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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.  

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. 

Ruining your FICO score

fico

We’ve covered credit (FICO) scores in depth.  It’s one of the most talked about things in bankruptcy and on my blog.  

People worry about their FICO score and almost every person I meet with believes that bankruptcy will ruin their FICO score.  

They think that once they file bankruptcy they’ll have a scarlet “B” tattooed on their forehead for all time, like they’re some kind of criminal…or worse.  

“I’ll never be able to function again” is a line I often hear.  

Because of this fear, people stagger on, scratching and clawing, burdened with debt and the fear of getting out of it. 

Many people who actually take the time to get to know debtors and what actually drives their financial situation often come to the realization that they aren’t a bunch of deadbeats who are trying to game the system.

They’re normal people who struggle and endure trying times and difficult financial situations.  

That said, I want to shout this from the rooftop:

RUIN YOUR FICO SCORE, DON’T RUIN YOUR LIFE

The financial talking heads constantly beat the drum that your life and your self worth are wrapped up in a miserable little score, which is very odd considering that we don’t even understand what that score really is

That score is something that even I as a bankruptcy lawyer of more than a decade don’t even quite understand. I’ve written about it and I have a good grasp on what it does but there are nuances of the scoring system that even I don’t know. 

All the while, we are told life will end, the world will stop rotating, the sky will fall if our credit score (which is derived from notoriously inaccurate information) declines.  

That’s horse squeeze. 

It’s that fear that keeps consumers in America struggling to get out of debt.  They keep trying to repay debts that they’d never get paid off in this life or the next, just to preserve a “score” that ultimately doesn’t mean much. 

Credit scores are dynamic.  In fact, the CFPB states that your credit score starts increasing the day you file bankruptcy

The biggest thing you can do is focus on your overall financial heath. You do this through getting rid of dischargeable debts, saving for retirement, living beneath your means and having an emergency fund. 

That fear keeps American consumers struggling to pay debt that they can never repay, in this life or the next.  In order  to preserve their credit score, they appear resigned to a lifetime of minimum payments rather than a fresh start in bankruptcy

Don’t spend your life just struggling to stay afloat. 

When you’re ready to take a step in the right direction, call me

 

The Real Cause

A talking head recently stated that the root cause of bankruptcy was irresponsibility and financial fraud.

It’s a #@mn good thing I couldn’t reach through the screen and grab this guy by the neck.  

Fraud! Irresponsibility! Robbing Peter to pay Paul! 

The agony and pain felt by creditors (i.e. Bank of America or J.P. Morgan Chase) knowing they’d been hoodwinked and bled dry (note the sarcasm). 

It’s absolutely nauseating to listen to this drivel because it is a bald faced lie. 

The mere assertion that someone would go through the bankruptcy process just to deal with a few “lifestyle choices” is frankly an insult to the hard work that my clients and my team put into every single case.  

The *Actual Cause of Bankruptcy

Nonsensical spending is rarely the cause of bankruptcy.  Does it happen? Absolutely! But that’s maybe 5% of cases. 

The need for bankruptcy arises most often under the following circumstances:

  • Loss or downsizing of a job
  • Health problems
  • Failed businesses
  • Having to support adult children, grandchildren or elderly parents
  • Divorce
  • Covid-19

Carried balances on credit cards are usually a result of living expenses, not a trip to the Louis Vuitton store. 

The gig economy hasn’t helped, nor has pandemic related closures.  People are finding themselves more responsible for calculating tax withholdings, finding their own insurance and funding their own retirement. While gig jobs are a good supplement, they often don’t provide reliable enough wages to keep people afloat long. 

How People Actually Get in Trouble

Most of the people I see are in my office because they were trying to do the right thing.

  • They bought a house
  • They started businesses
  • They cared for relatives
  • They fought hard to not have to renege on their debts.

At some point the inevitable will catch up. 

It often starts with a tax problem.  You’ll have reduced your withholdings because you needed extra cash. Suddenly April 15th rolls around and you owe hundreds or even thousands more than you thought you would.  

Maybe you’re sick and can’t work.  If you don’t have paid sick leave at your job, you’re stuck holding the bag.

Even if you do have paid sick leave, do you have insurance? Even if you do it can cost thousands to get sick.  Hospitals and doctors will sue you and garnish your wages.  

Are you trying to keep you home? Are you behind on your mortgage or did you have a significant increase in rent? 

Everyone has a different story, but most of them don’t start with, “Ms. Barrett, I spent $5,000 on purses at Saks Fifth Avenue.”

In reality, its circumstances in life that often catch up.

That’s why we’re here. 

If you need help, don’t wait until it’s too late.  The sooner you act, the better your outcome will be.  Call me, I’m here waiting to help you get your finances sorted out.

Does my bankruptcy go in the newspaper?

newspaper

THE VAST MAJORITY OF BANKRUPTCIES DO NOT GO IN A NEWSPAPER

One of the main concerns people have is whether or not people will know about their bankruptcy.  The long and short of it is, they COULD find out, but it won’t be in the paper or splattered all over the internet.  

While it’s true that bankruptcies were occasionally published in the distant past, (think 40-50 years ago) today bankruptcy is so common that newspapers can’t possibly devote that much space to outing those people who seek bankruptcy protection.  

In some jurisdictions, business bankruptcies are published but that’s generally to alert any creditors that may not get notification through the bankruptcy court.  There are so many personal bankruptcies that it would be both space and cost prohibitive to publish them.  

WHAT ABOUT INDEPENDENT CONTRACTORS?

Maybe you’re a 1099 employee. Uber drivers, multi-level marketing consultants (think Avon or Rodan and Fields), Realtors and truck drivers.  They also don’t get published in the newspaper.  If you’re worried that you might end up in the newspaper of that the town crier will be singing it out in front of the courthouse steps, come see us.  We’ll be happy to answer all your questions about the bankruptcy process and give you HONEST answers about what you will and won’t encounter.  

Maybe you are wondering about independent contractors like Uber or Lyft drivers, multi-level marketing consultants, realtors or some truck drivers?  They don’t get listed in the Star Tribune either.

HOW DO PEOPLE GET INFORMATION ON BANKRUPTCIES?

I know you probably ask this question because you’ll see it splattered all over the news when companies like GM or Chrysler or major celebrities like Donald Trump, Michael Vick or 50 Cent file bankruptcy.  One reason why you see it is…these are huge multinational corporations and celebrities who live lavish public lifestyles, not someone who’s just a little behind on their bills. 

As I stated in the opening paragraph, people COULD find out about your bankruptcy. The federal government has a website called Public Access to Court Electronic Records (PACER) which shows all federal court filings including bankruptcies.  Here is a link if you want to peruse the court filings (hot tip: it’s very boring).  

To search bankruptcies or any other federal court filing, you first have to have a username.  You can get one but it’s a little cumbersome.   Then you have to pay $.10 per page to access the court filings.  Additionally, a lot of people file federal court cases so a generic name search isn’t going to necessarily turn up your name. So unless they have your Social Security number (they probably don’t) it’s going to be hard to find your information.  

So, long story short, there’s a really good chance that no one will ever know you filed bankruptcy outside of your creditors and anyone you tell yourself.  If you have questions about the bankruptcy process, call me.  I’ve been doing this a long time and I’ve helped thousands of people get out of debt.