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What is a Bankruptcy Risk Score?

There is a little known piece of information out there floating around in the world of credit data that most people have never heard of.  In fact, I didn’t even know it existed until I became a bankruptcy attorney. Most everyone has heard of a credit score and I get tons of questions about what the credit score is, how its used and how you can improve it.  In fact, the discussion about credit scores is part of nearly every consultation we do at Harmon and Gorove. The piece of information that isn’t often discussed is a person’s bankruptcy risk score. A bankruptcy risk score is a number that indicates the likelihood of an individual filing for bankruptcy.  

According to bankrate.com, “According to financial experts, this score is used secondarily to the credit score when financial institutions scrutinize a consumer’s credit history. Kept tucked away from consumers for nearly 20 years, this number differs from the credit risk score, because it’s a little more specific. It measures how likely a person is to file for bankruptcy.”  The banking industry uses the number for a myriad of reasons including lending decisions and compliance. In other words, if your bankruptcy score is too high, they likely won’t lend to you and additionally, if banks know that they have a number of loans on the books that have a high risk of filing bankruptcy, they will know how much they need to keep in reserve to cover these potentially bad loans.  

Consumers also get a raw deal when it comes to figuring out what these scores actually mean.  Each bureau has their own ratings score. Whereas the credit bureaus generally use a scale from 300 to 850 with 850 being the highest, the bankruptcy risk score doesn’t have a standard index of measurement like credit scores. This means consumers are only able to get general information about their bankruptcy risk. This means that unlike credit scores, there’s no surefire way to know if your score is high or low compared to other numbers. 

The absolute last thing any creditor wants is for you to seek bankruptcy protection, particularly Chapter 7. Once that case is filed, they have to quit calling and leave you alone.  What that means for them is that they will get no money out of you, ever. The only debts that generally aren’t wiped out in bankruptcy are student loans and income taxes (and even those can be reduced or eliminated depending on your circumstances). If your bankruptcy risk score rises, even as you are in the worst financial shape you’ve ever been in and have the least ability to pay, collection efforts may grow extremely aggressive as creditors and their slimy collection agents often view this as their last chance to get anything from you before you are protected by the law. 

If you find yourself struggling financially and you’re tired of trying to keep your head above water, give the attorneys at Harmon and Gorove a call to see how we can help you get out of debt for good.  Our attorneys have over 30 years of experience helping good people out of tough situations.  Our attorneys work every day to help people just like you, get out of debt and get a fresh start on life.  Let us put our experience to work for you.

Never Trust Your Mortgage Servicer

If you’re one of the millions of Americans who have a mortgage I’m going to say something pointed and perhaps, upsetting. Don’t trust the loan servicer on your mortgage for one second. The mortgage industry has, for lack of a better term, created a swamp around your home.  The lender’s representative (or snake as I call them) lives in that swamp.

Don’t ever turn your back on a snake.

By stating this, I don’t mean to foster distrust between people and their mortgage lender, but in all honesty, that’s the best legal advice I can give.  Ronald Reagan once use the term, “Trust but verify.” I just advise you to verify, verify, keep records and don’t believe a word they say unless you have it in writing. 

Never ever, ever rely on anything your loan servicer tells you on the phone.  Nothing.

You may use the information you gather on the phone as clues, but don’t ever draw conclusions from what you’re told by the person on the other end of the line because chances are, they don’t know anymore about your mortgage than you do.

Why these agents just can’t be trusted….

Loan servicing in this country is a huge industry with narrow profit margins. The difference between your mortgage lender and your mortgage servicer can be found here.   One of the biggest expenses for loan servicers is customer service. Good customer service is expensive. As I stated, the companies who are contracted to collect the payments on your home loan operate on very tight margins in an extremely competitive business. The cheaper the better (at least in their eyes).

People:  The most obvious place any business can reduce costs and make more money is to hire the least expensive employees you can find.  Cut their training to the bare minimum, and give them absolutely zero flexibility in how they do their jobs. In short, the person on the other end of the line probably just isn’t up for the job and chances are, it isn’t even their fault.

Procedures:  When you get a copy of how your payments are posted to your loan balance, you often see a payment posted, then reversed, then reapplied differently. A friend of mine received a loan history where the servicer made more than sixty entries on the loan ledger in a single day. I don’t know about you, but sixty entries in a single day is a bit excessive.

Selloffs:  It’s extremely rare that a servicer handles a loan for the life of that loan.  Instead, the right to service the loan is handed off or sold. One servicer to another, presumably to a company who will charge the owner of the loan even less to do the job. Usually, what the new servicer doesn’t even get a reasonable history of the loan, just a bunch of numbers that are supposed to add up to something, but what that something is, who knows.

Phone calls are not evidence so don’t even try…

The root problem with relying on what your loan service agent says on the phone is this:  How do you prove it?  You may have taken meticulous notes but unless you recorded the call (which could be illegal) you don’t have anything.

Words are fleeting and it is extremely easy to misunderstand what someone said, especially if there is a language barrier.  If there’s trouble, and there usually will be, there’s no paper record. An oral agreement isn’t worth the paper it’s written on.

You won’t work it out…

A client recently was dealing with “customer service” trying to determine how much money was required to bring the loan current before the foreclosure sale which was ten days away. Four days from the actual date of foreclosure, the servicer admitted that the loan has been sold and they had no authority to do anything, but it gets worse. The new servicer said the loan isn’t in our system yet, so we can’t tell you.  Truly, this client was almost out of options because they waited until the last minute.

When you’re in default on your loan…

Number 1, don’t wait until the last second to try to stop your foreclosure.  Foreclosure is very serious and deserves your full attention the minute you see the problem.  You will only make a bad situation worse. You should always utilize the tools you have under federal law to get the accounting and answers you are entitled to. Also, I know I’ve said it before but I can’t state it enough, don’t trust anything you’re told on the phone.  If it’s important (and if you’re behind, everything’s important), GET IT IN WRITING.

Finally, If you’re out of options and need legal protection, start interviewing bankruptcy attorneys before you get a foreclosure notice.  If you show up at the last second and many lawyers assume you’ll be a rotten client.

 

Can I Convert From Chapter 13 to Chapter 7

A very common problem for a lot of people who have filed a Chapter 13 bankruptcy  is the repayment plan that must take place during the case. So much can happen in your financial life during the 36 to 60 months that it takes to complete a Chapter 13 and receive a discharge. You could have a medical emergency, lose a job or experience the loss of a loved one. Life has a way of throwing us little curves that could complicate the repayment plan under a Chapter 13 bankruptcy and make it almost impossible to complete. The question is: Can you convert from a Chapter 13 to a Chapter 7 in this situation?

Fortunately, you are generally allowed to convert from a Chapter 13 to a Chapter 7 at any time. It is probably the most common conversion in bankruptcy. In reality, only about 33% of people filing for Chapter 13 bankruptcy are able to complete the entire three to five years required for a repayment plan in its original format. Usually this is due to some unforeseen circumstances like the ones mentioned above. If your back is up against a financial wall, a conversion may be one of your only options.  

Remember, if you have filed a Chapter 13 bankruptcy, you are allowed to dismiss your case at any time. However, it’s important to remember that once your case is dismissed, the automatic stay is lifted. That means your creditors are once again free to start collection activity or begin foreclosure proceedings.

What Do You Need in order to convert?

Once you’ve decided you want to convert from Chapter 13 to Chapter 7, there are some technical requirements that you must meet. First, you will need to file a Notice of Conversion form with the bankruptcy court. It will also require a $25 fee. Once filed, the conversion usually takes place in just a few days. When all goes smoothly, you won’t lose the protection of your automatic stay.

The one issue that you may run into is the means test that must be passed for the conversion to become final. You may have originally chosen Chapter 13 bankruptcy because your income was too high to qualify for a Chapter 7.Remember,  the income limitations will still remain in effect for a Chapter 7 conversion.

The means test was implemented as a part of the bankruptcy reform act of 2005 as a way to make sure that debtors with high enough incomes ultimately repaid at least some of the money owed to their creditors. If your job or income has changed or you have gotten a divorce or lost a spouse that brought income into the household that pushed your into a Chapter 13 bankruptcy, you will likely be able to pass the means test now. However, if you still make too much money to qualify for a Chapter 7, your conversion will be denied.

What Happens After the Conversion?

Once your petition to convert from Chapter 13 to Chapter 7 is approved by the court, any money you have paid the trustee that has not been divvied out to  your creditors will be returned to you. Your Chapter 13, at this point, is concluded. You will now receive a new Chapter 7 trustee and you will have another 341 hearing with that trustee. Harmon and Gorove will then assist with filing a new statement listing all your assets, liabilities, income and expenses. Going forward, your case will act just like a normal Chapter 7 bankruptcy.

Pros of Converting From a 13 to a 7

  1. You’re done with the Chapter 13 repayment plan.
  2. A normal Chapter 7 is usually completed within 4-6 MONTHS of filing, not 3-5 years.
  3. All unsecured debts are discharged under a Chapter 7.

 

Cons of Converting to a 7 from a 13

  1. Depending on what kind of debt you have, a Chapter 7 may not help if your troubles are from certain types of secured debts.
  2. A Chapter 7 can be on your credit report for up to ten years.
  3. The Chapter 7 trustee may sell certain assets you possess to pay creditors in Chapter 7.

If your Chapter 13 repayment plan is creating an unbearable burden on you, a Chapter 7 bankruptcy may be a better fit for your financial situation. In order to understand the process and your rights under Georgia bankruptcy laws, you’ll need to speak with an experienced Georgia bankruptcy attorney. Remember; you have options!

Adding Debts to your Bankruptcy

Bankruptcy, whether it is a Chapter 7 or Chapter 13 case, is a useful and wonderful tool you can use to dig yourself out of a bad financial situation. The only downside is that it’s pretty much a one shot deal. Think of it as a yard sale for your debt. On that day you have to unload your stuff and you can’t go back and add anything to that garage sale after the fact. That’s a broad idea of how debt in a bankruptcy works. Every penny of debt you have when the bankruptcy is filed can be part of the bankruptcy but adding debts, as a rule, can be difficult. However, there are some rare exceptions.

When can you add debt to a Chapter 7?

When you come in to our office for your bankruptcy consultation, you should bring copies of all your bills. A recent version of your credit report would also be extremely helpful as well. By doing this, you can make sure that all your debts make it into the bankruptcy petition we file with the court. But you may not bring everything or you may have a recent bill that you don’t have a copy of or that isn’t reflected on your credit report.

If you realize after the initial filing that you forgot to tell us about a debt you incurred BEFORE the petition was filed, you can notify your attorney and the petition can be modified to include that debt. Generally speaking, there is a modest fee for the additional paperwork due to the court costs incurred by us to file the updated petition. 

When can you add debt to a Chapter 13?

We can modify your Chapter 13 bankruptcy if you forgot to include a bill or debt in the pile of paperwork you gave your attorney just like we can in a Chapter 7. However, this can be a little more of a hassle if the debt is substantial or if it’s secured because it could trigger a change in your Chapter 13 repayment plan and possibly cause your Chapter 13 payment to go up. If your attorney has to redraft your repayment plan, you’ll likely have to pay an additional fee including more court costs to modify the case.

When can you add debt to a bankruptcy after the initial filing date?

Sometimes you can add debts to your bankruptcy that were incurred after your initial filing date. These situations are as follows:

  • Your Chapter 13 is dismissed and you file another Chapter 13 case. All of the new debt you incurred between the two filings can be included.
  • If you file a Chapter 7 and receive a discharge then file for Chapter 13 protection, you can add any new debts to the Chapter 13.
  • If you file a Chapter 13 and then find yourself unable to make the payments and choose to convert to a Chapter 7, all the debts you racked up between the Chapter 13 filing date and the date of conversion can be added to your new Chapter 7.

 

How to avoid having to modify your bankruptcy case

You generally want to avoid modifications if you can.  Modifying your case can add time and expense that can be avoided if you plan your case the right way.  Planning your case often seems counter intuitive because most people view bankruptcy as an option of last resort and rush into it with the first attorney they find. The better scenario is to schedule a free bankruptcy consultation with a reputable attorney who can help you. They can help you plan the best time to file so that it maximizes the impact the bankruptcy will have on your debts.  You should never try to figure out bankruptcy on your own.  A mistake can be very costly and potentially wipe out any benefit you may actually receive by filing bankruptcy. 

The second thing to consider is preparation. Preparation is imperative to the success of your case.  You will need two years worth of tax returns, 6 months worth of pay stubs, a copy of all your bills, your bank statements and any other statements you have including savings accounts, receipts for childcare, rent or mortgage statements, and any other financial agreements.  Basically anything you would need to prove your financial situation. 

The experienced attorneys at Harmon and Gorove can give you advice based on your individual circumstances. Their decades of experience can help you make sure that your filing is as successful and impactful as is possible. Do yourself a favor and invest in your future. Contact the competent and compassionate attorneys at Harmon and Gorove today for a FREE consultation.  Let us help you get your life and your financial freedom back from greedy creditors.

 

Is Debt that’s Discharged Really Gone?

Can my old debt come back to haunt me?

Clients ask this constantly.  They’re scared to death that the problems they had before their bankruptcy will come back and that the relief was only temporary.

The short answer is no.

Debt that is wiped out, in your bankruptcy case is gone as a legal liability forever.

The automatic stay that stops all collection activity when your bankruptcy is filed is replaced, once your case is complete, with a discharge injunction.

But then, this is law, so nothing is quite that simple.

Personal liability

The bankruptcy discharge eliminates all personal liability for debts that can be discharged.

If you eliminate your personal liability, your former creditors can’t sue you to recover discharged debts and can’t get a judgment that allows them to place liens on your assets or garnish your wages.

Was the debt discharged

Bankruptcy law prevents some debts from being discharged in bankruptcy. If you want your debt discharged, your debts must be listed in your bankruptcy schedules in order for us to notify your creditors.  We even have to notify the creditors that can’t be discharged.

Debts that can’t be discharged include

  • Child support,
  • Student loans,
  • Recent taxes,
  • Judgments for personal injury caused by drunk driving.

Unfortunately, the discharge order that’s issued by the court once your bankruptcy has concluded doesn’t list the debts that are discharged.  It just says that debts that were dischargeable in bankruptcy are gone.

Is there a lien

The discharge eliminates your personal liability for a debt.  Some creditors have obtained liens that they have attached to certain assets before you file bankruptcy.  If they have perfected that lien it can remain as a charge against those assets.

Perfected liens are an interest in property, a claim to a piece of what you own.

Some liens survive the bankruptcy.  The lien is only a claim on what you owned at the time the bankruptcy was filed.  They can not attach it to assets you acquire after you file bankruptcy.

A lien survives unless you get a bankruptcy order that avoids the lien. Those liens can be eliminated if it impairs an exemption you claimed in the bankruptcy case.

In order to do this you must file a motion to avoid lien in your case.  This means you need to tell your attorney that a creditor might have obtained a judgment from another court and placed a judgment lien before your bankruptcy case was filed.

Do creditors know you got a discharge

Your bankruptcy filing requires that you list all your creditors with good mailing addresses. We do this so they get a notice when your discharge is entered.  Notice to creditors is also about due process because your creditors do have certain rights.

Creditors also get notified so they can participate in the bankruptcy proceedings. It allows them to exercise their rights in the case.

Once your case is discharged, the court mails a copy of the order discharging your debts to everyone on the list of creditors you provide to your attorney at the onset of your case.

If you leave creditors off the list or the debt is sold to someone else, they have no way of knowing that you’ve discharged your debts.  However, notifying creditors isn’t everything. There are rules that pertain to bankruptcy that wipe out debts, even if the creditor isn’t notified.  

So, the rule is:  the debtor’s personal liability for a dischargeable claim is wiped out forever, if the creditor got notice or if there was no payment to any creditors in the case.

If you are drowning in debt, the attorneys at Harmon and Gorove are experts in handling Chapter 7 bankruptcies. We have handled thousands of cases and helped discharge millions of dollars of debt for our clients.  If you feel the need to speak with a qualified bankruptcy attorney contact the attorneys at Harmon and Gorove to schedule a free, no obligation consultation to find out what your rights are under the Bankruptcy code.  

 

 

5 Ways to Tell People You’re Getting a Divorce

We all want to communicate with others, it’s one of the most basic of human needs. This is especially true in times of divorce. Wanting to communicate with people and knowing how to do it is often where problems can occur. 

In today’s world, there are more ways to communicate your divorce announcement than ever before.

Facebook

For almost anyone on earth that has access to a computer, Facebook is the dominant force in Social Media. It makes sense that you might be contemplating announcing your divorce on Facebook.  You can reach hundreds or even thousands of people with a single post. Facebook offers a number of approaches. There’s the subtle way, simply changing your relationship status from married to single, divorced or its complicated.

The downside of doing this is that your status change could trigger a barrage of messages and comments from concerned friends and family.

If you do announce your divorce like the one mentioned above, posting that on Facebook can actually be reasonably productive. You will break the news to a lot of people at one time. However, the best way to announce this kind of thing on Facebook is to prepare a joint statement with your spouse. Even with divorce, there’s strength in presenting a united front. If that’s not possible, you can always post the news alone.

Just remember one thing: Everything you post on Facebook can be used against you in court. So if you’re not doing a joint statement, keep your post short, simple and non offensive!

Mass Email

A more private alternative than social media, email is a good way to let people far and wide know the news.  It also controls WHO knows, since you’ll control who gets the email. But, this approach also has its downsides.

First, if you send a mass email to a lot of people at once through your regular email you might get tagged for spam.  That means that lots of people won’t see it.

Of course, you could send individual (and personalized) emails to everyone you know. The biggest downside to this is that custom crafting all those emails can be tiring. The final problem is that, as with Facebook, you’re likely to get a responses you’re not ready for.

Divorce Announcements

Much Like wedding announcements, divorce announcements are a thing and they are a formal way to let your friends and family know about your new development.  These should ONLY be used once your divorce is final and should NOT be used until such time.

Greeting card universe  features a number of divorce announcements.  If you do decide to send divorce announcements though, use caution. While most of them seem funny, a great deal of them border on bad taste. So if your intended recipients are easily offended, this may not be the best way to break the news to them.

Christmas Cards

Just like with Facebook, there’s two schools of thought on this way of announcing your divorce.

If you’re trying to be subtle, you can include a family photo of just you and your kids in your Christmas card.  Simply sign the card with just your name and your kids’ names. Most people can read between the lines, although some may think your spouse died.

If you choose to be more forthcoming you can always include a statement in your card about what happened this year with your family and include the announcement of the divorce in that.

This approach isn’t for everyone but it could cut down on the emails and comments you might face using social media.

Face to Face

There’s no more personal way to communicate but it’s also one of the hardest ways. It’s emotional and time consuming. When you are first starting your divorce journey, having one-on-one conversations about your divorce with anyone can be extremely challenging.

However, face to face conversations are the best way to break the news of your divorce to those who are close to you. Just make sure you keep it positive and productive.

You also need to consider the timing of the conversation. If you open up to people about your divorce too soon, you’re either going to be a sobbing mess or you’re going to be mad enough to spit nails. Your emotions are too raw for you to be anything else.

Being emotional is okay if the people you are talking to are your closest friends and family. If you’re trying to have a face to face conversation with anyone else, it’s probably best to wait until your emotions have settled down and you can talk about your divorce without becoming too emotional.  

If you’re facing the prospect of divorce call the attorneys at Harmon and Gorove today and schedule a free consultation to find out what your options are for an uncontested divorce.