Bankruptcy

The Cure

in Bankruptcy, Credit and Credit Cards

We hear them every day and we have written extensively about get out of debt schemes and what an absolute scam most of them are.  People sit there and pitch the most unimaginable garbage to people who are struggling with debt.  They’re just like the snake oil salesmen of the wild west with all of their ridiculous cure all solutions.  “Buy my book and learn how to get out of debt fast” barks the salesman from his multimillion dollar radio perch or the best one is, “we’ll get your credit card company to settle for pennies on the dollar.” They’re selling you snake oil and without a proper diagnosis, you’ll get exactly…nothing. Except for a lighter wallet. 

You don’t treat a medical problem without a proper diagnosis.  Is it gas pains or colon cancer, a headache or an aneurysm?  You wouldn’t let someone start cutting or taking a dangerous therapy if you only needed to take a tylenol or quit eating so many beans. 

Much like medical problems, for a proper cure, your finances need a proper diagnosis too.  Do you have a temporary problem that will work itself out with a little discipline or are you throwing your hard earned money into a bottomless money pit. The answer is a big step in diagnosing and treating your debt problems. 

Rx for Debt

Any good physician needs to know things about you.  Your age, your medical history, family history, etc. 

An attorney assessing your financial situation will have similar questions.  We need to know your age, whether you have dependents, what your assets are, who and how much you owe as well as what your income is.  All those are questions we have to have answers to in order to recommend a good plan to get you out of debt.  

If you’re about to retire, you don’t have the luxury of time to get out of debt by just cutting a few frills but if you’re young and single with a good job, maybe selling that expensive car for a more frugal model and cutting back on the dinners out will help you get your financial house in order.  

The old, “cut out the lattes” line doesn’t exactly work if you’re staring retirement squarely in the face like it would for a 22 year old. Sometimes “buckling down” is:

Too little, too late

Most of the better known and more respectable “debt gurus” have advice that is better suited for how to live AFTER you cure your debt issues or if you have plenty of time and discipline and not much debt.  You have to start by comparing your income to your debt load.  Otherwise known as a Debt to income ratio.  If you’re using all your income just to service the bare minimums of your debt, you need a lot more help that someone who just spent a little too much this month.  

You have to assess your situation.  If you’re hunting squirrels, you don’t need a howitzer, but if you’re taking on a grizzly bear, you better come with some powerful options. 

How risky is the cure

The last question we need answered to give you a proper diagnosis is, how risky is the treatment.  In medicine, you don’t want to have brain surgery for a headache.  Think about the side effects of the medicine you take.  Every medicine has them and you don’t want to take something dangerous unless you have to.

When you are talking about curing debt though, you risk having to live with no safety net, especially if you’re doing it the “radio show” way. We have talked about how nearly half the country can’t cover a $1,000 emergency without having to borrow money from somewhere.  $1,000 isn’t much in this economy and don’t fool yourself into thinking that you can put your hands on a grand in a matter of minutes or that you’re not one of those people.  

One thousand dollars isn’t much in this economy.  Yet a $1,000 expense would imperil a huge swath of our citizens.  This list details more than 30 different everyday situations that could require you to spend at least $500.  None of those reasons are all that crazy or out there.  It could happen to any of us at any time.  Not long ago, we wrote about what to do when you’re in serious debt and I’ll link to that here.  It goes into greater detail and will help you understand more of your options.  

Taxes, Taxes…Taxes

in Bankruptcy

Unfiled Taxes

It’s that time again in America.  The final deadline for filing your taxes looms large. People who got extensions will have to file their taxes by October 15th and that day looms large for those who owe.  You’ve done your taxes and gotten to the bottom line.  You owe… way more than you have in your bank account.  

So…what now?

File your taxes anyways.  

The IRS, horrible as they are, won’t start harassing you for money on April 16th or July 16th or even October 16th.  They likely haven’t posted the returns that have been filed yet, especially in years like this with COVID lurking in office buildings.  

There are serious advantages to filing your return, even if you don’t have the money to pay right now.  In fact, filing your return and starting the clock has way more advantages than hiding behind the fact that you don’t have the money to pay.

Payment plans available

The number one thing you can do is send in what you can.  It lowers your tax debt and the penalties and interest that will accrue on that debt from the word go.  Look, the IRS is greedy.  They just want your money and they want all they can manage to get from you.  That’s how the government is.  Send them what you can, when you can.  You don’t have to enter into an installment agreement with the IRS.  Just make sure that when you send in your payments, you notate your social security number, name and what year you want the money to go to on your check. 

If you’re really in need (for whatever reason) of a formal payment plan with the IRS, you can set one up online so long as you owe less than $50,000. 

Additional penalties for failure to file

If you don’t file a tax return and don’t get an extension, you’ll be up the creek without a paddle. You’ll be smacked with a separate penalty for failure to file the return.  That’s on top of the penalty you’ll pay for failure to pay as required.  Trying to hid from the IRS is way more expensive than doing the right thing. 

Filing returns starts the clock

On the escape option that is.  Taxes aren’t eternal.  Yes, I said that and it’s true.  Taxes can go away after time.  There is a statute of limitations on taxes that can make them uncollectable. 

There’s also the silver bullet, Bankruptcy. 

Bankruptcy law allows you to discharge certain taxes that are of a certain age before they can even expire.

But there’s a catch.  You have to file.  The clock doesn’t start ticking until you file your tax return.  That’s why filing, even when you can’t pay, is supremely advantageous.  

You need to adjust your withholdings

The final reason why you need to get last year’s return ready is that you need to get your withholding right for this year.  Even an extension can cause problems because it delays your ability to adjust your withholding on your W-4 to account for the fact that you owed this year.  You want to adjust your withholding so you don’t have to pay out of pocket again next year when everything is said and done.  

The bottom line is, hiding from a problem isn’t going to make it go away.  Especially if that problem is with a government agency as nasty as the IRS.  If you owe back taxes and you can’t pay them, contact the attorneys at Harmon and Gorove to see how bankruptcy can help you get a handle on your tax debt.  We have a dedicated team of professionals that understand your rights under bankruptcy and how they can help eliminate tax debt.  

Debts that follow you

in Bankruptcy

Some debts just follow you out of bankruptcy.

There aren’t many but some do exist.

Debts on the list below can, and often are, collectible after your discharge in a Chapter 7. Chapter 13s however, are often better vehicles for ridding yourself of many of these debts.  

Family/Domestic support payments

It doesn’t matter what your state calls it, these types of payments, made to former spouses or children, are not dischargeable. 

Your most recent taxes

Income taxes are not dischargeable if they are less than three years old. 

Taxes that can still be assessed

If you file bankruptcy in the middle of the year, it doesn’t quash the ability of taxing authorities to continue to collect taxes for that year. 

Unfiled taxes

It doesn’t matter if the tax debt is 12 years old, if you didn’t file a tax return, the clock hasn’t started ticking yet. 

Payroll taxes

Your employer withheld taxes for things like medicare and social security are not dischargeable. 

Judgments for drunk driving

Liability for death or personal injury from impaired operation of a vehicle

Debts from divorce

If you owe money to your former spouse and/or your children because of a divorce, you may not have that debt discharged. 

Student loans

Student loans are almost never dischargeable….seriously.  Anyone who tells you otherwise, is lying.  

Loans you took to payoff taxes

You can’t pay your taxes with a loan you wish to file against. 

Government Fines

If you are being punished by a government for a criminal act, you may not discharge that debt.

Non dischargeable if….

There are three additional times where a debt can survive a bankruptcy, but it requires some fancy legal maneuvering by a creditor’s attorney.

Any debt you incurred through fraud, breach of fiduciary duty or deliberate injury to someone’s person or property.  Each of these debts require a victim to file suit or charges against someone to prove it actually happened.  

There are also actions where a creditor can object to the dischargeability of the debt based on evidence that you created that debt through bad faith or bad behavior.  The presumption favors the debtor, but if the creditor can establish that the debt was created by your bad faith, the law has a duty to see that those debts are not dischargeable. 

You do have to understand that the debt actually has to be incurred because of your bad behavior.  Not paying a debt is not bad behavior, you actually have to do something bad. 

Some liens survive…

Bankruptcy wipes out your personal liability for a debt, but if a lien exists before the bankruptcy is filed, that lien can survive the bankruptcy but you can’t be held liable for the debt. In other words, If your car is repossessed and the bank sells it for less than you owe, they can no longer sue you for the difference.  Same thing with your house.  If you don’t reaffirm your mortgage, but you keep making payments, the bank will be happy to take your money.  However, if you quit making the payments and the house is foreclosed upon, the bank can’t sue you if they sell it at a loss. 

After your bankruptcy, if you continue to make your payments on the secured debts, creditors are happy to get your money and leave you alone.  If for some reason you change your mind or if more financial trouble is coming down the pipe for you, you are allowed to walk away from the liened property and only lose the property. 

The attorneys at Harmon and Gorove can walk you through the process and tell you about your options.  Call us today to set up a free, no obligation consultation with one of our award winning attorneys do discuss your situation.

It’s never too late

in Bankruptcy

Timing

Did I wait too long? 

Oh no, I didn’t mess this up did I?

What am I going to do?

Sound familiar? It does to us. If you’ve put off filing bankruptcy because you were hanging on for a miracle that didn’t come through or you thought it would just go away just know that miracles, at least in the harsh world of finance, almost never happen and I can assure you, if someone has gone to the trouble to serve you with suit papers, they aren’t just going to go away.  

But is it too late? Has time truly run out on you?

No, it hasn’t.  Bankruptcy can pull your bacon out of the fire at just about any point in the collections process.  Should you have filed sooner. Yeah, you should have, but you didn’t.

We don’t recommend that you procrastinate.  In fact, people need to stop waiting till the last second to get in touch with a bankruptcy attorney.  Bankruptcy shouldn’t be a last resort.  

Suit papers

When a summons and a complaint is served to you, the clock starts running.  You only have a certain amount of time to answer the complaint.  If you don’t answer the complaint, whoever is suing you gets whatever they asked for. 

Guess what?

You don’t have to answer the complaint if you file bankruptcy.  

Bankruptcy stops the complaint and the lawsuit dead in its tracks.  That’s the beauty of the automatic stay.  Federal law supersedes state law and the state court must then all action in the case and the creditor must withdraw the suit. Additionally, at the end of your bankruptcy, the amount that you supposedly owed, is discharged.

Remember, It’s not too late.

You get sued and lose, is it too late?

You lost.  Losing stinks, especially in court, or so we’ve heard. 

Now you have a judgement against you. 

Just because a judge has ruled in favor of your creditor, bankruptcy can still help.  The debt can probably still be discharged in bankruptcy.  The only time a debt can’t be discharged is if you are being sued over family support obligations, very recent tax debts, criminal fines or debts created through fraud.

If you’re sued by your every day average credit card, someone with a personal loan of any kind of medical debt, you can wipe it out.  Even after a judgement has been entered. 

The only problem with all this is, Chapter 13 has limits on how much debt you can have and still qualify.  Once a creditor has the judgement against you the debt is fixed.  If this debt is too large, it can put you over the debt limits for a 13. 

One more problem is the fact that waiting until a judgement is on the books could also mean that a court found that you committed fraud. In that case, the bankruptcy court may find the same problem and then the debt would be excluded from discharge.

All that said, it’s still not too late. 

A creditor gets a lien, is it too late?

Bankruptcy isn’t a silver bullet, but it does change the balance of power.  If you got sued, and lost, and the creditor has perfected a lien against an asset it’s probably still not too late.

But that depends.

One of the things about bankruptcy is that it generally eliminates your personal liability for a debt.  However, some liens can survive bankruptcy once they’re attached to certain assets. 

There’s hope though.  You are allowed to avoid a judgement lien if it interferes with your exemptions.  It doesn’t matter how old a lien is, if it interferes with an exemption you can claim on an asset, you can avoid it. 

Bankruptcy can change the balance of power even if you’ve waited til the creditor with a judgment has perfected a judgment lien against your assets.  How much change is possible depends on the exemptions available when you file bankruptcy. Avoiding a lien isn’t automatic and you have to file a motion but even if you forget you can reopen your case in the future and file that motion. 

Again, in almost every circumstance, it’s not too late.

You’re being garnished, is it too late?

If you’re being threatened with a garnishment, your creditor has already obtained a judgement from a court.  That judgement can then be used to collect that debt. 

Just like every other situation I’ve discussed, a bankruptcy stops a garnishment dead in its tracks. Your creditor may end up being able to keep the money they collected before you filed, but from then on, all your money is yours. 

In certain cases, bankruptcy law allows you to recover money your creditor got from you before you filed, but you need to talk to your attorney about what that entails.

Because of the effect bankruptcy has on garnishments, it’s not too late.

When you do it is up to you

At virtually any point during a collection action, filing bankruptcy can put the brakes on a bad situation and give you the ability to eliminate your debt. Once it’s discharged, it’s gone for good and is henceforth, uncollectable.

There are some situations bankruptcy can’t undo.  If you take out a second mortgage or do a cash out refinance to “consolidate” your debt or you raid your 401k to pay back debts you could have otherwise dismissed in bankruptcy, that money is gone and we can’t undo that.  

That’s why it’s always better to plan early rather than wait. 

The attorneys at Harmon and Gorove are ready when you are.  We provide free consultations and seek to give you the best advice, regardless of whether we make money or not.  If you’d like to speak with one of our award winning attorneys, click here to schedule a consultation today. 

The “Last Resort”

in Bankruptcy, Credit and Credit Cards

last resort

If you find yourself in a financial pickle, there are three times when it makes sense to look at bankruptcy.  The first is in a crisis, the second is when you’re looking at the totality of your financial situation and the third is when you’re so worried about your finances that you’re literally making yourself sick. If you’ll notice however, none of those are called, “last resort.”

All of the financial gurus out there, and I mean all of them, love to sit around and talk about how bankruptcy should only be a last resort.  While I enjoy listening to some of these “gurus” I prefer to take some of their advice with a grain of salt.  Using bankruptcy as a last resort often keeps people from getting the help they need, when they need it.  It can often lead to people throwing good money after bad by trying to repay debts when it’s obvious you can’t.  That kind of thinking delays the inevitable, costs you more and absolutely makes you more stressed. 

That said, let’s talk about when it’s a good time to file bankruptcy.  Remember, none of these situations are a “last resort.”

1.  You’re in crisis

You just got a notice that your car is going to be repossessed, you were told at work about a garnishment that would hit soon or you got a foreclosure notice in the mail from your mortgage lender.  Without a roof over your head, your whole paycheck or a car under your rear end, you’re going to have a hard time making day to day living manageable.  It’s going to threaten the whole foundation of your financial house.

Filing bankruptcy can stop all of those actions dead in their tracks.  It can allow you to keep assets that you may otherwise lose to creditors without bankruptcy.  It gives you a chance to reassess your situation, effectively calling a timeout on collection efforts while you sort through what you need to do to survive. 

Remember, bankruptcy triggers an automatic stay and that’s like pulling the emergency brake on a train.  Everything comes to a screeching halt. It stops all collection actions against you including suits.  

Lawsuits aren’t automatically a crisis, even though it seems like one at the time.  It’s more of a wakeup call that your finances are not in a good place and you need to do something to get your finances back in order. Remember, the lawsuit is just one creditor knocking at your door.  If you’ve got one that’s upset, chances are there are more and they can sue you too. 

Bankruptcy gives you a time out to breathe, assess and figure out where to go from here.  Not to mention that it wipes out many of your unsecured debts.

2.  You finally see the forest through the trees

It doesn’t necessarily take a crisis for you to take a look at your balance sheet and realize that you’ve dug yourself into a hole you aren’t likely to get out of. Making decades of minimum payments just to keep creditors away isn’t a way to live and it certainly isn’t a way to get out of debt.  I know you see the part of your credit card bill that tells you when you’ll get out of debt if you only make your minimums AND don’t spend anymore money.  It’s a long time, even for small debts.  

Having a healthy financial situation includes having an emergency reserve and a good chunk of change saved for your retirement. If you keep throwing all your money at Discover and American Express, you’ll be eating dog food when you turn 75. 

Lawmakers created bankruptcy because they understood that the economy is better when people are able to be self sufficient.  It doesn’t matter how you got into debt, you’re not a bad person.  Most bankruptcies result from things that are out of our control. Job losses, illness, divorce, death of a loved one and the list goes on and on.  Whether you are in a bad financial situation because of bad luck or bad choices, getting the fresh start you need can certainly be a refreshing thought. 

3.  You’re killing yourself with stress

Stress is a major driver of physical and mental health issues in our country.  It is unfortunate that we tend to deify those people who struggle to pay off their debts.  While that’s all well and good, we truly need to remember one thing.  Stress kills.  Stress makes us less likely to be able to make good decisions and forces us into choices that can have ramifications for years to come. 

When money worries have an impact on your ability to sleep, work, or have healthy relationships, it’s worth looking at bankruptcy as an option.  Even for people who are older and protected from collection by exemptions, you may look into bankruptcy for the sake of your heirs even if you won’t do it for the sake of your health. 

These reasons for seeking help via bankruptcy often overlap but the idea that bankruptcy should only be a last resort is just patently untrue.  Filing bankruptcy shouldn’t be taken lightly but it also shouldn’t be the last option.  The sooner you examine your situation the sooner you can start looking at getting the help you need before you go out and do something crazy like borrow against your house or your retirement savings to pay off some dischargeable debt. 

When you’ve determined that you need to seek help, call the attorneys at Harmon and Gorove.  We have helped thousands of people escape the burdens of debt and get a fresh start.  We offer 100% free consultations and will always tell you the best course of action, even if it doesn’t make us a dime.  

Garnishment Survival Guide

in Bankruptcy

“Your wages are subject to garnishment,”

That’s the first line in your most recent letter from HR. 

If You Do nothing 25% percent of your net earnings will be sent to whatever creditor has a judgement against you. 

Do something:  keep reading this if you live in Georgia and are subject to a wage garnishment.

I have three points to make here:

  • What to do in the short term,
  • What to do in the medium term, and
  • in the long run, what can we do to keep this from happening again. 

 

What is Wage garnishment 

A wage garnishment is an order from a judge, obtained after a judgement is secured against you, that allows a creditor to take money directly out of your check to satisfy the judgement they obtained.  

The fact that you are getting garnished means that a judgement has already been obtained by a creditor  and a judge has agreed that you are liable for an amount of money you owe to the creditor.  If everything happened the way it was supposed to, you should have gotten a copy of the complaint that was filed against you.  Due process requires that before the hearing to determine whether and how much you owe, you’re served with the complaint and have a chance to defend yourself against the complaint in court. That doesn’t always happen like it’s supposed to and we’ll discuss that later.

Georgia allows creditors, once they have a judgement, to take your wages directly from the source, your job, to collect on a judgement.  Your wages are protected to an extent by state and federal laws.  The cap is currently 25%. 

In this article we are going to look at the judgments you’re most likely to face.  Judgments for unpaid medical bills and credit cards.  There are a number of other judgments that we won’t worry about today.  

1.  Protect Your Paycheck 

The garnishment allows the creditor to take 25% of your paycheck, but that’s the max and that’s after other deductions are subtracted. 

There are a number of other exemptions under Georgia Law and you need to review them to find out if any of them apply to your situation. If you don’t fall under those exemptions there isn’t much you can do to stop a garnishment outside of bankruptcy.  

Notify your payroll department of your exemptions

If you pay falls under the scope of the exemption you need to make sure that your payroll is aware of it.  Theoretically, they should be aware of it as it is their job to follow the law, however, it’s always best to remind them of their duties and that you believe your income to be exempt from the garnishment. 

2.  Attack The Judgment

Your wages can only be garnished if a court has determined that you actually owe the money your creditor says you owe.  If you were at the hearing and lost, it is your job to appeal.  If you didn’t appeal, the matter is close and the judgement stands..  

However, If the judgement was a complete surprise to you (in other words, you weren’t properly served) you may have a chance to fight back.  This is a procedural attack on the judgement not one attacking the merit of the creditor’s claim. Attacking claims are hard though and will usually require the assistance of an attorney.  There are some legal aid societies that may be willing to help, but if you don’t qualify you’re on your own to either figure it out or hire an attorney. This is only a good thing to do if procedure truly wasn’t followed AND you have a good defense.  You don’t want to go to the trouble and potential expense of fighting the claim if you’re just going to lose anyways. 

3. Completely examine your finances. 

Your time is precious and limited.  Before you try to really hunker down and try to fight this, you need to take a look at your entire financial picture.  You need to ask yourself a question and it’s very important for you to reflect on it:

“If I handle this debt, will I still be able to pay all my other debts?”

If the answer is yes, there are a number of reputable credit counselors and social workers who can help people develop budgets.  Some organizations like the Salvation Army help people create budgets that, if adhered to, can help people to live within their means. 

If the answer is no, you need to look at other options, primarily bankruptcy.  There are tons of debt settlement companies out there and most of them are either outright scams or they don’t offer real, lasting solutions to your problems.

Bankruptcy attorneys are well versed in analyzing finances and determining whether or not you are able to get out of your financial troubles without the help of Bankruptcy. 

If you’re facing a garnishment, reach out to the attorneys at Harmon and Gorove.  They offer a free, no obligation consultation to help you decide your best course of action.