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The HAVEN act and Bankruptcy

Do you ever wonder how bad rumors get started?  Bad headlines don’t help.

Congress is considering a new piece of legislation.  It’s called the HAVEN act.  The act will correct a problem that has existed since the 2005 overhaul of bankruptcy.  

If you are a veteran who receives disability income from the VA, that money is counted in your means test.  In other words, it counts against you in bankruptcy, whereas regular disability income does not. 

Frankly, that’s not fair. 

The HAVEN Act saves the day

That’s where the HAVEN act comes in.  

Chapter 7 bankruptcy is a liquidation bankruptcy (it’s what most people who are in big debt want) and it gets rid of all of your debts that are dischargeable.  The problem is, you have to qualify for a Chapter 7 via the means test.  

This military disability increases your total income, which in turn can cause your income to be so high that you are forced to do a Chapter 13 bankruptcy. 

The HAVEN act eliminates military disability income from the means test just like regular SSI disability and gives you a big boost.  

There is, unfortunately a lot of rumors going around about the current state of bankruptcy and military benefits.  

Misconceptions about the current system

 A reporter for the military times has stated that veterans who file bankruptcy under our current system risk having the benefits taken away.  He states “Bankrupt vets can lose their disability benefits.”

This is patently false.  

The current system allows the military disability benefits to be counted in the means test, but it by no means eliminates your disability benefits.  

All this means is that IF your income is high enough, it could cause you to have to do a Chapter 13 bankruptcy instead of a Chapter 7.  

But, I repeat, you do not LOSE your benefits.  You still get a check from the VA every month just like you always did and will continue to do for the rest of your life.  

If you file a Chapter 7 bankruptcy, the trustee can’t take your check from YOUR bank account. 

Additionally, the Chapter 13 trustee does not take them from you either.  They still go into YOUR bank account and you may have to use some of your disability money to make your Chapter 13 payment.  

While all of this may seem confusing, rest assured, as a bankruptcy lawyer, it’s my job to understand the nuances of the law and make sure you get the best outcome possible.  Trust me, I do and you will. 

If you’re a veteran who is concerned about your VA benefits and the bankruptcy process, call me.  I understand it a lot better than you may think (I actually work with veterans to get VA disability for them as well). 

We’re here to help, especially those who have worked so hard and sacrificed so much already.  

The Secret Risks of Debt Settlement

If you’re maxing out credit cards every month and just making the bare minimum payment, you’re going about all this the wrong way.  You’re financing a lifestyle at a very high rate of interest and creating a lot of financial risks for yourself.  

I know you hear the ads all the time.  “USA FREEDOM CREDIT CARD DEBT RELIEF WILL SAVE YOU THOUSANDS!” Shouts some announcer on the radio, or maybe you’re scrolling social media and see smiling happy people with a prompt to contact someone to settle your debt for pennies on the dollar.  

It sounds too good to be true and it often is.   The FTC gives warnings about these types of schemes and I’m linking to it here.

The problem is, most of the companies don’t disclose how this actually works and that opens you up to tons of risks.  You’re not getting something for nothing.  

In fact, you could actually end up in more debt and with worse credit than you had when you started. 

So, how does it actually work?

In a debt settlement arrangement, a borrower (you) or someone representing the borrower contacts a credit card company and asks for a settlement.  Mind you, this only works if you can pay off the full balance at one time. 

The guy at Monster Mega Bank, N.A. hears this and thinks, “OMG, these people are going to file bankruptcy and we’re going to get nothing, let’s see if they’ll settle for half.”

Now, here’s the problem.  You don’t have thousands to pay them, even if they will settle for a significantly reduced amount. 

So, what do we do? Well, the debt settlement company opens up a shiny new line of credit in your name and uses that money to pay off the credit card company.  

Now, that may not sound too bad…but here’s the catch.  1. The debt settlement company is going to make tons of money off of you.  2. Monster Mega Bank, N.A. is going to report a “settlement” on your credit, and that’s going to hurt your score. 3. You’re still making payments to the debt settlement company and guess what? Now you don’t have revolving credit to help make ends meet. These are the biggest risks of the debt settlement process.  

Why Bankruptcy Eliminates the Risks

Debt settlement services rely on credit card companies writing off a portion of your debt.  Not only does that hurt your credit score, it can also have serious tax implications.  

The IRS treats forgiven debt like income but debts discharged in bankruptcy are completely tax free. 

If Monster Mega Bank, N.A. forgives $25,000 worth of debt, you’re going to get a 1099 that will treat that forgiven debt as income.  Then you’re going to owe taxes on  $25,000 in extra income. 

That’s a risk they didn’t tell you about.

Additionally, there’s no guarantee that Monster Mega Bank, N.A. is going to work with USA Freedom Debt Relief Company anyways. 

Then you’re right back at square one. 

That’s where bankruptcy comes in.  

In bankruptcy, Monster Mega Bank, N.A., has no choice but to work with you. It’s federal law. 

In bankruptcy you may be entitled to a full discharge of your unsecured debts or you may be able to pay back only a small portion of them with a very manageable interest rate.  

Another good thing is, bankruptcy increases your credit score starting the day you file.  

Is that too good to be true? Actually, no.  A government study confirmed it

Bankruptcy actually gets rid of the derogatory marks on your credit report and allows most people to obtain new credit within months of your discharge.  

If you’re concerned about the risks of debt settlement or you’ve already been the victim of a debt settlement gone wrong, give us a call.  Bankruptcy is a powerful tool that can help clean up a lot of the messes that debt settlement causes. 

Don’t be scared

Scared

Often,  I advise my clients to cease making payments to credit card companies in preparation for a bankruptcy filing.  After all, if the debt will be discharged anyways, that last $29 minimum payment isn’t going to break Wells Fargo. 

I often get looked at like I just asked them to shoot a puppy. 

They’re scared and bumfuzzled. What on earth?

“If I don’t make my payment, won’t they send me to collections?”

To many of my clients, being in “collections” is the worst thing ever.  Almost like a prison even, complete with the dank, dingy cells and the rattling bars. 

Chances are, as long as you file within a reasonable time, there’s no need to be scared. You’ll probably never even hear from a bill collector. 

The weapons they deploy

Most of the tools at the disposal of a debt collector are psychological.  

They call and harass (alot) to try to get you to pay up.  If you don’t there isn’t much else they can do without deploying their next weapon.  

A lawsuit.

This is where things get hairy.  In the State of Georgia, a lawsuit can (and often does) result in a garnishment.  They can take 25% of your pre-tax income. 

I don’t know about you, but if I lost 25% of my pre-tax income, I’d be up a creek. 

The good news is, bankruptcy stops garnishments dead in their tracks, but that’s not the point of this blog. 

What really matters 

The problem with debt collectors is that they have you focused on the wrong thing and they often have you scared for no reason. 

They want you to worry about their problem.  Namely, the debt you (supposedly) owe them. 

They are concerned about getting their money, but often, paying this one bill isn’t going to solve all your problems.  In fact, it may make them worse.  

You need to be focused on solving the bigger problem: What does the totality of your financial life look like? 

First, don’t let debt collectors distort your priorities. There are bills that absolutely need to be paid first.  Mortgages, child support, rent, car payments, taxes.  Without a roof over your head or a car under  your bottom, you can’t get to work. 

Additionally, the government is way more aggressive than any collection agency could ever dream of and the government doesn’t give up. 

I try to impart upon my clients this important lesson.  Don’t worry about one debt collector. Worry about the whole health of your finances.  

In the end, you need to be able to sort out your finances and find a way to live in financial peace and comfort.  

You need to be able to sleep at night, make ends meet and retire one day. 

That’s why you need to call me

How the Grinch could steal Christmas

The Grinch

We all know about the Grinch.  The curmudgeonly green guy with a severe dislike of Christmas.   After stealing Christmas from the people of Whoville and driving it up a mountain to push it off, he hears the people celebrating nonetheless and ultimately has a change of heart and returns the trimmings of the Christmas holiday to the people of Whoville. 

That’s not the Grinch I’m talking about this holiday season. I’m talking about a Grinch who will take Christmas, Thanksgiving, New Years and anything else that you value as we enter the holiday season.  There are lots of those Grinch’s out there, lurking in the shadows, just waiting to have a chance to swipe everything you need to pull off a memorable holiday season with your family.

The inflation Grinch

Gas is up over $1.00 a gallon. Beef is up an average of about 35%. Real wages have declined 1.9% since January and the consumer price index is up 5.4% this year.  In real terms, inflation is costing the average American family about $2,100 extra this year alone. This doesn’t account for the fact that we haven’t even gotten to the cold part of the year when heating bills (natural gas is up 180% year over year) are expected to soar

In other words, times are tough right now.  Families all over the country are having a hard time making ends meet. Inflation makes the dollars you do earn worth less.  The pound of beef you bought last month for $3.25 is now $3.99.  It’s costing you an extra $20 to fill up your tank every week. It’ll probably cost you double this winter to heat your home. In other words, your wallet is being stretched thinner and thinner every day. 

The garnishment Grinch

Creditors have been extremely aggressive. Garnishments in Georgia are among the highest they’ve been since the great recession.  Remember, in Georgia, a creditor can garnish 25% of your pre tax income EACH TIME YOU GET PAID.  That means if you make $2,000 a month, EACH creditor with a garnishment order can take $500 a month from your check, before you pay taxes, insurance or anything else.  

With inflation being what it is, losing 25% of your paycheck can be the difference between keeping a roof over your head and food in your belly or not.  If you’ve been served with suit papers, the time to act is now. The garnishment WILL happen sooner or later, and it’s much easier to stop before they actually take money from your check. 

The repo Grinch

Do you have a car payment? If you’re like me you do…and it’s a big expense every month.  With inflation taking a chunk out of every paycheck and the potential for a garnishment taking 25% more, you can easily catch yourself missing a car payment.  In days past, missing one payment wasn’t a big deal so long as you caught it up quickly.  Now, that’s a different story.  

Along with inflation hitting literally everything else, used car prices are up 32% over this time last year.  Guess what…your finance company knows this and they’re in a hurry to cash in.  We’ve seen cars be repossessed for being just 1 payment behind.  Why? Because finance companies see an opportunity to pick up a vehicle that has a lot of equity in it right now, selling it quick and pocketing the cash.  Leaving you with little to nothing to show for all those years of car payments. 

The foreclosure Grinch

Do you own your house? Fantastic! You’re creating generational wealth to pass on to your kids and grandkids.  The problem… you took a COVID forbearance and now your bank wants those payments caught up now or in the very near future.  Chances are, you took that forbearance to survive during COVID.  Your job was cut or at least your hours were reduced.  Now, you’ve got to come up with an extra $5,000-$10,000 to catch up the mortgage.  You know what else is a problem…the bank knows how much equity you have too. Home prices are up an average of 15% since 2020.  Just like the repo Grinch, they see an opportunity to foreclose on your house, sell it, and make a tidy profit. 

Stopping the Grinch

Now that you’ve read this far, let me give you the good news.  We can stop the repo, foreclosure and garnishment Grinch dead in their tracks. The inflation Grinch, not so much, but when everything else is going your way…you can probably manage. Bankruptcy is the law, not a suggestion like debt consolidation.  When you file bankruptcy, it puts the full force of the United States Federal Court system squarely behind you.  That means the repo man better not mess with your car and the foreclosure sale of your home is stopped dead in its tracks.  Oh, and that lawsuit seeking to garnish your wages…it’s toast. If you’re finding yourself in a tough situation, now’s the time to act.  File today and you could be debt free by Christmas.  

In the story, the Grinch’s heart grew three sizes that day and he realized the error of his ways.  Your creditors won’t be so altruistic. 

When you’re ready to stop that Grinch BEFORE he can load your stuff on that sleigh, give me a call. 

An Estate Plan in 5 Easy Steps

Estate Plan

An effective estate plan is something that doesn’t just come together overnight.  It takes some planning on your part and you shouldn’t neglect these things.  In the uncertain world we live in, it never hurts to put in a little leg work now so that when the time comes, your family isn’t stressed out by having to tie up lots of loose ends or worry about their future.

Below is a list of 5 Steps we think are extremely important for each person to do, regardless of wealth. 

Make an Inventory

You have many things that you have accumulated over the course of your life both tangible and intangible. You may not think you have enough to worry about, but to be very frank, you would be surprised by what all you’ve got. 

Tangible assets like cars, boats, houses, jewelry and other real estate are all things you need to account for. If you own these things free and clear, that’s great, otherwise you’ll need to let your heirs know who holds mortgages or loans on the items in question. 

You also likely have intangible assets.  Things like 401(k)s or other retirement plans like pensions or IRAs.  You may also have life insurance, bank accounts, ownership in a business or stocks and bonds.  You’ll need to leave a detailed list of where each of these assets are and how you access them.  

You don’t want your heirs spending their precious time looking for things or for those things to ultimately end up where you don’t want them to go. 

Account for your family’s needs

If you’re married and/or you have children who depend on you, you’ll also want to make sure that you have something in place to take care of their needs until such time as they’re able to do that themselves.

If you have someone who depends on your income, you’ll want life insurance from a highly rated company. (I’ll link to the A.M. Best list of top life insurers here)  How much you need depends on your individual circumstance, but generally speaking for each million dollars you have in life insurance, you’ll be able to safely generate about $30,000-$50,000  per year in income if invested wisely.  

If you have children and you’re not married, you’ll also need to designate a guardian if the children are under 18 or have no other surviving parent.  Don’t take for granted that your children will end up with the relative you want them to live with.  Custody battles have torn extended families apart.  

Finally, if you have children, you’ll want to make sure that you document how you would want them raised.  Don’t assume a guardian would raise your children in the way you want them brought up if you don’t specifically express that in your directives.  Guardians should be named in a will or other binding legal document and you should discuss with your guardians how you want your children raised BEFORE you name them in your will. 

Establish your directives

A key tenant of any good estate plan is a medical care directive, also known as a living will, will give your family guidance in how you wish for your medical care to progress should you find yourself unable to make those decisions. 

There are also powers of attorney that exist that give people the ability to direct your financial life should you become incapacitated.  You need to be careful with these documents though and make sure you fully understand them before assigning those powers to just anyone.  

Finally, you’ll want to have a will in place. A will is a legal document that directs your executors (those you choose to carry out your final wishes and disperse the assets of your estate) in settling your final debts and dispersing any inheritances you wish to leave to people. It is the final LEGAL piece of any good estate plan. 

Review your beneficiaries

Many assets can pass to people you designate outside of the probate process.  Bank accounts, life insurance, retirement and pension accounts all have beneficiaries that can be listed as P.O.D. (pay upon death).  In this scenario, these assets can pass to someone outside the probate process.  The problem is that if you leave someone as a beneficiary, it will pass to them REGARDLESS of your wishes laid out in your will.  In other words, if you named an ex or someone else you don’t want to get the money as a beneficiary, it will go to them regardless.  It’s always a good idea to review beneficiaries periodically and especially after major life events like a birth, death, marriage or divorce.  

Plan to reassess

This may seem redundant, but you always need to be reassessing how you want your estate handled.  Your state in life may change, you may get married, divorced, have children, inherit from another relative or have any number of changes in fortune over the course of your life.  Keeping a good, updated plan in place is imperative to those you leave behind.  Not only because it ensures your wishes are carried out, but it also ensures that when your heirs are dealing with grief and/or other uncomfortable situations, they know and are reassured by your written wishes. 

While many of these steps can be taken without the help of an attorney, having wills, powers of attorney and medical directives drafted by a knowledgeable attorney can ensure that your final wishes are carried out and unlikely to be overturned. When you’re ready to take steps to ensure the future of your family and discuss your estate plan, give us a call.

 

An Angry Divorce

Divorce is scary and can evoke a wide range of emotions, including anger. In our practice, we seek to help couples avoid as much of this anger and despair as possible by having a supportive and non confrontational approach to divorce.  However, we understand that inevitably, there will be some difficult feelings.  Below is a list of steps you can take to help deal with the angry feelings that will inevitably come with divorce, because in the end, remaining civil is what’s best for everyone. 

If you’re angry:

  • Write: keeping a journal or writing letters to yourself can help deal with unfortunate thoughts. 
  • Talk: It’s important to discuss your feelings with others, especially trusted friends who are willing to listen.  If you don’t feel comfortable discussing your feelings with a friend, reach out and find a counselor in the area who specializes in divorce counseling. 
  • Take a look at your “core beliefs”: do these core beliefs that you’ve had your whole life still serve you well.  We tend to trust that these long held beliefs are sacrosanct but in all honesty, we all need to re-examine our feelings and beliefs from time to time to make sure they are still serving us well. 
  • Take responsibility: You’re probably angry that your marriage is over, even though you’re doing it in an uncontested way. In all honesty, marriages rarely end with one spouse being 100% at fault.  Take an opportunity to examine what your role may have been in the end of your marriage and work on that. 
  • Learn what your “triggers” are: Try to understand why you get angry and before you express that anger, think about your response.  
  • The kids: If you have children with your spouse, protect them.  They didn’t ask to be born and they certainly didn’t ask to be dragged into the middle of the spats you and your spouse are having.  Don’t badmouth your spouse, withhold support or block visitation.  Your kids (even your adult children) love you both and they deserve to have a life where their parents can be cordial. 
  • Forgive: If you don’t learn to forgive you’ll be stuck in a rut for the rest of your life.  Ending a marriage is hard.  It may not be what you ultimately wanted. Spending your life dwelling on this anger will never allow you to live a fulfilling life and will just continue to wreak havoc on your physical and mental wellbeing. 

If your ex is angry:

  • Listen: listen to the concerns of your spouse.  Part of an uncontested divorce, (other than the cost savings) is to hear and accept what is angering and hurting your spouse.  
  • Learn to walk away: Sometimes your spouse is being unreasonable or attacking you.  Don’t be afraid to take a time out and rejoin the conversation once everyone has had a chance to calm down.  Put limits on what you’ll allow to be said and how you’ll be treated.
  • Try to defuse the situation: Sometimes empathy can go a long way.  Maybe you agree and potentially even sympathize with your spouse. If you agree, offer a genuine apology. Apologies can quickly calm the flames of anger. 
  • Don’t take things personally: Anger is deeply personal.  You and your spouse are both going through a lot right now.  
  • Learn compassion: Your ex is going through just as much as you are.  They may be worried about their future.  They may be worried that they’ll never see their kids again or that they’ll somehow prefer you over them. A lot of anger is caused by fear or shame. 

In the end, the point of an uncontested divorce is to try to lessen these emotions.  We want to make a stressful time as easy as possible.  We know things won’t ever be the same between you, but you can end your marriage in a dignified and peaceful manner.  We’re here to help you just like we’ve helped countless others. When you’re ready, we’re here