Tag: debt relief

Your Cosigner filed Bankruptcy, What Now?

So often when someone needs to make a large purchase they must take out a loan.  The vast majority of us, myself included, have to incur debt to make these large purchases.  For many of us, getting this loan is going to require a cosigner. A cosigner is an additional person (besides you) that will agree to be liable for the debt in the event that you default on the loan and stop making payments.  The cosigner, just like you, is expected to pay back the loan in full if the other part can’t or won’t. What happens though, when your co-signer files bankruptcy? How is that going to impact your role as the primary borrower?

The best way to explain this situation is to give you an example.  Becky is looking to buy herself a new boat. Becky’s credit isn’t good enough to get the loan for the boat without a cosigner.  Becky’s cousin, Tammy agrees to be a cosigner on the loan but won’t be listed on the title as an owner of the boat. A few months later, Tammy has to file for bankruptcy and through the bankruptcy process, Tammy is remove from the loan and no longer required to pay it back.  You ask, what happens to Becky and her boat now?

Becky still has to pay back the loan.  As the primary borrower, she still owes the balance of the loan.  If Becky pays the loan back in full, the boat is hers, free and clear.  The only issue with being the primary borrower and the cosigner in a finance contract like this is that eventually the property will be titled in the primary borrower’s name.  Issues can occasionally arise if the finance company declares the loan in default due to the cosigner’s bankruptcy but these can usually be remedied by refinancing the loan in solely into the name of the primary borrower.  This can even result in lower payments for the primary borrower.

Additionally, Tammy’s bankruptcy shouldn’t show up on Becky’s credit.  Occasionally, situations arise where this is reported to credit bureaus but they can usually be resolved by filing a dispute letter with the three credit bureaus. Our advice is usually this: don’t cosign.  If you can’t afford to buy something using your own credit, maybe you need to explore less expensive options.

If you find yourself in financial trouble due to cosigning a loan with someone else, contact the attorneys at Harmon and Gorove today to see how we can help mitigate the damage of cosigning a loan. 

Cosigning is ALWAYS a Bad Idea

We understand how hard it is to say no, especially to a friend or family member.  Let me say this loud and clear, when a family member of a friend asks about cosigning a loan for them, RUN FOR THE HILLS! JUST SAY NO! DO NOT UNDER ANY CIRCUMSTANCES SIGN THAT LOAN!

No matter how sure you are that they won’t default on the loan, you may even feel it in your soul, DON’T DO IT.  If a lender is asking for a cosigner, there’s a good reason. It’s because they believe that the primary borrower won’t be able to make their financial obligations.  More often than not, the lender is right.

When it comes to cosigning, you’re being asked to guarantee a debt.  If the primary borrower doesn’t repay the debt, you’re on the hook for the debt and the creditor WILL come after you. You’ll be on the hook for late fees, collection costs, attorneys fees and the principal balance of the loan.  If the debt goes into default it WILL show up on your credit report. The bottom line is, cosigning is always a bad idea.

Cosigning is always a bad idea.  Have I made myself clear up to this point? Cosigning a debt puts you in the worst possible situation.  You receive no benefit from the loan you’re cosigning. You aren’t getting a student loan to improve your education, you’re not getting a house to live in and build equity in, you’re not getting that flashy new car to ride around town in. You’re just on the hook for all of it.  You can have you bank accounts and assets seized, your paycheck garnished, you could be subject to litigation and you could ultimately end up in bankruptcy.

We understand that it’s difficult to refuse to help someone you love.  Telling friends or family members no is one of the toughest things you can do. However, it may be the best thing you can do for your relationship.  Think about what your relationship will be like if your friend or family member defaults on the loan or even just misses a payment. That’s going to show up on your credit at a minimum and will likely bring your score down 20 or more points.  The damage that cosigning can do to relationships can not be understated. You’ll be left with a loan and a relationship that will be severely damaged from here forward.

If you’ve cosigned a loan with someone who has missed payments or defaulted on a loan completely and you find yourself on the hook for their mistakes the attorneys at Harmon and Gorove can help.  We are experts in dealing with these kinds of issues through the bankruptcy code.  Contact us today for a free, no obligation consultation about how we can help you get out from under these debts and get your life back.

How to Recover from Bankruptcy

Dead end roads, dead end jobs, dead end relationships.  All these are good examples of things that can truly be a dead end.  Notice, however, how the word Bankruptcy was NEVER mentioned as a dead end.  Quite the contrary, Bankruptcy can be a fantastic new beginning that can give you a fresh perspective and fresh start on your road to financial success. Bankruptcy allows you the kind of fresh start you need after a run of bad luck or a series of bad decisions.  By using these mistakes and learning from your bad luck, you can have a great deal of success after bankruptcy. Below, I list how you can successfully recover after bankruptcy.

 

  1. First things first, you MUST learn from your mistakes and misfortunes.  It is important to identify what happened and what caused you to file bankruptcy in the first place.  Was it bad choice, a spate of ill health, a run of bad luck or just plain stupidity. The decision to file bankruptcy was hard enough and let’s be honest.  You probably don’t want to be back here again. In order to avoid this problem in the future, you’ve got to figure out how you got here in the first place.
  2. After you identify your mistakes the next thing you’ve got to do is to plan for the future.  You need to create a budget based on what you can ACTUALLY AFFORD based on your income. Making this budget and sticking to it will lead you to a lifetime of financial success and keep you out of our office in the future.
  3. Once you’ve made plans, the next thing you need to do is set some goals.  Where do you want to be in 1 month, 6 months, 1 year, 5 years or a decade? You need to set goals and work them into your budget.  Such goals should include an emergency savings fund. An emergency cushion should be at least 6 months worth of your expenses in the event you have a job loss or experience medical problems in the future.  
  4. Once you’ve set up goals, you need to work on re-establishing your credit.  The only caveat to this is that it must be done SLOWLY AND DELIBERATELY. You can start out by rebuilding your credit slowly but getting a credit card and using it for a deliberate purpose.  Only buying certain things and ALWAYS paying it off at the beginning of the month. Over time this will allow your credit score to recover once you’ve shown your responsible and able to pay off your debts each month.  
  5. Finally, it’s always best to have a positive attitude.  Bankruptcy can be stressful (although we try our best to ease that stress) and cause a lost of difficulty in life. It is, however, important to focus on the positive aspects of filing bankruptcy. If you let this process continue to kick you while you’re down, you won’t be able to complete the other 4 steps to recovery.  

 

A significant majority of people come out of bankruptcy and find themselves more successful and better prepared for the financial road ahead.  If you feel that bankruptcy might be able to help you improve your financial situation please contact us for a free, no obligation consultation so we can show you just how we can help.  The attorneys at Harmon and Gorove have decades of experience in helping people get back on their feet, recover from financial trouble and achieve their goals.  We look forward to helping you!

Protecting Assets From Creditors

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. 

The Great Things about Chapter 13

Most people come in to our office wanting to do a Chapter 7.  They think it’s the best thing possible because it lets them cancel all their debts. While for some people, that’s a good thing, for others it can cause a lot of problems.  I happen to think that Chapter 13 bankruptcies allow for the most flexibility which is why I believe that should a 13 be a good option for someone, they should definitely pursue it.  Below, I lay out a list of reasons why I believe a Chapter 13 is a great option for certain people.

Chapter 13 cases are great because:

  • The amount of money you repay to your creditors can be as little as 0%. While that sounds too good to be true, it is, depending on your individual situation of course.
  • You keep your stuff, unless you don’t want to.  You keep your house, your business, your car, etc.  No one is snooping around trying to find things to sell.  
  • You can amend a Chapter 13 during the case.  If your income goes down, you lose a job, or you just go out on maternity leave, the plan can be amended to accommodate those life changes.     
  • You can dismiss your case if you want.  You can literally just walk away. While that isn’t necessarily a good idea, you can do it, unlike in a Chapter 7 plan.
  • The automatic stay protects you for the entirety of your case.  You can’t be a victim of foreclosure or repossession if you abide by the plan.
  • If you’re behind on your mortgage, the amount you’re behind can be included in the plan and caught up over the course of the plan.  
  • If you have a really big interest rate on your car, the amount of the interest rate can be reduced to a lower rate.  
  • The IRS HAS to abide by the plan and let’s be honest, no one likes the IRS.
  • Your attorney’s fees are included in the plan.  You don’t have to come up with the money to pay your lawyer up front.  

Other advantages to Chapter 13s

If you do have to file a Chapter 13 case, you’re eligible for another Chapter 13 (should you need one) a whole lot sooner than you can if you had filed a Chapter 7.  In fact, its ok to file a second Chapter 13 two years from the filing of your first case.  

Generally speaking, a Chapter 13 is off your credit a whole lot sooner than a Chapter 7.  Usually, a 13 is gone two years after you complete a 5 year plan.

Unlike working with a debt settlement agent, your Chapter 13 Bankruptcy is enforced by the full weight of the federal court system.  ALL your creditors must abide by it or the face severe penalties. NO creditor can opt out and at the end of the Chapter 13 Plan, the debt you owe them is gone, one way or another.

In the end, a Chapter 13 case is a great way to get back on your feet after a period of financial difficulty.  Our attorneys have filed THOUSANDS of Chapter 13s and we have decades of experience successfully shepherding cases through the court.  Contact our office today for a free, no obligation consultation to find out of you qualify for a Chapter 13 case.  

Don’t Chance Your Future Financial Stability

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.