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Alternatives to Bankruptcy: Usually a Bad Idea

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?

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

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.

 

How do I find a good Bankruptcy Attorney?

This is a very important question, especially from people that haven’t ever had the need to hire an attorney or who are considering bankruptcy for the very first time. Depending on where in the State of Georgia you reside, there can be any number of options.  Finding a competent Georgia Bankruptcy Attorney is the most important factor in the outcome of your case. Below, we add a few bits of extra information to help you know that you have chosen the best lawyer for you that can help you navigate your way through the bankruptcy process successfully.

Finding the RIGHT Attorney

First, and most importantly, you want to make absolutely sure that the lawyer you choose is a SPECIALIST in bankruptcy law. We can’t possibly stress the importance of this enough.  Much like medicine, the law is extremely specialized.  Having an attorney who focuses on specific types of law allows them to have the kind of expertise you need in order to make sure your case is given the attention it deserves and has the outcome you want.

The United States Bankruptcy Code is second in complexity only to the United States Tax Code and thus, only an attorney who is a specialist in bankruptcy can possibly know all the ins and outs of the bankruptcy code of the United States and the specific laws of Georgia.

You have likely found several attorneys in your area that practice bankruptcy.  The question is, how do you choose between them? Probably the most important attribute of the best bankruptcy attorneys are their timeliness. Because of the very strict timelines in the bankruptcy filing process and the large amounts of paperwork necessary, the lines of communication between you and your lawyer are very important. At Harmon and Gorove, we pride ourselves on responding to our clients’ most urgent needs quickly and providing expedient service to keep their case on track.

Aside from timeliness, you want to find a local bankruptcy attorney who is not only experienced in successfully filing bankruptcies, but who also has a good relationship with the bankruptcy trustees in your division. Because each bankruptcy division and judge can do things a little differently than the other courts, it pays significant dividends to have a team of lawyers that is highly knowledgeable about the workings of the court in which YOU will be filing for bankruptcy.

There are many ways to find a good lawyer who can help you file bankruptcy, which include getting in touch with your state bar association, the local bankruptcy court, or asking friends or family who have filed before. Another good way is to just drive around and see which bankruptcy offices are actually open every day. Many of the bankruptcy attorneys you see advertising in the area only have satellite offices that are rarely staffed and if you do hire them, you likely won’t see them after the initial consultation.  Their attorneys work out of a centralized office somewhere in Atlanta and you definitely won’t see them walking through downtown, your kids won’t go to school with their kids and grandkids, and they won’t be at the high school football game on Friday night. Your attorney may not even show up at court with you, hiring a fill-in lawyer because you simply aren’t worth their time.  Finding an attorney that doesn’t just come in to the community to take your money just makes sense. Our attorneys at Harmon and Gorove are specialists who deeply care about the success of each client’s case. OUR attorneys will be there, by your side, every step of the way. We answer our own phone, we give you our direct emails and WE show up at court with you.

If you are looking for an attorney to help you through the bankruptcy process, give us a call to schedule a free consultation and let us show you why we’re the BEST choice to help you through the bankruptcy process.