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Adding Debts to your Bankruptcy

Bankruptcy, whether it is a Chapter 7 or Chapter 13 case, is a useful and wonderful tool you can use to dig yourself out of a bad financial situation. The only downside is that it’s pretty much a one shot deal. Think of it as a yard sale for your debt. On that day you have to unload your stuff and you can’t go back and add anything to that garage sale after the fact. That’s a broad idea of how debt in a bankruptcy works. Every penny of debt you have when the bankruptcy is filed can be part of the bankruptcy but adding debts, as a rule, can be difficult. However, there are some rare exceptions.

When can you add debt to a Chapter 7?

When you come in to our office for your bankruptcy consultation, you should bring copies of all your bills. A recent version of your credit report would also be extremely helpful as well. By doing this, you can make sure that all your debts make it into the bankruptcy petition we file with the court. But you may not bring everything or you may have a recent bill that you don’t have a copy of or that isn’t reflected on your credit report.

If you realize after the initial filing that you forgot to tell us about a debt you incurred BEFORE the petition was filed, you can notify your attorney and the petition can be modified to include that debt. Generally speaking, there is a modest fee for the additional paperwork due to the court costs incurred by us to file the updated petition. 

When can you add debt to a Chapter 13?

We can modify your Chapter 13 bankruptcy if you forgot to include a bill or debt in the pile of paperwork you gave your attorney just like we can in a Chapter 7. However, this can be a little more of a hassle if the debt is substantial or if it’s secured because it could trigger a change in your Chapter 13 repayment plan and possibly cause your Chapter 13 payment to go up. If your attorney has to redraft your repayment plan, you’ll likely have to pay an additional fee including more court costs to modify the case.

When can you add debt to a bankruptcy after the initial filing date?

Sometimes you can add debts to your bankruptcy that were incurred after your initial filing date. These situations are as follows:

  • Your Chapter 13 is dismissed and you file another Chapter 13 case. All of the new debt you incurred between the two filings can be included.
  • If you file a Chapter 7 and receive a discharge then file for Chapter 13 protection, you can add any new debts to the Chapter 13.
  • If you file a Chapter 13 and then find yourself unable to make the payments and choose to convert to a Chapter 7, all the debts you racked up between the Chapter 13 filing date and the date of conversion can be added to your new Chapter 7.

 

How to avoid having to modify your bankruptcy case

You generally want to avoid modifications if you can.  Modifying your case can add time and expense that can be avoided if you plan your case the right way.  Planning your case often seems counter intuitive because most people view bankruptcy as an option of last resort and rush into it with the first attorney they find. The better scenario is to schedule a free bankruptcy consultation with a reputable attorney who can help you. They can help you plan the best time to file so that it maximizes the impact the bankruptcy will have on your debts.  You should never try to figure out bankruptcy on your own.  A mistake can be very costly and potentially wipe out any benefit you may actually receive by filing bankruptcy. 

The second thing to consider is preparation. Preparation is imperative to the success of your case.  You will need two years worth of tax returns, 6 months worth of pay stubs, a copy of all your bills, your bank statements and any other statements you have including savings accounts, receipts for childcare, rent or mortgage statements, and any other financial agreements.  Basically anything you would need to prove your financial situation. 

The experienced attorneys at Harmon and Gorove can give you advice based on your individual circumstances. Their decades of experience can help you make sure that your filing is as successful and impactful as is possible. Do yourself a favor and invest in your future. Contact the competent and compassionate attorneys at Harmon and Gorove today for a FREE consultation.  Let us help you get your life and your financial freedom back from greedy creditors.

 

Is Debt that’s Discharged Really Gone?

Can my old debt come back to haunt me?

Clients ask this constantly.  They’re scared to death that the problems they had before their bankruptcy will come back and that the relief was only temporary.

The short answer is no.

Debt that is wiped out, in your bankruptcy case is gone as a legal liability forever.

The automatic stay that stops all collection activity when your bankruptcy is filed is replaced, once your case is complete, with a discharge injunction.

But then, this is law, so nothing is quite that simple.

Personal liability

The bankruptcy discharge eliminates all personal liability for debts that can be discharged.

If you eliminate your personal liability, your former creditors can’t sue you to recover discharged debts and can’t get a judgment that allows them to place liens on your assets or garnish your wages.

Was the debt discharged

Bankruptcy law prevents some debts from being discharged in bankruptcy. If you want your debt discharged, your debts must be listed in your bankruptcy schedules in order for us to notify your creditors.  We even have to notify the creditors that can’t be discharged.

Debts that can’t be discharged include

  • Child support,
  • Student loans,
  • Recent taxes,
  • Judgments for personal injury caused by drunk driving.

Unfortunately, the discharge order that’s issued by the court once your bankruptcy has concluded doesn’t list the debts that are discharged.  It just says that debts that were dischargeable in bankruptcy are gone.

Is there a lien

The discharge eliminates your personal liability for a debt.  Some creditors have obtained liens that they have attached to certain assets before you file bankruptcy.  If they have perfected that lien it can remain as a charge against those assets.

Perfected liens are an interest in property, a claim to a piece of what you own.

Some liens survive the bankruptcy.  The lien is only a claim on what you owned at the time the bankruptcy was filed.  They can not attach it to assets you acquire after you file bankruptcy.

A lien survives unless you get a bankruptcy order that avoids the lien. Those liens can be eliminated if it impairs an exemption you claimed in the bankruptcy case.

In order to do this you must file a motion to avoid lien in your case.  This means you need to tell your attorney that a creditor might have obtained a judgment from another court and placed a judgment lien before your bankruptcy case was filed.

Do creditors know you got a discharge

Your bankruptcy filing requires that you list all your creditors with good mailing addresses. We do this so they get a notice when your discharge is entered.  Notice to creditors is also about due process because your creditors do have certain rights.

Creditors also get notified so they can participate in the bankruptcy proceedings. It allows them to exercise their rights in the case.

Once your case is discharged, the court mails a copy of the order discharging your debts to everyone on the list of creditors you provide to your attorney at the onset of your case.

If you leave creditors off the list or the debt is sold to someone else, they have no way of knowing that you’ve discharged your debts.  However, notifying creditors isn’t everything. There are rules that pertain to bankruptcy that wipe out debts, even if the creditor isn’t notified.  

So, the rule is:  the debtor’s personal liability for a dischargeable claim is wiped out forever, if the creditor got notice or if there was no payment to any creditors in the case.

If you are drowning in debt, the attorneys at Harmon and Gorove are experts in handling Chapter 7 bankruptcies. We have handled thousands of cases and helped discharge millions of dollars of debt for our clients.  If you feel the need to speak with a qualified bankruptcy attorney contact the attorneys at Harmon and Gorove to schedule a free, no obligation consultation to find out what your rights are under the Bankruptcy code.  

 

 

The Side Effect of Debt

Debt is something that is a fact of life in the modern world.  Everywhere we turn, we are forced to borrow money in order to get ahead in life.  We have to borrow money for our education, our homes, our cars, even our phones and healthcare. In an ever more expensive world, debt is a burden that we must all bear.  One thing you should keep in mind though as you take on debt is that there is a side effect and debt should be used sparingly and in ways that will IMPROVE your life.

The Consequences of Debt

Debt has several side effects.  The first side effect is that you WILL pay more for an item bought using debt.  This is called interest and virtually every lender expects to be paid some amount of interest.  The second side effect is that you can face difficulty repaying that debt. When you take out loans, lenders generally look at your income vs liabilities.  That’s called debt to income ratio. If you lose your job or face a pay cut, you could find yourself stuck owing more than you can physically pay back. The third side effect of debt is that you can end  up being a slave to that debt. You’ll always feel like you have a yoke around your neck constantly pulling against you and keeping you from achieving your financial goals. Finally, the last side effect of debt is the added pressure that debt can put on you and your relationships.  Poor financial decisions is one of the leading causes of divorces and breakups. It even causes some people to rethink whether or not they wish to marry to someone.

Some Debts can be Good, but understand reality

Like I said earlier, some debt is necessary and in fact, some debts can even be beneficial.  Having a home loan can help you buy a house and build equity. Homes are often times the biggest asset the average american can own.  Home ownership is vastly higher in the U.S. than it is in most of the developed world. Student loans, when used responsibly, can help people meet educational goals that improve their lives and help them earn more money.  The biggest thing about these debts are that they need to be used sparingly and only taken out in small doses. Just because a lender says they’ll loan you $400,000 on your home doesn’t mean you should do it. Many people who took out student loans took out more than they needed or didn’t look at ways to cut costs like attending in state public schools, utilizing community colleges and technical schools or getting degrees that won’t help them achieve their financial goals.  Having $150,000 in student loan debt for a bachelor’s degree from your dream college doesn’t feel so good when the payments come due and you’re only making $20,000 a year working as a barista.

Interest is a real drain on household resources each year as well.  A typical family in America pays an average of $10,000 per year in interest and the average person could pay hundreds of thousands of dollars in interest over the course of the life of a loan, especially mortgage loans.  Imagine what you could do with that money. Pay cash for you education, save for retirement, go on a vacation, the list goes on and on. The bottom line is, when you take out debt, make sure you always ask yourself if its worth it.  Is that $5 latte worth $8 by the time you factor in interest on your credit card? Is that fancy new $50,000 car worth the $70,000 you’ll ultimately pay after you account for interest? Asking yourself these questions while looking at the big picture can help you have a brighter financial future.

Don’t put off seeking professional help

A side effect is an unwanted outcome that often places a significant burden on the person experiencing it. If you’re already experiencing the burden of debt, you should consider contacting us for a free consultation .  We meet with clients all the time who don’t want to file bankruptcy because it would hurt their credit.  What they don’t realize is that having a credit score of 800 is useless if you are already maxed out on debt.  While repaying your debt is an admirable goal, it’s not always possible or even advisable. Starting fresh is exactly what bankruptcy is all about and why we do what we do.  Filing bankruptcy is better than spending the remainder of your life in debt, never getting ahead, and never saving for retirement. At the very least, you should speak with a qualified bankruptcy attorney about how they can help you recover your financial well being using the bankruptcy code to your advantage. Consultations with a qualified, award winning attorney, are always free at Harmon and Gorove.  We’ll be honest with you about your options and never pressure you to do something that isn’t in your best interest.

 

Is Student Loan Debt Dischargable in Bankruptcy

Student loan debt has been labeled a crisis in the United States.  The total outstanding amount of student loans in America currently stands at just over 1.5 Trillion dollars.  That’s more than is owed even to credit card companies. Needless to say, thousands of Americans are struggling with student loan debt each and every day.  They are putting off buying houses, getting married and starting families. The payments and the weight of those payments are keeping people from being entrepreneurial and taking risks. Student Loans are a yoke around the neck of American productivity and frankly, it’s causing our society a lot of trouble.

For people who find themselves unable to pay all their bills, Bankruptcy is a great way to get back on the road to financial prosperity.  Many people often come to our office asking if student loans can be discharged in their bankruptcy, as that alone is a significant contributing factor into why they can’t make ends meet.  Unfortunately, the answer to the question, are my student loans dischargeable, is often no. Student loans are nearly impossible to discharge, especially in this part of the country. In other parts of the country, appeals courts have allowed discharge in certain circumstances that are very limited and still allows only a select few to actually qualify for discharge and then it’s usually only a partial discharge. There are very few times that student loans are dischargeable and only if certain criteria are met.

In order for your loans to be discharged you must prove what the court calls and Undue Hardship.  What actually qualifies as an undue hardship is usually up to the court of appeals that is deciding your case.  In order to qualify for an undue hardship you must pass what is known as the Brunner Test. The test is composed of 3 basic things:

  1. The debtor is unable to maintain a minimum standard of living for themselves and their dependents with their current level of income and expenses.
  2. Their current financial situation appears that it will continue throughout the course of the repayment plan and finally
  3. The debtor has made a good faith effort to repay all the loans that they took out.

IF the court determines that you meet these criteria then they would cancel part or all of your outstanding student loan debt.  I will be very honest. In the decades our office has been operating we have only had 1 client actually have their student loans discharged and that client was going through a terminal disease.  Sadly, it probably isn’t going to happen. There are, however, other options available.

Filing a Chapter 13 or Chapter 7 bankruptcy can allow you to discharge many of your other debts, including medical debts and credit card debts that are taking up valuable disposable income. That income, if freed up, could allow you to get your student loans paid back very quickly and allow you to get that burden off your back for good.

If you are feeling overwhelmed by debt, including student loans, come see the experienced and friendly attorneys at Harmon and Gorove.  They have decades of experience in handling bankruptcy cases of all kinds and they can help you decide which path is best for you during our free, no obligation consultation.  Contact us today to see how we can help you become debt free.

 

Tackling Credit Card Debt

With credit card debt in the United States nearing 1 TRILLION dollars, it’s easy to say that a great deal of people are feeling overwhelmed by the debts carried on their revolving accounts. Many people who carry balances on their credit cards pay just the monthly minimums and ignore the problem.  This is NOT a good plan. Pretending your debts don’t exist just makes the problem that much worse. This strategy will backfire on you every time in the long run. It will make you miserable, it will cause you to be unable to save for the future and it could eventually drive you into bankruptcy.

If you are interested in trying to get started on paying down your long term credit card debts we have some advice for you.  The best strategy starts with the first step and that step is often to modify your spending habits by creating a budget and sticking to it. Just small modifications to your daily routine can mean big savings that you can then start using to pay down your balances one at a time, always starting with the payment with the highest interest rates.  

Step one is to decide on a repayment strategy.  Don’t allow yourself to continue to drown under the weight of multiple credit card payments each month.  If you start working your way down from the top (meaning you pay off your biggest balance or highest interest rate) you can begin to reduce your debts quickly, freeing up more and more disposable income that you can then use to continue to pay off other debts.

Another step you can take is to communicate with the people you owe money to. If you’re struggling with the exorbitantly high interest rates that are routinely charged by credit card companies, sometimes just giving them a call and asking for an interest rate reduction will allow you to free up more money to pay down the principal on the card each month.  Sometimes credit card companies will work with you on rates if you’ll commit to repaying the debt at that lower interest rate.

There are lots of options available to you if you feel like your drowning in credit card debt.  The attorneys at Harmon and Gorove can help you find a way out of debt for good. Contact us for a free, no obligation consultation to find out how we can get you started down a path to financial freedom.

 

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.