Tag: bankruptcy

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.

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.  

Collection Threats: What’s real?

in Bankruptcy, Credit and Credit Cards

When you think about debt collectors, you usually think of someone that isn’t very nice.  They call, they harass and they threaten.  In reality though, what threats to take seriously and what threats to ignore is something most people don’t understand.

The reality is, most of them are empty threats.  

  1. You’re not going to jail.  Debtors prisons are a relic of the distant past.  
  2. They’re not going to send people to pick you up.  That’s kidnapping and that’s illegal. 
  3. Chances are, they’re not going to “ruin” your credit. 
  4. So what if they, “refer it to an attorney to look at.”

 

The three threats with teeth

There are only three things you really need to be concerned about.

  1. They have a court judgement against you and they know where you work.  They can then file a garnishment and take your pay. 
  2. There is a lien against your house by your Homeowners Association or your  mortgage lender and they are threatening to foreclose on your house.  You need to be concerned about that and you need to take action to stop it.
  3. You’re behind on your car and they’re threatening to repossess it.

 

That’s what you need to be concerned with.  The rest, well, is just crap. Let’s be honest, the lender would really just rather make a deal. It’s cheaper, cleaner and keeps everyone happy.  

The debt collector who is legitimate will reach out to you in writing or dials you from a number that is from a real debt company. That said, just because they are from a “real company” doesn’t mean they won’t lie to you, call you at work, tell your loved ones about your debt or do other illegal things. 

If you find yourself drowning in debt and being harassed by legitimate debt collectors, reach out to us at Harmon and Gorove.  We can help you get your finances in order and bring some peace to your life.  Contact us today to learn how bankruptcy can help you achieve financial freedom and peace. 

Credit score increases rapidly after bankruptcy, says by the CFPB.

in Bankruptcy, Credit and Credit Cards

Our clients are often so very concerned about their credit score.  That’s natural, and frankly, we are too.  I check my credit score at least once every two weeks.  It’s a point of pride for many people.  For others however, it can be the difference in being able to get ahead in life or not being able to afford those things we need. 

We have some very good news to report for people who are worried about the impact that bankruptcy will have on their credit score. The good news is, and I say it boldly;

AFTER BANKRUPTCY, CREDIT SCORES GO STEADILY UP

That’s right.  All these years you’ve been lied to by people who have no idea what they’re talking about.  Telling you that if you file bankruptcy your finances are toast and you’re dead in the water. You’ll never get another loan again.  We’ve all heard it and it’s usually coming from the slime ball that charged you 97% interest on a $2,500 car loan.

We didn’t just make this up either, although we already knew this to be true, this is a report from the Consumer Financial Protection Bureau.  The study, which you can read here is completely legitimate and has been researched over the last 17 years. Another finding from the study is 

A PERSON’S CREDIT SCORES START IMPROVING THE SAME YEAR AS YOUR BANKRUPTCY FILING

Take a minute and absorb that.

How Creditors Use Fear

Creditors and all their hack buddies scream from the rooftops about bankruptcy trashing your credit score.  The data shows just the opposite.  In fact, there’s usually no dip in your score after filing.  The overwhelming amount of people who file bankruptcy see an IMMEDIATE increase in their score. Don’t believe us, just read what the CFPB says: 

Median credit scores increase steadily from year-to-year after consumers file a bankruptcy petition.

Median scores for Chapter 7 filers recover more quickly than those for Chapter 13 filers possibly due to the much quicker and more likely discharge of Chapter 7 filings.  

Bankruptcy improves your Financial Health

When it comes to your financial health, let’s get one thing straight. Your credit score is a vastly inadequate indicator of your financial health.  What really matters is your balance sheet.

A credit score is a distraction

In the grand scheme of loans and credit, lenders look at your balance sheet as much or more than your credit score.  In essence, they look at your net worth which is comprised of assets minus liabilities.  If you eliminate the liabilities you have via bankruptcy, your net worth looks even better. 

A credit score is just a number, most banks prefer a measure called the Debt to Income ratio or DTI.  If you wipe out unsecured debts, your DTI goes down as well, improving your likelihood of getting approved for a loan.  

Boost your credit score

You can take actions that can boost your score.  One of the best ways to do that is to check your credit report.  Not just your score, but what’s listed on your report.  When you look into credit reports, you’ll find that credit reports are notoriously inaccurate. Nearly 1 in 4 credit reports had factual inaccuracies that could negatively impact your credit score. That’s why its very important to check your credit report often, even more so than your score itself.  

Is bankruptcy right for me?

Just because you can file bankruptcy, doesn’t mean you should. It’s just one of the things you should consider if you find yourself needing to file.  Lots of different factors influence whether you should file bankruptcy.  We discuss those factors in one of our recent blog posts

If you’re ready to discuss filing bankruptcy with an experienced bankruptcy attorney, contact our office today for a free, no obligation consultation.  

Business after COVID-19

in Bankruptcy

There will come a time when the coronavirus becomes a treatable disease.  Human patients will be recovered and we will have a treatment.  That’s just the inherent optimist in me.  However, many businesses will still be struggling long after the human toll has been realized.  These small businesses will have to make some tough decisions, including whether to continue in business or not.  I’m reminded of the Kenny Rogers song, “The Gambler.” In the song he sings about knowing when to hold ‘em and knowing when to fold ‘em. That’s what every struggling business owner has to consider.  

Here are some things to think about as you consider the future.

Do you even want to continue

The most important part of the small business is the owner of the business themselves.  They drive the business, create the products and supply the vision to make the business successful. If you’re drained and don’t feel like you can go on, now’s the time to look long and hard at whether you should continue operating the business.  

If you’re up for the challenge, there are more questions.

Can your business continue

Once this is over and we arrive at whatever “normal” is, we need to determine whether there is still a demand for the product or service you provide via your businesses. If there is a demand for your product, how long before that demand ramps up to the point that you can bring the business back to profitability.  How will you survive financially in the meantime? Because of these questions, you’ll need to look at the following instructions. . 

Reorganize your business to survive

COVID-19 has forced all of us to look at our situation and reevaluate how we operate, us included.  It causes us to look at what is and is not important and what is and isn’t essential. We have to take a tough look at our operations and ask ourselves:

Could the business continue with

  • More or less owners
  • fewer employees or restructured hours
  • Fewer locations or completely online

Take the time to reevaluate and embrace the opportunity to change the way things work, hopefully for the better

New debt 

Business loans are a part of the government’s recovery plan but one of the problems with this is the uncertainty about how the loans are to be repaid. You need to consider whether or not you’re able to float more debt.  Were you current on your debts or were you debt free?  Is borrowing essential to even keep the lights on.  If it is, then you have no other choice.

Winding down and moving on

Ending your business isn’t just an all or nothing choice.  If you fold the business you can still remain in the industry either as a manager or other type of operator.  It gives you the opportunity to re-enter the market in the event that the demand comes back without losing contacts in the industry.  

Challenges going forward

All of these issues are fluid and the situations are constantly changing.  We have helped hundreds of business owners wind down operations and get the piece of mind they need in order to move on with their lives.  If your business is failing or if it’s just overwhelming you, schedule an appointment with one of our award winning  bankruptcy attorneys to see if bankruptcy would be an option to help you move forward. 

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.Â