situation and reevaluate how we operate, us included.  It causes us to look at what is and is not important and what is and isn’t essential. We have to take a tough look at our operations and ask ourselves:

Could the business continue with

  • More or less owners
  • fewer employees or restructured hours
  • Fewer locations or completely online

Take the time to reevaluate and embrace the opportunity to change the way things work, hopefully for the better

New debt 

Business loans are a part of the government’s recovery plan but one of the problems with this is the uncertainty about how the loans are to be repaid. You need to consider whether or not you’re able to float more debt.  Were you current on your debts or were you debt free?  Is borrowing essential to even keep the lights on.  If it is, then you have no other choice.

Winding down and moving on

Ending your business isn’t just an all or nothing choice.  If you fold the business you can still remain in the industry either as a manager or other type of operator.  It gives you the opportunity to re-enter the market in the event that the demand comes back without losing contacts in the industry.  

Challenges going forward

All of these issues are fluid and the situations are constantly changing.  We have helped hundreds of business owners wind down operations and get the piece of mind they need in order to move on with their lives.  If your business is failing or if it’s just overwhelming you, schedule an appointment with one of our award winning  bankruptcy attorneys to see if bankruptcy would be an option to help you move forward.  

 

How to pay for bankruptcy, even when you’re broke

One of the greatest ironies in the law in the United States is that bankruptcy costs money. This is especially troublesome when you’re already broke.  Our laws are so convoluted and so byzantine that in order to do it right, you have to have an attorney.  While that sounds counterproductive for me to wish you didn’t need an attorney, I genuinely believe that people who have a simple enough situation should be able to file their case and handle things themselves as opposed to having to hire me.  Then again, that’s a topic for another day.  Bankruptcy gets you out of debt, but only if you have the money to file.  

The costs included in bankruptcy include the following.  

  1. Your filing fee: This varies depending on what chapter of bankruptcy protection you choose to file. 
  2. Credit counseling class: the Bankruptcy reform act of 2005 made credit counseling classes mandatory for all filers.  You can thank Joe Biden for that. 
  3. Your attorneys fees.  

 

As a general rule, I do not recommend that people file a bankruptcy “pro se” or without an attorney.  It doesn’t matter how broke you are,filing bankruptcy without an attorney will likely do more harm than good and could even lead to you not being able to file bankruptcy again in the future. The change in the law from 2005 rigs the bankruptcy system against clients and all but ensures that without a competent attorney, your case will fail.

The only thing that congress did leave in place that makes sense is the one saving grace of bankruptcy, the ability to pay your bankruptcy attorney after you file Chapter 13.

Chapter 13 pays the attorney for you

A Chapter 13 is a repayment plan tailored for your individual budget. You make a monthly payment to a Chapter 13 trustee for anywhere from 3 to 5 years. Those plan payments also pay the lawyer who helped you file the plan in addition to ensuring that your creditors are paid back what they law determined that they’re owed. 

In contrast, a Chapter 7 bankruptcy usually requires that you pay your attorney at least part of the fees you owe before you file.  This makes paying for a Chapter 7 a more difficult process in and of itself albeit one that we are happy to work with you on. 

In Chapter 13, your attorney is paid, through what is called an administrative claim.  This means, once you pay your filing fee, your payment is the same each month going forward and your attorney is paid a portion each month out of your payment to the trustee. 

Why Chapter 13 works best for many people

In a Chapter 13, you’re effectively financing your attorneys fees with no interest and this helps a lot when you’re flat broke.  This can literally be a godsend when you need to file bankruptcy and you need to file now

Obviously Chapter 13 comes with some downsides that certainly don’t appear in Chapter 7s.  The biggest downside is that it takes longer to complete and to get your discharge.  The length of time it takes to complete a Chapter 13 does deter people due to the fact that life gets in the way sometimes and can complicate your ability to make the plan payments. 

Usually though, if you’re really broke,  you can file a Chapter 13 with payments that are as little as $100 a month. If that’s not good enough, you can always rest assured that in the event that you can’t complete your Chapter 13, you always have the right to convert to a Chapter 7. 

If you find yourself in need of an experienced bankruptcy attorney during these trying times, don’t hesitate to contact the attorneys at Harmon and Gorove.  We have decades of experience helping people in a compassionate and cost effective way get out of debt. Contact our office today for a free, no obligation consultation where our experienced attorneys will review your situation and make a recommendation for how you can best get out of debt. 

Evictions and Bankruptcy

As of the publishing of this blog entry, the State of Georgia has resumed judicial evictions.  They have been going on for just under two weeks and already, courts are seeing their dockets fill up with hundreds of requests in each and every county, particularly in the Northern District.  The sad reality is, those evictions have a real impact on real people.  You may have googled your protections and found what you think are protections that the state offers.  What you may not have realized is that google often pulls in information from other states, despite your inquiry. The truth is, in Georgia, you have very few legal remedies should your landlord file a dispossessory action against you. 

Landlords can file a dispossessory against you the minute that you are late and within a matter of weeks, law enforcement can show up at your door and remove you and your family from the property.  In Georgia, evictions are like clockwork. In certain circumstances, Bankruptcy can help slow or stop the eviction process and it can certainly help you if you wish to break your lease and move on or if your landlord is seeking a judgement against you for unpaid rent.  Bankruptcy is a powerful financial tool you can use to help yourself get out of a bad situation.  If your landlord is trying to evict you, you should seek the opinion of a qualified bankruptcy attorney as to whether or not bankruptcy can help you in your situation.  

If you have already been evicted, bankruptcy can stop the landlord from continuing to collect back rent and keeps them from getting a judgment against you for any unpaid rent from the remainder of the lease.  Additionally, if you know you can’t afford your rent, bankruptcy can allow you to break your lease without the repercussions of being sued by your landlord for ending the lease early.  This is particularly true in cases of commercial leases when you must shut down your small business.  

If you find yourself in the unfortunate situation where you are unable to afford to pay for your rent any longer or your landlord has sought a judgement against you, contact our office today.  We offer a free consultation, either in person or online, to help you discuss your options in bankruptcy.