Tag: assets

Asset Protection and Saving Money in a Chapter 13

in Bankruptcy

So many people come into my office wanting to file a Chapter 7 bankruptcy.  That’s all well and good and we love to get people into 7s when we can, but the reality is, even a Chapter 13 can save you money in the long run, even if you’re paying back 100% of your debt.

Clients with tons of equity in their home or with another asset or assets that can’t be protected in a Chapter 7 often are faced with a choice and usually, that choice is, do a 7 and risk my asset or do a 13 and pay everyone back. Clients often struggle with finding the benefit of using Chapter 13 to manage their debt.

An example I like to use stems from a client I helped a couple of  years ago. This client came in with a substantial amount of equity in their home and couldn’t understand why she needed to file a Chapter 13.  She didn’t want to file a Chapter 13 and was adamant about that. However, they also didn’t want to lose their home. I explained to this client that even though they technically could pay back their creditors due to their income, filing bankruptcy would ultimately save this person a great deal of money AND it would mean that creditors had to abide by the protections provided by the law.  Once I crunched the numbers to explain why a Chapter 13 would be good for this person, I gave them the answer. In this client’s case, the answer was $40,000. 

Chapter 13 saved $40,000 over the course of their case when compared to paying all the creditors what they were owed outside of bankruptcy.

It’s the interest rate

The $40,000 savings for this client originated from the difference between the interest rate that is forced on creditors during the bankruptcy as opposed to the rates on taxes and credit cards outside the bankruptcy.

When creditors are entitled to get interest on their claims in bankruptcy, the interest rate that applies is usually much lower than the rates claimed by the IRS and the credit card companies.  When credit card companies charge interest up to 30%, the 4-6% you’ll pay in a bankruptcy is a huge deal. 

Chapter 13s crush credit cards

If my client had paid his credit cards over 5 years (the same duration as the Chapter 13 plan)  according to contract terms netted the credit card issuers $37,000 in interest! The total cost to pay off those cards was roughly $90,000.

The cost to pay off the same amount of debt in Chapter 13 was $4250 in interest and just a small amount in Chapter 13 trustee commission. In the end, it was a major win for my client. They saved over $30,000 in interest on credit cards alone. 

Non economic benefits

In this post we’ve largely looked at the economic benefits of a Chapter 13, however, there are other benefits that come up as well.  You also have to look at your physical and mental wellbeing. Honestly, the stress of debt and constantly having to shuffle everything around just to make the bare minimum is quite taxing.  Financial distress is one of the leading causes of the following bad things in life:

  1. Divorce- Finances are a leading cause of divorce.
  2. Depression- Debt can lead to a vicious downward spiral and many people who are suffering from financial problems also suffer from depression.
  3. Stress– Debt causes stress, there’s no doubt about that.  Stress causes significant health problems including heart disease, stomach problems and reproductive issues.

 

If you’re someone who needs help with your debt contact the attorneys at Harmon and Gorove.  We have decades of experience helping people who are in debt, get out.  We might even be able to save you several thousand dollars by consolidating your debts into a Chapter 13 bankruptcy. 

Protecting Assets From Creditors

in Bankruptcy

Look, we all get it. When we get scared we hide.  It’s a natural reaction to trouble to take the things we value and try to keep them safe. The same thing goes when people you owe money to come calling.  You think about how you can keep those things you’ve worked hard for and value in your possession. Protecting Assets from creditors becomes a top priority.

One of the first reactions is to transfer ownership of your car or house or other items of value you have laying around the house.  You may think about giving certain things away to friends or family. In the end, you’d rather someone you love have it instead of it going to some greedy creditor.  

The only problem with protecting assets this way is that it’s illegal.

People who receive the fraudulent conveyance often get sued by someone, whether its a creditor or a trustee.  These types of transfers have been illegal for at least the last 200 years.  You simply can’t give away your wealth when you owe money to other people. The law is the same whether it’s at the state level or in the bankruptcy code.  Gifts and/or fraudulent conveyances are not effective tools you can use to put your assets beyond the reach of creditors. If you are trying to fraudulently transfer assets, all you’re doing is setting the recipient up to be sued.

You can sell if the price is right.

What all this DOESN’T mean is you can’t sell your assets, it just means that you have to actually sell them for what they’re worth.  For instance, if you have a 2 carat diamond ring, you can’t sell it to your friend Cindy for $50 and if you’re driving a Rolls Royce, you can’t sell it to your Aunt Jean for $1,000.  You have to sell the items for what they’re worth, otherwise it raises serious suspicion. If you sell these items or you fraudulently convey property to someone else, the trustee is allowed to void that sale via a lawsuit.  Generally speaking, the trustee has a period of time called a lookback. Generally that period of time is about 2 years. If you transfer items out of your name during that time period the trustee can sue the person who received your assets and get them back to use to satisfy your debts.


Another problem that can arise in transferring property in a fraudulent way is that you can run afoul of the bankruptcy code.  In 11 U.S.C. 727 the bankruptcy court is allowed to DENY discharge if they find that you made a fraudulent conveyance.  This means you just paid all this money and did all this work and you’re going to get NOTHING in return.

The best way to keep your assets is by filing a Chapter 13 Bankruptcy.  You should always resist the urge to hide your assets. The United States Trustee has a great deal of power to look back through your finances through different types of hearings and examinations.  You should ALWAYS consult a competent bankruptcy attorney to find out what your options are and what property is exempt from the trustee’s reach in your bankruptcy. If you have assets with a value that exceeds your exemptions, you should consider a Chapter 13 Bankruptcy.  

 

The attorneys at Harmon and Gorove have decades of experience in protecting assets from creditors.  We work hard to make sure that what YOU have stays YOURS. Contact our office today to set up a free, no obligation consultation to discuss your rights under the Bankruptcy Code. 

Don’t Chance Your Future Financial Stability

in Bankruptcy

I often find my clients asking, how do I avoid having to file bankruptcy and are there any alternatives that I should look into before I do this?  The answer is yes, there is a way out of debt without bankruptcy. It involves the following steps, but be careful as it can compromise your future financial stability:

  1. Find a way to make more money, then
  2. Find a way to cut your expenses in a meaningful way and finally
  3. Use your savings to pay off the debt

IF you can do these three things for a long enough period of time AND your debts aren’t already unmanageable then you can probably find a way to make all this work. The better question to ask yourself is, IF I can do this, is it even a good idea?

There’s a cost to paying off debt

If you’re trying to achieve what I outlined above there are some things that you can cut from your daily expenses.  If you’re cutting things like visits to the coffee shops for a cappuccino, your membership at the golf or tennis club or you’re cutting the cord on your cable company then go ahead.  Those are wants, not needs. IF, however, you’re going without those things that are necessary like an emergency savings fund, skipping medicine or doctor visits or dipping into your retirement savings you’re playing with fire.  Continuing down this dangerous path is a very bad choice. One financial mistake or misstep in this situation can lead to complete catastrophe.

YOUR future is important

Whether this financial mess was caused because of bad choices you’ve made or due to a spate of bad luck, you don’t need to make the problem worse by not having a safety net just because you’re acting out of pride.  Chances are, by this point, your credit is probably ruined anyways. Far too many people come into our office with the strong conviction that because they incurred this debt they’re going to pay it, come hell or high water.  While having convictions is important in life and I applaud your desire to fulfill your obligations, I would advise against repaying all of these debts IF it means that the repayment of these debts would leave you no room for improving your finances in the present or in the future. You should NEVER risk your financial stability out of some sense of pride of conviction.  You’ll literally trade one bad situation for another. The biggest part of reforming your finances is looking to the future. You MUST look past the trees and see the whole forest. Your financial future starts TODAY and stretches into the next decade and into the rest of your life.

The attorneys at Harmon and Gorove are experts at providing you with all the facts you need in order to make the best decision for your financial future.  We want to provide you with all the tools you need to make the best decision for you. That’s why we provide a free, no obligation consultation so we can discuss what is best for you and your individual situation.  Contact us today so we can help start you down the path to financial stability today.

Alternatives to Bankruptcy: Usually a Bad Idea

in Bankruptcy

Pardon my bluntness, but the alternatives to bankruptcy often just suck.

I’ve heard countless horror stories about alternatives to bankruptcy over the course of my career but the one that has stuck with me was one that happened about two years ago.

A client hired a debt settlement company thinking they’d get her out of a big mess she’s gotten into.  She didn’t want to file bankruptcy because she was worried about the “stigma.” Because she was worried about the “stigma” she ended up with 5 different judgments against her and three separate garnishments.  The cost of her bankruptcy was higher than it otherwise would have been and she’s still out the $2,000 she paid to the debt settlement company. (For the record, my fee in her case would have been less than that amount.).

Living Large on Fear

Stories like this one exist all over the country.  People get ripped off every day because they’re scared of bankruptcy.  Alternatives to bankruptcy are blasted all over the internet and TV.  They are a shining example of the way these firms profit from the fears of people who think bankruptcy makes them a bad person or will, “cost them everything.” Most people will do just about anything they can think of in order to avoid bankruptcy for one reason or another.  Maybe they’re ignorant of the process of bankruptcy or they have some moral obligation they need to fulfill by paying their debts.

If you’re one of those “debt relief” companies, feeding the fear of bankruptcy will make you very rich.

Appeal to the inherent desire to do right by creditors, and you get your money before it’s obvious the debt is simply too large to pay off.

When can Bankruptcy be the Best Choice?

I’ll be very honest, Bankruptcy isn’t for everyone.  In terms of my finances, that isn’t the best thing I can say, but that’s not why I’m here. Bankruptcy can vastly improve the lives of many more people than actually use it. I have several instances when bankruptcy is a good idea. Generally speaking, the following statements apply:

  1. The greater your debt to income ratio, the more it would benefit you to file bankruptcy.
  2. If you don’t have a substantial amount of money saved up for retirement, you should probably consider filing.
  3. If you’re older, you should look at filing.

ALWAYS do your Homework

Even though I’m married to a teacher, I don’t claim to be one myself. I can, however, tell you this.  If you’re going to pay money to someone who is PROMISING to get you out of debt, you should at least meet with a bankruptcy attorney.  Our firm offers free, no obligation consultations. A lawyer can tell you about how bankruptcy should work and the risks that come with working with a debt settlement firm.

Unlike debt settlement, a bankruptcy can usually wipe out debts, often with no payments necessary so you can obtain immediate relief without the chances that the creditor will send you a 1099-C.

Other people with higher incomes or significant assets that can’t be protected in a Chapter 7 Bankruptcy can often file a Chapter 13 case.  Chapter 13s are known as debt reorganization cases.  Depending on your circumstances, you’ll pay back anywhere from 1% to 100% of your unsecured debt.

The bottom line is, there are alternatives to bankruptcy, but a lot of them stink.  If you truly want to be debt free in the fastest, most pain free way, bankruptcy is the way to go.  However, you should always decide the course that’s best for you. Meeting with one of our attorneys is free of charge and we can tell you the best course of action.  In the end, we want to help you any way we can, even if it’s to tell you that bankruptcy isn’t the best option for you. If you feel you’ve reached the end of your financial chain, don’t wait until it’s too late. Contact us today for a free, no obligation consultation.

How Much Should I Pay for a Bankruptcy?

in Bankruptcy

When you’re broke and you’re thinking about filing bankruptcy finding a good price is something that’s definitely on  your mind. In fact, cheaper looks good. If some lawyer is willing to do my bankruptcy for $500 why should I pay someone else $1,000 or $1,500? You may think you’re getting a deal but like answers to many questions in the law, what you’re getting may not always be best for you.

The Costs of Bankruptcy depends on your facts

Whether you need to file bankruptcy now, later or not at all depends on how your personal financial situation fits into the protections provided by the bankruptcy code. Our attorneys, during your free consultation, will gather these facts and analyze your situation so that we can figure out how to best help you using the existing bankruptcy laws. If your bankruptcy lawyer doesn’t look in the right places, know what rocks to turn over or isn’t completely familiar with the bankruptcy code, you’ll probably his some pretty big snags in your case. With the caveat that there is no direct and sure-fire connection between cost and quality, let’s talk about how much it should cost you to get back on the road to financial prosperity.

How to figure what you should pay

  1.  The person charging the least is probably not for you.  Chances are, they’re new or they are dabbling in a very complicated section of the code.  Maybe they’re trying to upsell you another product and they’re farming out the actual work of the bankruptcy to someone who knows even less than they do. Additionally, do you really want the cheapest guy in town advising you about your finances.  As with everything in life, you get what you pay for.

 

  1.  The more you’ve got, the more protection you’ll need.

If you have substantial assets, it more than likely that you’re going to have to pay more for a bankruptcy attorney.  If you’re filing to save your house or stop big money lawsuits, you need to call in the big guns. You don’t need to hire someone who occasionally files a bankruptcy for buddies or someone who is fresh out of law school. It’s one thing to just discharge old credit card debt, but when real money’s on the line, you don’t want to go cut rate.

  1.  If you’re involved financially with lots of people, you’re going to need a good lawyer.

Do you have business partners? Do you own property with someone else? Have you set aside a chunk of change for your kids? All of these situations can fall under specialized parts of the bankruptcy code that most people who only do bankruptcy part time don’t know about.

  1.  Who is coming after you for money?  

If you’re up against the big boys like the IRS, Child Support collections, wealthy ex business partners or investors or an angry, well funded ex spouse you better lawyer up in a big way. The stronger your opposition, the more money they have to investigate you and dig through your life for money they can recover.

What should you actually get for your money?

When you choose a bankruptcy lawyer you need to look for someone who is familiar with the law and has the skills to see how the law applies to your individual case. The more you pay, the more likely you are to feel entitled to access to the attorney and their responsiveness to you, no matter how crazy your question sounds or how frequently you need questions answered.   Price alone isn’t always indicative of good customer service. In fact, some of the most expensive lawyers in the area are the most likely to farm your work out to others. On the opposite end though, low fees don’t usually leave room for the attorney to develop interpersonal relationships and give you excellent customer service.

So, how much should I actually pay?

At the risk of sounding cliche, it all depends on your situation. It can depend on the cost of living where you are, legal fees just cost more in Atlanta than they do in Newnan.  It also depends on your individual circumstances. If you have easy debts like credit cards, if you’re a W-2 employee or if you don’t have a ton of assets, you’ll usually find that your bankruptcy will cost less.  Another thing to consider is the legal market where you are. Be prepared to meet with several lawyers. The best Bankruptcy attorneys in the area offer free consultations. You should meet with at least two bankruptcy attorneys before you decide which attorney should represent you.  Finally, be prepared to reject law firms that don’t speak with you candidly and offer you up front pricing and fees. You should also feel comfortable with your attorney and quiz them about their experience.

Finally, just because someone charges the most doesn’t mean they’re the best. It just means they charge the most.  

If you find yourself needing quality representation, I hope you’ll give our attorneys a chance to earn your business.  Contact us today to schedule a free, no pressure, consultation to determine how we can help get you back on the road to financial prosperity.  

Cleaning Up Finances Before Bankruptcy

in Bankruptcy

There’s good reason to tidy up.  The popular show on a major streaming service has made tidying up a national sensation. Many people try to cleaning up finances before bankruptcy but that isn’t always a good idea. In fact, don’t waste your time cleaning up finances before bankruptcy and especially before you consult with a bankruptcy attorney.

Doing this could result in you wasting money or losing options under the bankruptcy code if you make any last minute changes to your financial situation. Your situation has the most options available to you if your attorney sees your financial picture in its totality.  What looks like a mess to you may look like major opportunities and significant advantages to your bankruptcy counsel.

There’s a potentially high cost to trying to tidy up.

The most sickening feeling I get when consulting with a client is when they tell me they just paid off a debt to a family member, borrowed against their retirement to satisfy debts, or paid off taxes in lieu of something else while cleaning up finances before bankruptcy. None of these things should be done without seeing a competent bankruptcy attorney.

Paying off debts to family

Paying off our family seems like the right thing to do.  We want to take care of our family, especially when they took a risk by loaning us money.  People do this for many different reasons. Some do it to hide the fact that they had to file bankruptcy while others do it to potentially protect assets from the bankruptcy process before you file.  

The most likely outcome of this situation is that paying off these people (friends, family, business partners) will actually hurt you and them more than it helps anyone. The Trustee can sue family members and friends you’ve paid off for during the preceding year to recover the money you paid them. These payments are often known as preferential payments and they are not legal under the bankruptcy code.  Under bankruptcy, there must be fair payments to ALL creditors, not just the ones you want to pay off.

Often, the exemptions allowed in Georgia will protect more of your money than you expect.  Once your case is concluded, you can pay off your family or friends without any kind of adverse consequences.  In other words, hold onto your money until AFTER you’ve consulted with an attorney.

Most settlements before bankruptcy are a waste

One of the most troubling scenarios I’ve seen in recent times involved an older couple who had spent more than 5 years trying to pay off credit card debt through a debt settlement agency.  They did this in lieu of meeting with a bankruptcy attorney. What they didn’t realize was that despite all the thousands of dollars they had spent, not all of their debts were being paid through the settlement. They had to file bankruptcy anyways and they got no credit from the money they spent trying to pay off their credit cards.  During this time they struggled to pay their property taxes and student loans and they ultimately fell into default as well.

The better option for that would have likely been to file bankruptcy and use the excess money they had to retire the tax debt or pay off their student loans as those two types of debts are not dischargeable under bankruptcy.

Generally speaking, your bankruptcy will be no simpler, less expensive or less damaging to your credit based on the number of creditors you have.  If you have to file bankruptcy, reducing the number of creditors you have isn’t going to matter to your case.

Tax debt can actually be useful

Generally speaking, people usually think owing the government is bad business.  However, in your bankruptcy case it could actually be an asset if your income is above the average in your state.  This helps with the means test that helps determine if you make too much money for a Chapter 7. You can deduct the tax debts you owe from your income in order to qualify for a Chapter 7 in certain cases. The same thing goes for mortgage arrearages and property taxes you owe on your home.  These types of debts can be useful in getting you into the type of bankruptcy you want to file. If you eliminate this type of debt before you consult with an attorney and it leaves us with fewer tools to adjust your income when working with the means test.

Stop trying to clean things up

Don’t make the mistake of cleaning up finances before bankruptcy if you haven’t consulted with an attorney.  We need to see all the pieces, broken or not. Don’t try to sweep debts under the carpet or pay them off before you consult with a competent bankruptcy attorney. The attorneys at Harmon and Gorove have decades of experience in helping people clean up their financial mess and get their life back.  Contact us today for a free consultation to see how we can help you.