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Straight to Jail

Jail

What would you do if you found out there was an arrest warrant out for you because you hadn’t paid your bills? Would you go around and borrow money from family and friends? Pack your bags and skip town? Change your name and head to France? Laugh?

If you said laugh, you’re correct.  In the United States we don’t arrest people for owing money you don’t have. 

There are scammers out there that are banking on the fact that you didn’t pay attention in Civics.  They’ll call you or email you, maybe even send something over in the mail.  

You’ve heard the calls and they all go something like this: “You have arrest warrant. Call this number now to avoid arrest by authorities. Court case filed in your name soon. Agent Bill William, Federal Department Revenue Service.”

As laughable as this is, it’s just another scam…and somehow it works.  

Preying on the vulnerable

If it didn’t work, they wouldn’t keep doing it.  This scam works because it preys on the emotions people have when they can’t pay their legitimate bills.  

These pieces of human garbage want to exploit you and your emotions to try to squeeze as much cash out of you as possible.  It’s a scare tactic and it works.  

That money isn’t going to your actual creditors, it’s going to end up in the pocket of some scammer in a rogue country. 

When can you go to jail?

There are some situations that can cause you to be arrested and go to jail for your debts.  Blatant refusals to pay child or spousal support ordered by a court can sometimes land you in jail.  Occasionally, a creditor can sue you and get a subpoena to make you show up in court.  If you defy that subpoena, you can sometimes be arrested, but not for failure to pay.  

Get “scam immunity”

If you’re in a bad enough place financially that the thought of getting arrested over your debts is keeping you up at night, you need to seek professional help.  That’s where we come in.  

Bankruptcy was a system created to eliminate debts, legally.  We have filed thousands of cases and eliminated nearly hundreds of millions of dollars in debt for our clients.  

Our website has countless articles about collection rights and we offer free consultations to discuss how bankruptcy can help you become free of the burden of debt.  We’re here to help when you need it most.  

But, just in case we need to say it again, don’t send your money to Agent Bill William.  The Federal Department Revenue Service isn’t coming to put your in jail. 

 

Emotional Barriers to Bankruptcy

Rock Bottom

Generally speaking, debt evokes strong emotions.  Those strong emotions often keep people from filing bankruptcy.  While these emotions are understandable, they shouldn’t be the reason why people keep slogging through years of debt related stress long after they should have sought help. The barriers we must overcome are:

Fear

Hardheadedness

Pride

These three emotional barriers keep people stuck in the cycle of debt.  

Fear

It’s the unknown.  While this kind of fear probably kept our primitive predecessors alive, today, there’s no excuse for not being informed.  

People are scared that they may not be able to access credit, they fear being viewed as a failure, they fear that somehow, others will judge them. Those things keep people on the sidelines and stop them from seeking the help they so desperately need.

Some of this fear is irrational but most of it stems from heaps of band information.  Some of this bad information is just a misunderstanding but a lot of it is deliberately spread by people who profit from your fear. Unscrupulous creditors seeking to keep you out of bankruptcy so they can squeeze just a few more bucks out of you before you seek the help you deserve. 

In the end, fear of bankruptcy is understandable. However, I’m going with FDR’s thought.  All we have to fear is fear itself. 

Hardheadedness

Hardheadedness is a trait that you really have to appreciate.  It causes people to finish the race, to follow through, to succeed against the odds.  It’s a virtue. Sometimes though, hardheadedness keeps you from seeking the assistance you need. 

You say to yourself, “I created this mess for myself, now I am the only one who can get out of it.” While that feeling may be honorable, it isn’t always logical. 

You’ll keep trying to chip away at the mountain of debt you’ve gotten yourself in and you’ll end up neglecting the things you need to focus on.  You’ll forego a real and important need that can make your life better and more fulfilling.  Often people skip medical treatments, let their mental health suffer and they’ll often neglect the biggest thing you can do to improve your life…save for retirement. 

Pride

 “I can pay my debts.  I’m not the kind of person who files bankruptcy.”

I hear that garbage all the time and I want to scream. 

Well, who files bankruptcy anyways?

A lot of times it’s people you know. People just like you. People who have gotten sick, people who have lost their job or seen a decline in income, people who got sucked in by the flashy and expensive world we live in. 

You don’t file bankruptcy because you’re immoral.  It’s a legal solution that fixes an economic problem.  After all, not having enough money isn’t a crime. Even Jesus associated with people who couldn’t afford the trappings of life. 

Look at the people who have filed bankruptcy.  Former Presidents, major corporations, even Walt Disney.  Do we look at people or companies in a lesser light just for asking for help to start over?

For far too many people, it takes hitting rock bottom to get over the emotional barriers:  when these irrational emotions are finally whittled away, rationality wins out and people seek the help they truly need. 

If you need help, don’t wait.  Call us today. We can get you the help you deserve. 

 

The Cure

We hear them every day and we have written extensively about get out of debt schemes and what an absolute scam most of them are.  People sit there and pitch the most unimaginable garbage to people who are struggling with debt.  They’re just like the snake oil salesmen of the wild west with all of their ridiculous cure all solutions.  “Buy my book and learn how to get out of debt fast” barks the salesman from his multimillion dollar radio perch or the best one is, “we’ll get your credit card company to settle for pennies on the dollar.” They’re selling you snake oil and without a proper diagnosis, you’ll get exactly…nothing. Except for a lighter wallet. 

You don’t treat a medical problem without a proper diagnosis.  Is it gas pains or colon cancer, a headache or an aneurysm?  You wouldn’t let someone start cutting or taking a dangerous therapy if you only needed to take a tylenol or quit eating so many beans. 

Much like medical problems, for a proper cure, your finances need a proper diagnosis too.  Do you have a temporary problem that will work itself out with a little discipline or are you throwing your hard earned money into a bottomless money pit. The answer is a big step in diagnosing and treating your debt problems. 

Rx for Debt

Any good physician needs to know things about you.  Your age, your medical history, family history, etc. 

An attorney assessing your financial situation will have similar questions.  We need to know your age, whether you have dependents, what your assets are, who and how much you owe as well as what your income is.  All those are questions we have to have answers to in order to recommend a good plan to get you out of debt.  

If you’re about to retire, you don’t have the luxury of time to get out of debt by just cutting a few frills but if you’re young and single with a good job, maybe selling that expensive car for a more frugal model and cutting back on the dinners out will help you get your financial house in order.  

The old, “cut out the lattes” line doesn’t exactly work if you’re staring retirement squarely in the face like it would for a 22 year old. Sometimes “buckling down” is:

Too little, too late

Most of the better known and more respectable “debt gurus” have advice that is better suited for how to live AFTER you cure your debt issues or if you have plenty of time and discipline and not much debt.  You have to start by comparing your income to your debt load.  Otherwise known as a Debt to income ratio.  If you’re using all your income just to service the bare minimums of your debt, you need a lot more help that someone who just spent a little too much this month.  

You have to assess your situation.  If you’re hunting squirrels, you don’t need a howitzer, but if you’re taking on a grizzly bear, you better come with some powerful options. 

How risky is the cure

The last question we need answered to give you a proper diagnosis is, how risky is the treatment.  In medicine, you don’t want to have brain surgery for a headache.  Think about the side effects of the medicine you take.  Every medicine has them and you don’t want to take something dangerous unless you have to.

When you are talking about curing debt though, you risk having to live with no safety net, especially if you’re doing it the “radio show” way. We have talked about how nearly half the country can’t cover a $1,000 emergency without having to borrow money from somewhere.  $1,000 isn’t much in this economy and don’t fool yourself into thinking that you can put your hands on a grand in a matter of minutes or that you’re not one of those people.  

One thousand dollars isn’t much in this economy.  Yet a $1,000 expense would imperil a huge swath of our citizens.  This list details more than 30 different everyday situations that could require you to spend at least $500.  None of those reasons are all that crazy or out there.  It could happen to any of us at any time.  Not long ago, we wrote about what to do when you’re in serious debt and I’ll link to that here.  It goes into greater detail and will help you understand more of your options.  

 

Taxes, Taxes…Taxes

Unfiled Taxes

It’s that time again in America.  The final deadline for filing your taxes looms large. People who got extensions will have to file their taxes by October 15th and that day looms large for those who owe.  You’ve done your taxes and gotten to the bottom line.  You owe… way more than you have in your bank account.  

So…what now?

File your taxes anyways.  

The IRS, horrible as they are, won’t start harassing you for money on April 16th or July 16th or even October 16th.  They likely haven’t posted the returns that have been filed yet, especially in years like this with COVID lurking in office buildings.  

There are serious advantages to filing your return, even if you don’t have the money to pay right now.  In fact, filing your return and starting the clock has way more advantages than hiding behind the fact that you don’t have the money to pay.

Payment plans available

The number one thing you can do is send in what you can.  It lowers your tax debt and the penalties and interest that will accrue on that debt from the word go.  Look, the IRS is greedy.  They just want your money and they want all they can manage to get from you.  That’s how the government is.  Send them what you can, when you can.  You don’t have to enter into an installment agreement with the IRS.  Just make sure that when you send in your payments, you notate your social security number, name and what year you want the money to go to on your check. 

If you’re really in need (for whatever reason) of a formal payment plan with the IRS, you can set one up online so long as you owe less than $50,000. 

Additional penalties for failure to file

If you don’t file a tax return and don’t get an extension, you’ll be up the creek without a paddle. You’ll be smacked with a separate penalty for failure to file the return.  That’s on top of the penalty you’ll pay for failure to pay as required.  Trying to hid from the IRS is way more expensive than doing the right thing. 

Filing returns starts the clock

On the escape option that is.  Taxes aren’t eternal.  Yes, I said that and it’s true.  Taxes can go away after time.  There is a statute of limitations on taxes that can make them uncollectable. 

There’s also the silver bullet, Bankruptcy. 

Bankruptcy law allows you to discharge certain taxes that are of a certain age before they can even expire.

But there’s a catch.  You have to file.  The clock doesn’t start ticking until you file your tax return.  That’s why filing, even when you can’t pay, is supremely advantageous.  

You need to adjust your withholdings

The final reason why you need to get last year’s return ready is that you need to get your withholding right for this year.  Even an extension can cause problems because it delays your ability to adjust your withholding on your W-4 to account for the fact that you owed this year.  You want to adjust your withholding so you don’t have to pay out of pocket again next year when everything is said and done.  

The bottom line is, hiding from a problem isn’t going to make it go away.  Especially if that problem is with a government agency as nasty as the IRS.  If you owe back taxes and you can’t pay them, contact the attorneys at Harmon and Gorove to see how bankruptcy can help you get a handle on your tax debt.  We have a dedicated team of professionals that understand your rights under bankruptcy and how they can help eliminate tax debt.  

It’s never too late

Timing

Did I wait too long? 

Oh no, I didn’t mess this up did I?

What am I going to do?

Sound familiar? It does to us. If you’ve put off filing bankruptcy because you were hanging on for a miracle that didn’t come through or you thought it would just go away just know that miracles, at least in the harsh world of finance, almost never happen and I can assure you, if someone has gone to the trouble to serve you with suit papers, they aren’t just going to go away.  

But is it too late? Has time truly run out on you?

No, it hasn’t.  Bankruptcy can pull your bacon out of the fire at just about any point in the collections process.  Should you have filed sooner. Yeah, you should have, but you didn’t.

We don’t recommend that you procrastinate.  In fact, people need to stop waiting till the last second to get in touch with a bankruptcy attorney.  Bankruptcy shouldn’t be a last resort.  

Suit papers

When a summons and a complaint is served to you, the clock starts running.  You only have a certain amount of time to answer the complaint.  If you don’t answer the complaint, whoever is suing you gets whatever they asked for. 

Guess what?

You don’t have to answer the complaint if you file bankruptcy.  

Bankruptcy stops the complaint and the lawsuit dead in its tracks.  That’s the beauty of the automatic stay.  Federal law supersedes state law and the state court must then all action in the case and the creditor must withdraw the suit. Additionally, at the end of your bankruptcy, the amount that you supposedly owed, is discharged.

Remember, It’s not too late.

You get sued and lose, is it too late?

You lost.  Losing stinks, especially in court, or so we’ve heard. 

Now you have a judgement against you. 

Just because a judge has ruled in favor of your creditor, bankruptcy can still help.  The debt can probably still be discharged in bankruptcy.  The only time a debt can’t be discharged is if you are being sued over family support obligations, very recent tax debts, criminal fines or debts created through fraud.

If you’re sued by your every day average credit card, someone with a personal loan of any kind of medical debt, you can wipe it out.  Even after a judgement has been entered. 

The only problem with all this is, Chapter 13 has limits on how much debt you can have and still qualify.  Once a creditor has the judgement against you the debt is fixed.  If this debt is too large, it can put you over the debt limits for a 13. 

One more problem is the fact that waiting until a judgement is on the books could also mean that a court found that you committed fraud. In that case, the bankruptcy court may find the same problem and then the debt would be excluded from discharge.

All that said, it’s still not too late. 

A creditor gets a lien, is it too late?

Bankruptcy isn’t a silver bullet, but it does change the balance of power.  If you got sued, and lost, and the creditor has perfected a lien against an asset it’s probably still not too late.

But that depends.

One of the things about bankruptcy is that it generally eliminates your personal liability for a debt.  However, some liens can survive bankruptcy once they’re attached to certain assets. 

There’s hope though.  You are allowed to avoid a judgement lien if it interferes with your exemptions.  It doesn’t matter how old a lien is, if it interferes with an exemption you can claim on an asset, you can avoid it. 

Bankruptcy can change the balance of power even if you’ve waited til the creditor with a judgment has perfected a judgment lien against your assets.  How much change is possible depends on the exemptions available when you file bankruptcy. Avoiding a lien isn’t automatic and you have to file a motion but even if you forget you can reopen your case in the future and file that motion. 

Again, in almost every circumstance, it’s not too late.

You’re being garnished, is it too late?

If you’re being threatened with a garnishment, your creditor has already obtained a judgement from a court.  That judgement can then be used to collect that debt. 

Just like every other situation I’ve discussed, a bankruptcy stops a garnishment dead in its tracks. Your creditor may end up being able to keep the money they collected before you filed, but from then on, all your money is yours. 

In certain cases, bankruptcy law allows you to recover money your creditor got from you before you filed, but you need to talk to your attorney about what that entails.

Because of the effect bankruptcy has on garnishments, it’s not too late.

When you do it is up to you

At virtually any point during a collection action, filing bankruptcy can put the brakes on a bad situation and give you the ability to eliminate your debt. Once it’s discharged, it’s gone for good and is henceforth, uncollectable.

There are some situations bankruptcy can’t undo.  If you take out a second mortgage or do a cash out refinance to “consolidate” your debt or you raid your 401k to pay back debts you could have otherwise dismissed in bankruptcy, that money is gone and we can’t undo that.  

That’s why it’s always better to plan early rather than wait. 

The attorneys at Harmon and Gorove are ready when you are.  We provide free consultations and seek to give you the best advice, regardless of whether we make money or not.  If you’d like to speak with one of our award winning attorneys, click here to schedule a consultation today. 

Hold it, fold it or run

You’ve got to know when to hold ’em,

know when to fold ’em;

know when to walk away,

know when to run…

Thus is the advice that is given to a young protege of the Gambler in the hit Kenny Rogers song. This advice is also good for people who are facing problems with debt to consider.  One of the toughest things for people who are facing uncertainty about their finances is knowing when to fold and get the financial help they need. 

We often play a bad hand

Almost everyone wants to repay their debts. We feel like it’s the “right” thing to do.  Paying your debts fits the narrative of the hard working hero who scrimped and went without to pay your debt in full.  Lord knows the creditors who push these massive debt loads onto people with the false assumption that they’ll be able to pay want you to think that not paying your debts will be the financial ruin of you until the end of the world. 

If you’re in debt, it’s hard to know what your choices are and to know which debts are the best to get rid of and which ones you need to keep. 

The problem is that no one talks about the actual cost of paying off burdensome debt.

Nobody talks about people who have such a strong commitment to pay burdensome debt, get blinded to other needs and other financial pitfalls.

Certainly, no one mentions good people who sacrifice and still fail to find a way to pay off their debts.

Nobody seems to care about the elderly; drowning in debt with no hope of better times ahead.

So how do you know how to play your hand, so to speak, when choosing the best way to succeed at getting out of debt?

Just like the cards you have, the decision about what to pay (hold) or file bankruptcy on (fold) depends on a number of factors. 

What’s the amount you owe?  

HOLD:  the lower your total debt, the more likely you can succeed in paying it off.

FOLD:  If you have a very large amount of debt it will take longer to pay off and will likely cause other events to interfere.

What’s your age?

HOLD: If you’re young, you have more time, theoretically, to pay off your debts due to the amount of time you have left in life to work. 

FOLD:  If you’re close to retirement, now’s the time to seriously start looking at cleaning up your finances

Do you have critical debts?

HOLD:  Do you owe taxes, have a mortgage or owe some kind of domestic support? These critical kinds of debts should take priority over unsecured or other debts that could be discharged. If you don’t owe these types of debts, a payment plan for other debts can often succeed.

FOLD:  paying unsecured bills when you owe these critical types of debt is EXTREMELY risky.

What does your retirement savings look like?

HOLD: IF you have a pension or a substantial amount of money saved for retirement, you can try to get your debts paid.

FOLD:  If you’re way behind on saving money for your golden years, wouldn’t it be better to use that money to save for retirement instead of paying back unsecured creditors?

Do you have an emergency savings fund?

HOLD:  If you have a big enough cushion to sustain a loss of income, try to pay off debt.

FOLD:  If you’re like the majority of Americans and have very little saved, you make yourself even more vulnerable diverting money to existing debt.

How to succeed

The number one thing you want to avoid is spending money you don’t have on old debts when you have no reasonable chance of succeeding.  Living paycheck to paycheck with no savings isn’t a good way to live and it makes life very tough. The young protege got some good advice for that taste of whiskey.

Kenny Rogers’ gambler told him:

That the secret to survivin’

Is knowin’ what to throw away

And knowin’ what to keep

Keep paying on old debts only if you have the ability to succeed.  Otherwise… well you know how the rest of the song goes. 

If you feel lost and are unable to find a way out of debt, contact the attorneys at Harmon and Gorove.  We have helped tens of thousands of people get the help they need in order to get the fresh start they so desperately need.