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

in Bankruptcy

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

in 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. 

The Reality of Unemployment

in Bankruptcy

COVID- 19 is having a dramatic effect on the average American household. We are seeing unemployment numbers reaching record highs not seen since the great depression. With a  wave of corporate bankruptcies having already begun, taking out legendary retailers like Neiman Marcus and J. Crew as well as the second oldest airline in the world, Avianca, with more pain in the corporate world likely to come and with that will come even more unemployment. 

Consumers, likewise, have faced an enormous amount of uncertainty.  A recent poll taken since the coronavirus outbreak paints a grim picture of household finances: Almost two-thirds of respondents (64%) anticipate that lost wages due to the pandemic will yield at least a $500 shortfall when trying to pay monthly bills. Nearly half of those households (27% of all respondents) predict a shortfall of $1000 or more. Those are real and substantial amounts of money.  We have already discussed how the average American is unlikely to be able to fully fund a $1,000 emergency.  Add that in with the fact that many Americans are likely to be $1,000 short of being able to make basic expenses and you have a recipe for catastrophe.  

While many have been able to float their expenses by relying on their $1,200 stimulus check and their boosted unemployment checks, others still find themselves short and others still haven’t received either their stimulus or their expanded unemployment benefits.  This leaves consumers with very few options.  As we outlined in an earlier blog post, you need to prioritize your payments.  You have to keep a roof over your head, food in your belly and you have to be able to obtain reliable transportation when it is safe to return to work or when you are able to find gainful employment in that order.  One of the best ways you can handle the shelter and transportation issue is through bankruptcy.  When times get tough, the bankruptcy code provides immense relief for people who have found themselves to be in tough financial situation.  This is done through the automatic stay which provides relief and stops actions by creditors.

Bankruptcy is a saving grace for people who have experienced financial hardship.  If you’ve exhausted your options or are feeling overwhelmed by your financial situation, don’t keep waiting for the next financial catastrophe to come down the pipe, get ahead of it and contact our office today for a free, no obligation consultation via phone, videoconference or in person (with social distancing of course) with one of our award winning attorneys.  In times of trouble, it’s good to know someone.  Let us work for you. 

A Study: Debt in Georgia

in Bankruptcy, Credit and Credit Cards

Consumer debt all over the country is approaching record levels.  We are all aware of the student loan crisis and medical debt, but the reality is, debt of all kids is at an all time high.  Citizens of the State of Georgia are facing incredible levels of debt.  More than 39% of Georgia residents have at least 1 account currently tied up in debt collection.  A recent CNN report states that more than $14 Trillion dollars of debt is outstanding in America.  That includes mortgages, student loans, car loans and credit cards, medical debt and other debts.  These levels of debt are scary to most people because levels of debt this high represent unsustainable amounts of money to service these debts.

The average American Family lives on less than $64,000 per year and while that number has risen lately, it pales in comparison to the average amount of debt carried by Americans at more than $137,000 .  Citizens of Georgia face higher collections and levels of debt that the national average. Citizens of Georgia have on average about $2,700 of credit card debt which on average costs around $275 a month in payments in order to actually pay it off.  That is a significant payment for most citizens in Georgia who average a gross monthly income of only $4,600 before taxes.  

What can we do about debt? Well that’s the million dollar question.  We try to pay it off if we can.  No one takes out a loan wanting to not pay it.  We often find ourselves struggling to deal with paying our debts and maintaining basic necessities and unexpected emergencies.  If your level of debt has become unsustainable, contact the attorneys at Harmon and Gorove to see how we can help you achieve freedom from debt with a completely free consultation with one of our award winning attorneys.

Don’t let the fear of bankruptcy hold you back: It will get better.

in Bankruptcy

Fear is a powerful thing.  Fear motivates people and holds other back. It’s true,  your life after bankruptcy may be different than it was before you went and made the best financial decision you’ve made recently. While its true that bankruptcy generally reduces your credit score, it’s likely that your credit was already not so great.  Bankruptcy can occasionally make it harder to get credit in the future, especially in the short term, but over time things get better.

Fear of bankruptcy and its aftermath isn’t a good reason to avoid using it when you need it. Bankruptcy is there for a reason and that reason is to help you in your time of need.  Bankruptcy can free up your finances and allow you to get through life without the need to take on more and more debt. With the financial freedom and stability bankruptcy provides, you may not even miss the credit lines you once had.

Recovery after bankruptcy: What happens next?

After a bankruptcy you’ll be considered, at least temporarily, a high risk borrower. Your best bet for rebuilding your credit is to make on time payments with your utility providers, especially cell phone and internet companies as they often report on your credit. With a Chapter 7 bankruptcy, you’ll have it reported on your credit report for the next 10 years and if you choose a Chapter 13 bankruptcy, it will stay on your credit report for the next 7 years. 

While you may have trouble getting loans or credit, most people are able to get credit for some kinds of purchases after only a year or two.

While you’re in the bankruptcy process you’ll encounter some minor difficulties on occasion. You may find it harder to rent an a place to live, buy a car or get a job.  If you already have a place to live and a good job or a reliable car, do your best to maintain the status quo. It could be difficult to get a car loan immediately after bankruptcy and while many landlords understand that people get in trouble sometimes, there are landlord who may exclude you if you have poor credit. 

After bankruptcy, the key things to do is remember to pay all of your bills on time. Stay current on them so that your new post-bankruptcy record stays clean and shows positive change from the bankruptcy moving forward. You may want to take out a credit card that requires a full deposit. These are available at many reputable banks and are usually available to people regardless of their credit history. This kind of card is designed to help you build your credit on one hand and it also keeps you protected by not allowing you to borrow more than you put down as a deposit. 

These are some things to think about with bankruptcy. We are always up front with our clients about he way their life will change. Your life may change after bankruptcy, but you will be able to move on and have a life without debt that overwhelms you. If you’re interested in scheduling a free consultation to discuss your options, contact the compassionate attorneys at Harmon and Gorove for a free consultation today.

3 uses for your Stimulus Check

in Bankruptcy, Credit and Credit Cards

As of the writing of this blog entry, more than 22 million Americans have filed for unemployment and millions more are staring into the abyss.  COVID-19 has decimated what was one of the strongest economies in American history. Businesses are closing and some of the most famous names in retail are likely to be seeking bankruptcy protection in the very near future. There is one silver lining in all this and that’s the help we’re all getting from the government in the form of Stimulus checks to help offset the damage COVID-19 has done to people’s ability to function financially. A lot of people don’t often receive a big lump sum payment like this and many are asking, what should I do with my newfound windfall.  We have a list below to help you decide. 

Meet your basic needs

Everyone has ongoing expenses that they must pay for, your stimulus can help.

Food: You’ve got to eat and so does your family.  You’ve got to be able to put food on the table day in and day out.  If you don’t have any other means of putting food on the table, this check can seriously help with one of life’s greatest necessities. 

Housing: You’ve got to keep a roof over your head.  Many people are finding offers of forbearance on loans and rent, but be sure to read the fine print.  Many banks and landlords are offering forbearance but the devil is in the details. Many of those banks and landlords will expect the entire amount due at the end of the forbearance period.  If you can, pay your mortgage or your rent.  

Transportation: If you’re lucky enough to have a job now or one to go back to once everything goes back to normal, you need to keep a set of wheels. 

Utilities: You should pay your bills if you can.  While many utility companies are’t disconnecting during the crisis, don’t think that’s going to be a free ride. The tab is still running and they will eventually expect payment, possibly with interest and fees. The bottom line is, look on their websites for coronavirus accommodations and how to contact them for assistance. Don’t ignore bills. Stay in touch with each company if financial hardship puts you behind and you can’t pay.

Save it

We have written before about the number of Americans who don’t have even enough money  in their bank account to cover a $1,000 emergency. With each person getting $1,200 in stimulus money and families getting more, if you are one of the fortunate people who still have a job, use this money to help build up a fund to cover the unexpected burdens you may not see coming yet.  

Invest in your future

Eventually, everything will get back to normal and when it does, you’re going to have a lot of financial decisions to make.  If you aren’t in the position to save your money and you’ve stopped paying some of your bills like credit cards and personal loans, know that your creditors will eventually come looking for you and the money you owe them.  If you already had a good amount of debt to begin with maybe you’re realizing that now may be a good time to start fresh with a clean slate. At Harmon and Gorove, that’s what we’ve done for nearly 40 years. If you’re facing financial uncertainty because of unsustainable debt, contact the attorneys at Harmon and Gorove for a free consultation to discuss how bankruptcy can put you on the path to financial security.