Bouncing Back From Bankruptcy

Original Source: https://www.fool.com/credit-cards/2018/11/01/bouncing-back-from-bankruptcy.aspx

Written By: Kailey Fralick

Published On: Nov 1, 2018

What Can You Expect from Your Bankruptcy Attorney?

One of the ways that people get out from under an oppressive debt is through filing for chapter 7 or chapter 13 bankruptcy.  Having debt discharged through bankruptcy can offer many people a great sense of relief.  The process itself however can be quite daunting without hiring a proper bankruptcy lawyer helping your through the process and forms.  When you are seeking an attorney’s assistance with the bankruptcy it is important to find one that offers you: competence, sound legal advice, preparedness, and representation.

Competence

Bankruptcy cases can range from straightforward to utterly complex.  The attorney you hire to handle your bankruptcy should have the skills that you need to have your bankruptcy proceed properly.  Your bankruptcy’s difficulty will range depending on a number of elements including:

  • The facts of your particular situation
  • The chapter of bankruptcy you are filing: chapter 7 or 13
  • The assets that will need to be sold
  • The status of employment and business ownership
  • The involvement of interested parties

Sound Legal Advice

Once you have established a relationship with a bankruptcy attorney a contract will be signed to specific the working agreement between you and your lawyer. This agreement will state what services you should expect that they will provide vs what you are to provide for yourself.  The first thing that your attorney will discuss with you is whether it is in your best interest to file for chapter 7, chapter 13, or another option.  This decision is based on what makes the most sense for you to achieve your financial goals. Your attorney should also brief you on what you can expect throughout the bankruptcy process along with the difficulties of your unique case.

Preparedness

Your attorney is in charge of making sure all of the paperwork that you need is filed and properly and within the timeline provided for your case.  You are required to disclose proper financial information to your attorney including: income, expenses, assets, and information pertaining to your debt.  Once this information has been received it will be processed and the two of you will review the information before it is filed.

You may be asked for more information by the court or the court’s trustee.  If you or your attorney fail to provide this information in a timely manner and you miss the deadline the following consequences may occur:

  • Delay in your bankruptcy proceedings
  • Dismissal of your case

Because of the serious nature of the consequences it is critical that the bankruptcy attorney you hire is diligent with paperwork and following required deadlines.

Representation

After the paperwork has been filed and the court has received everything it needs all debtors will be required to attend a hearing known as a 341 meeting of the creditors.  Depending on your case you or the bankruptcy attorney representing you may need to go to other hearings as well.  Your attorney will advise you when you meet with them on what type of hearings you will be required to attend.  Your bankruptcy lawyer should attend all hearings with you.  Some of these can include:

  • Chapter 13 bankruptcy confirmation hearing
  • Chapter 7 bankruptcy reaffirmation hearing
  • Motion/objection hearings

 

Bohikian Law Group specializes in bankruptcy services including chapter 7 and 13 bankruptcy.  More information can be found at http://bohikianlaw.com.

 

What Is Bankruptcy? Different Types and Why People File

The debts and income an individual or company has will determine what type of bankruptcy they are eligible to file for. Here’s what you need to know.

What Is Bankruptcy? Different Types and Why People File

Bankruptcy is usually seen as such an extreme situation, mostly associated with a failing business being forced to close down than anything else.

But as the amount of debt individuals and families are forced to accrue in order to survive increases, bankruptcy has become more common. A recent study showed a large increase of older Americans filing for bankruptcy, as different combinations of loans continue to put the average household in tens of thousands of dollars of debt.

It’s important to consider before filing: What is bankruptcy, what different types are there, and what could cause someone to file for it?

What Is Bankruptcy?

Bankruptcy is a legal process, an option for an individual, family, or corporation who finds themselves unable to pay off their debts.

The bankruptcy courts will go over your debts and liabilities, and will track your assets as well. Some of your assets may be used as repayment. These debts can be reduced or done away with altogether.

The ideal goal behind this system is to give people a second chance and a fresh start. Debt hangs over your head, and interest means it just continues to grow. It makes it harder to pay off, increases the number of predatory phone calls and voicemails you hear and can bring unmanageable stress into your daily life. Should the bankruptcy process work as it’s intended, you may have a chance at life without this.

How to File for Bankruptcy

The first part of filing for bankruptcy is determining whether it is the right call for you. It’s a huge undertaking, so ask yourself the important questions. How long will you likely have to repay these debts for? Are you legitimately unable to make the necessary payments? Can you compile the necessary information and documents? And are you prepared to deal with any fallout that comes with filing for bankruptcy? It can do significant damage to your credit score. Does your existing debt outweigh that consequence?

Filers will also want to look into a bankruptcy lawyer. It’s possible to file for certain bankruptcy types without one, but at a time when you’re at your most vulnerable financially, find someone who understands how to guide you through the various intricacies of filing.

Before one can file for bankruptcy, United States Courts require you to take credit counseling, and after you file, it requires debtor education courses. Certificates of completion are required before debts are discharged.

With credit counseling courses completed, the next step is to fill out the petition to file for bankruptcy. This and other bankruptcy forms are available on the U.S. Courts website. A bankruptcy attorney can help determine which other relevant forms will need to be filled out, based on what type of bankruptcy the filer is filing for, and how the specific local laws affect the case.

If the petition gets accepted, the case is usually given to a trustee, a party not employed by the courts who can help oversee the case. The trustee will comb through documents to make sure all assets have been accurately collected and that no fraud has been committed. They will also set up a meeting with the creditors wherein the party who filed for bankruptcy must testify under oath.

Bankruptcy Types

With bankruptcy being such a complicated issue that can affect so many different parties, there is much more to it than just “declaring bankruptcy.” Are you an individual or a business filing for bankruptcy, and how do your income and assets impact the plan for repaying debts? The U.S. has an entire court system dedicated entirely to bankruptcy cases, so it’s not afraid to get very intricate with the details.

There are several different types of bankruptcy. The most common ones, though, are likely Chapter 7, Chapter 11, and Chapter 13 bankruptcy.

Chapter 7 Bankruptcy

The most common form of bankruptcy is likely Chapter 7. This is also often known as liquidation bankruptcy. Unable to pay off debts with money, the party must, with the help of the trustee, liquidate their non-exempt assets and divide the money to give to creditors.

Much of the aforementioned process comes into play for Chapter 7 bankruptcy. Anyone who files for it will need to take the credit counseling courses within six months of filing. The relevant forms relating to Chapter 7 will need to be completed providing key information on your situation.

There will be means testing to determine whether someone has a way to pay off a significant portion of that debt with the provided information, including income. If it is determined they cannot, it continues as Chapter 7. If it is determined that they have enough means to pay off most of the debt, they likely won’t be able to file for it and will need to instead look into Chapter 13 bankruptcy (more on that later).

The trustee will set up the meeting the debtor has with creditors, and is able to sell non-exempt assets to pay creditors. The assets that are exempt from this may vary from state-to-state. The equity in your home, as an example, varies in how much is and isn’t exempt.

Debtors will likely need to take debtor education courses prior to successfully being discharged. It is important to note, especially before beginning the process, that not every debt can be discharged. Debt stemming from child support payments cannot be discharged.

Chapter 11 Bankruptcy

Individuals can file for Chapter 11 bankruptcy, but it is primarily known as a bankruptcy option for businesses. With Chapter 11, businesses can restructure their debts and potentially save themselves from going out of business. Huge companies like General Motors have used it to their advantage.

Once a person or company files for Chapter 11 bankruptcy, they become a debtor-in-possession. This means they still have many of the same responsibilities for operating the businesses, and will then work with the trustee for a plan to reorganize their debts. If the creditors and a bankruptcy judge approve, the trustee puts the plan into action.

Though the debtor-in-possession still maintains various responsibilities in running the business, they are also unable to make other decisions independently, such as making expansions to the business.

How can an individual qualify for Chapter 11 bankruptcy? They need to have more debt than would qualify them for Chapter 13 bankruptcy.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy is a bit different for individuals compared to Chapter 7. It is an option for individuals and families whose income makes them ineligible for Chapter 7, and is a bankruptcy plan that does not involve liquidating their non-exempt assets.

Like Chapter 11, it is a way to try and restructure and reorganize debt, but more geared toward people and families as opposed to corporations. Restructuring debts instead of liquidating assets lets people avoid having their houses foreclosed on.

It does, however, last much longer than Chapter 7. Having a trustee liquidate assets can get a debtor discharged in 6 months; in Chapter 13, in addition to providing crucial financial information in their forms the debtor creates a plan to use any disposable income they have left to make monthly payments toward their debt. Depending on the dollar amount going toward those payments, the process to getting discharged could take upward of 3 to 5 years. In that time, debtors are also not allowed to take on any additional debt.

The trustee in a Chapter 13 bankruptcy case will review the debtor’s proposed plan, as well as the information they provided about finances to make sure everything is accurate. If they and the creditors find the plan to be fair and trustworthy, the plan goes into action, and the trustee will divvy the monthly payments up to the creditors.

Why Do People File for Bankruptcy?

The amount of debt the average American has continues to rise exponentially each year. There’s now over $1.5 trillion in outstanding student loan debt alone in the country. With such astronomical debt hanging over so many American households, people look to drastic measures.

Emergency medical situations have put many Americans in tens of thousands, if not hundreds of thousands of dollars in medical debt. Medical debt and student loan debt can be a toxic combination for someone’s bank account, especially if they are also dealing with a loss of their job.

A combo of these three is an extreme, but many feel bankruptcy is still the “extreme” option, a last resort. Filing for bankruptcy can wreck a person’s credit score and take years to recover; for someone to declare bankruptcy, taking the time to build their credit score back up would have to outweigh the difficulties of living under their existing financial struggles and debt.

Bankruptcy and Lehman Brothers

Because bankruptcy among individuals is still seen as a last resort, the term is still thought of more for when businesses run out of money and are forced to shut down. As the anniversary of its bankruptcy declaration approaches, let’s look at the most notable bankruptcy event of the 21st century: The collapse of Lehman Brothers.

Lehman Brothers was an investment bank and global financial services firm who spent the first several years of the 2000s riding high. This can be attributed to what was, at the time, a booming housing market.

More and more Americans were buying houses, thanks to a major increase in subprime mortgages being given out by institutions like Lehman Brothers. Subprime mortgages were the loans offered to prospective homeowners with poor credit, and financial institutions were happy to give them out in the early 2000s when interest rates were historically low. But when the housing bubble burst, the U.S. Federal Reserve raised interest rates several times. People suddenly could not make their monthly mortgage payments; they defaulted and homes went into foreclosure. What was a thriving market turned into a subprime mortgage crisis.

Mortgages were not getting paid, and real estate prices kept falling. This was bad news for lenders, banks and investors who had put quite a bit of time and money into the market. Lehman Brothers began to fail. Mortgage lenders they had purchased were shut down. Their financial leverage of assets to equity was unsustainably high. They liquidated assets, they issued stock, but nothing was able to stop the bleeding. Lehman Brothers filed for bankruptcy on Sept. 15, 2008. Their assets and various businesses were sold off, and the financial services giant was no more.

Costs Involved with Filing Bankruptcy

When you are considering bankruptcy as an option to relieve your financial burdens the last thing you want to be worrying about is how much it is going to cost to hire an attorney and file the necessary paperwork.  After all, money is tight which is the reason you are contemplating this option in the first place.  In this installment we will discuss the fees involved with filing, hiring an attorney, and additional fees you may encounter.

Fees for Filing Bankruptcy

There are many bankruptcy options to choose from but the most popular being Chapter 7 and Chapter 13.   The filing fee for Chapter 7 is $335 and for Chapter 13 is $310.  There may also be a fee charged by the Bankruptcy Trustee which can range between $15 and $20 dollars.  Another fee you may need to cover is the cost for mandatory credit counseling and financial management classes.  These classes can cost upwards of $100 depending on where you are filing for bankruptcy and the options that are available.

Attorney Fees in Bankruptcy

Many people will unsuccessfully file for bankruptcy without the help of an attorney.  Paperwork often is incorrectly filed, the steps necessary are not taken, and many other hiccups plague individuals filing “pro se”, (without the help of an attorney).  The truth is that filing for bankruptcy successfully most often requires the help of a bankruptcy attorney.

Bankruptcy attorneys are responsible for setting their own fees.  On average bankruptcy attorneys charge $1,250 for their services.  This fee varies depending on where you are filing, the complexity of your litigation, your attorneys experience and reputation. The fees for filing Chapter 7 bankruptcy are often less than those found in filing for Chapter 13.  This is most likely due to the extra services that go into filing Chapter 13 such as setting up a repayment schedule and executing automatic payments.

This fee may seem like a lot at the moment.  It is to be assumed that your filing bankruptcy because you are lacking the ability to pay the debt.  When you take into consideration the average debt that is written off in bankruptcy is $15,000 that fee seems relatively reasonable as it takes a large debt down to pennies on the dollar.

Filing for bankruptcy isn’t an option that is easy for individuals to make.  It is one that should be made only after much research and contemplation.

Bohikian Law Group specializes in bankruptcy services including chapter 7 and 13 bankruptcy.  More information can be found at http://bohikianlaw.com.

The Graying of Bankruptcy

For decades, capitalists have held down wages and cut social programs. Now the chickens have come home to roost: older Americans are going bankrupt at record rates.

In old age, health declines. This is obvious, but its implications for social well being are enormous.

In a system where the majority of people have to sell their labor for wages to survive, people’s ability to support themselves financially almost always decreases as they age. Without public assistance, therefore, old age is comfortable only for those with savings, and uncomfortable if not downright miserable for those without.

This is why the United States passed the Social Security Act in 1935, which guaranteed a source of income to replace wages for all people 65 and older, along with the Social Security Act Amendments in 1965, which created Medicare, a public health insurance program for the same population. These programs are financed socially, by adjusting the tax rate schedule to accommodate them — that is, by requiring everyone in society to contribute, based on their ability to pay, for benefits that they will be entitled to after a certain age.

These and other mid-century programs made it a little bit easier to grow old in America, for a while. But they have come under strain as wages have stagnated and the cost of housing and education skyrocketed, placing a greater burden on social welfare programs to achieve adequate income for people. Meanwhile, programs themselves have been systematically starved of resources or outright eliminated.

Older Americans haven’t fared well. In fact, they’re filing for bankruptcy in record numbers. A new report from the Consumer Bankruptcy Project called “Graying of US Bankruptcy: Fallout from Life in a Risk Society” contends that, while it took a few decades to fully set in, older Americans are now experiencing the consequences of the assault on the social safety net that began under Reagan and has persisted, with leadership from both parties, ever since.

Running the Risk

“Government is not the solution to our problem,” Reagan was fond of saying. “Government is the problem.” His election inaugurated the reign of the free-market neoliberals, who advocated supposedly leaner and more efficient market-based alternatives to socially-funded government programs. Not coincidentally, these alternatives were friendly to capitalists — lower taxes, new lucrative private markets.

In 1982, Reagan established a commission made up of corporate executives whose task was to “root out inefficiency” in government spending. The Grace Commission issued “2,478 cost-cutting, revenue enhancing recommendations” that took aim at federal wages, retirement systems, healthcare programs, and a variety of federal subsidies which were deemed wasteful. The chairman of the commission, successful businessman J. Peter Grace, wrote to Reagan, “If the American people realized how rapidly Federal Government spending is likely to grow under existing legislated programs, I am convinced they would compel their elected representatives to ‘get the Government off their backs.’”

One man’s “getting the Government off their backs” is another’s evaporation of opportunity. As social programs have withered, wages have stagnated, and inequality has skyrocketed, many ordinary working people have lost their financial footing and their retirement prospects have dimmed. Today, just one hundred CEOs have the same amount of money stored away for retirement as the bottom 41 percent of the American population.

Meanwhile the age at which a person is eligible for full Social Security benefits has risen from 65 to 70, and the penalty for early retirement has increased up to 30 percent. Medicare recipients’ out-of-pocket costs are ballooning. Defined benefit pensions have been replaced with unpredictable and risky employee-owned 401(k)s. The list goes on.

And now the chickens are coming home to roost. The Consumer Bankruptcy Project found that since 1991, the rate of Americans age sixty-five to seventy-four filing for bankruptcy has doubled. The rate for those age seventy-five and over has tripled.

“The changes are so great,” they found, “that the broader trend of an aging US population can explain only a small proportion of what is happening in the bankruptcy courts. Older Americans’ reported reasons for filing strongly suggest that they are experiencing the fallout from our current individualized risk society and the corresponding shrinkage of their social safety net.”

The researchers’ data backs this up, suggesting that “that financial crises associated with living in America’s high-risk society are highly correlated with older Americans’ increasing use of the bankruptcy system.” As risk and responsibility have shifted from society as a whole onto individuals to pay their own way — even when they can’t work at all — older Americans are increasingly vulnerable to financial ruin.

The Means of Life

The responses to the questionnaires collected by the Consumer Bankruptcy Project illuminate the predicament that working-class older Americans are in. When asked the reason for bankruptcy, one respondent said:

All things went up in price. Retirement never went up. Had a part time job that was helping to meet monthly payments. House payment kept going up. Was fired from my part time job that I had for over 10 years without any warning. Being 67 and having back problems, not many people will hire you even as part time worker.

Here we can see the complex of problems that give rise to financial difficulty in old age. Income in retirement isn’t sufficient to cover the rising cost of living, including healthcare costs and payments on debt. After a lifetime of depressed wages, many people don’t have the savings to meet their financial responsibilities, yielding need employment to supplement their income.

But the aging body leads to a (real or perceived) inability to do the work needed to secure a wage. As a result, older Americans are increasingly left without much financial recourse besides personal bankruptcy — which is not a panacea, just a last-ditch effort to eliminate personal debt and stop the multiplication of costs.

One path to solving this problem is to make a concerted effort to drive up wages, control living costs, and repair the social safety net, so that people enter old age with savings instead of debt, and so that older people who can’t work still have a way to sustain themselves in their final decades. The Left should pursue this approach without reservation.

And there is a deeper issue, too, which requires a more radical solution in the long-term. The problem is that people are required to sell their labor to capitalists in order to have access to the means of life to begin with. What if, instead, we had a society where everyone was guaranteed a decent living just because they’re alive, not on condition of employment, and we pooled our resources and our productive capacities to make good on that guarantee? Then perhaps all people, young and old, could live with dignity.

The Purpose of Bankruptcy

No one ever really wants to file for bankruptcy, but there are times when it can be unavoidable for many.  People will want to file for bankruptcy if they have quite a bit of debt and no way to possibly pay it off during their lifetime.

The main purpose of bankruptcy is to give everyone a fresh start in life without a mountain of debt hanging over their head, while also allowing their creditors to collect at least some of the money that is owed to them.  After paying their creditors the amount that the bankruptcy courts tell them to, they will no longer be responsible for any of their remaining debt to those creditors.

There are six different types of bankruptcy filing options, although, only two of them are meant for regular people.  Chapter 7 bankruptcy will find people liquidating everything that they own to pay off their debts, while Chapter 13 will allow a person to keep their home as they are repaying all their creditors.  However, both options will allow everyone to keep most of their property and assets in the end if they qualify for certain exemptions.

The other four bankruptcy options include Chapter 9, Chapter 11, Chapter 12, and Chapter 15.  Chapter 9 can only be filed by a municipality and basically requests a reorganization process for that area.  Chapter 11 is usually used by commercial organizations as they try to reorganize their assets to pay off debts.

Chapter 12 is the bankruptcy code that farmers and fishermen need to file under if their business is not going well due to circumstances out of their control.  Through this process, a bankruptcy lawyer can help them create a plan to get out of debt within three years, unless the court allows for a longer time frame.

Chapter 15 is for cross-border cases, where the creditor and debtor live in different countries.

Everyone is encouraged to hire a bankruptcy lawyer to assist them through the entire bankruptcy process, so that they can file for the proper chapter of bankruptcy.  After all, the entire bankruptcy system is quite complex and there are many legal terms and phrases that people may not know or understand.  It can be quite easy for a person to get lost in the process, which is why the guidance of a bankruptcy lawyer is always a good option.

Anyone that chooses to not hire a bankruptcy lawyer may find themselves worse than they were before, especially if they need to pay their creditors more than they should in a shorter amount of time.  The goal of bankruptcy is to get out of debt and move on with life, not continue to feel stuck for a longer period of time.

Bohikian Law Group specializes in chapter 7 and chapter 13 bankruptcies in Michigan. Contact us today to find a bankruptcy attorney that will help you in debt relief at http://www.bohikianlaw.com/ today.

Brookstone files for bankruptcy and will close all of its mall stores

Brookstone filed for bankruptcy and will close its remaining 101 mall stores.

The mall and airport seller, best known for massage chairs, quirky gadgets, and travel luggage, filed for Chapter 11 bankruptcy in federal court on Thursday. It was Brookstone’s second bankruptcy round in four years.

The company will keep its 35 airport stores and website open and running while it attempts to find a buyer.

It has secured a $30 million loan to finance operations during the sale. In a bankruptcy filing, Brookstone said it had liabilities totaling up to $500 million and assets between $50 to $100 million.

Brookstone’s CEO said in a statement that its airport and online businesses were successful, but an “extremely challenging retail environment at malls” forced the company to close its stores there.

Unabated traffic losses at malls have plagued brick-and-mortar sellers. Mall vacancies reached a six-year highlast quarter as a wave of stores closed, including Walgreens, Bon-Ton, Sears and Kmart, Best Buy, Kay and Jared, Matress Firm, and GNC.

“They’re trapped in hundreds of these B and C malls, whose traffic has been in serial decline,” said Mark Cohen, the director of retail studies at Columbia Business School. “Where they are in triple-A malls, they’re faced with very high rent.”

The company got its start in 1965 with a classified ad in Popular Mechanics magazine for hard-to-find tools. Brookstone opened its first retail store in 1973 and moved into malls in 1980. It later opened smaller airport stores.

“Brookstone had a unique value proposition,” said Sean Maharaj, a director in the retail practice of consultancy firm AArete. “They had a sophisticated offering. It was more boutique-like and felt a little white glove.”

Best-selling products in Brookstone’s history include the Big Blue Bluetooth speakers, Nap weighted blankets, and Rock & Recline Shiatsu massage chairs, according to a spokesperson for the company. It was a launching pad for popular brands such as Tempur-Pedic, Fitbit, Indiegogo, and Segway.

The company also had a thriving catalog business during those years, selling consumers moderately priced novelty items. In 2006, the last year public filings were available for the company, it circulated close to 60 million catalogs.

“We believe our strength is identifying, developing and selling products that are functional in purpose, distinctive in quality and design and not widely available from other retailers,” Brookstone said in the filing.

In the mid 1990s, Bain Capital, then led by Mitt Romney, took the company public. It operated publicly for close to a decade and then was sold in 2005 to a group of buyers that included a private equity firm in the United States and a Chinese-based retailer.

brookstone mall store

“When the company went private it was probably coming off of the most successful run in its history,” Steven Schwartz, Brookstone’s former chief merchandising officer and interim CEO, said in a phone interview last week.

The two ownership groups did not share the same priorities and Brookstone cycled through around 10 CEOs during the same stretch, Schwartz said. Turnover made it hard to implement a consistent strategy and vision.

“We were an amazing store company, but we didn’t have our eyes on the ball the right way digitally,” he said.

In 2014, Brookstone filed for bankruptcy and was sold to a Chinese consortium for $136 million. At the time, Brookstone operated 240 stores, 70 fewer than it had in 2006.

As the company struggled internally, shoppers found more places online to buy the speakers, headphones, and tech tools they once were only able to get at Brookstone or rivals like Sharper Image.

“The category is Amazon bait,” said Columbia’s Cohen. Smartphones and apps, not gadgets, satisfy many consumers’ hunt for new technology.

“They weren’t able to support the endless procession of new and engaging ideas and categories that a consumer who is curious expects,” he said. “It’s a treadmill that’s difficult to stay on.”

Brookstone was known as a place where shoppers could find innovative gifts, usually for men, Schwartz said. (Its headquarters in New Hampshire are located at One Innovation Way.)

Customers didn’t always know what they wanted when they went into a store, but they would wander around, try out products, and purchase an audio or travel product they found useful and engaging.

Brookstone had difficulty distinguishing itself from new competitors and telling its story online, where it’s harder to shop without knowing exactly what you want. It lost relevancy with many shoppers and fell out of mind.

The company’s troubles were an early sign of legacy retailers grappling with creating a new digital identity, Schwartz said: “We were the canary in the coal mine for the internet and for the digital age.”

Original Source: https://money.cnn.com/2018/08/02/news/companies/brookstone-bankruptcy/index.html

Original Author: Nathaniel Meyersohn

Financial worries: Why waiting to file bankruptcy can be so damaging

A new study shows millennials are delaying life events due to being in debt. Elizabeth Keatinge has more. Buzz60

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Filing for bankruptcy is often seen as an admission of personal and financial failure. Many people try hard to avoid it, but they end up paying the price for waiting.

The longer people wait to file bankruptcy, the more they struggle, according to a 2018 law review study. By the time they declare bankruptcy, their well-being and financial life are damaged, undermining the fresh start the legal tool offers them.

Here’s why waiting to file bankruptcy can be so damaging — and when you should consider filing.

Why waiting is draining

The time before a person files for bankruptcy is sometimes known as the financial “sweatbox.” That’s the period when people are facing asset depletion, debt collection lawsuits and forgoing basic necessities like food to avoid filing bankruptcy.

Many sweat it out for years before reckoning with their debt. The misery of the sweatbox is an increasingly common American experience, a new report from the Notre Dame Law Review titled “Life in the Sweatbox” finds.

The report uses data from the Consumer Bankruptcy Project, a long-term academic research project that studies people who file bankruptcy, why they file and the consequences. The current CBP data include information from 3,200 bankruptcy cases between 2013 and 2016. “Life in the Sweatbox” also features CBP survey information from 910 of the 3,200 filers.

The report shows that among those surveyed, over 66% were “long strugglers,” or those who endure the sweatbox for two years or longer. Nearly a third waited five years or longer. Compared with the 2007 CBP, the number of long strugglers who waited five years or longer more than doubled in the latest CBP data.

The longer people stay in the sweatbox, the worst their overall financial situation becomes:

  • Long strugglers have half the median assets compared with other debtors, or those who didn’t wait two or more years to file bankruptcy
  • The median debt-to-income ratio of long strugglers is over 40% higher than other debtors
  • Around 50% of long strugglers faced debt collection lawsuits, compared with 35% of other debtors

Stigma against filing and dedication to paying debts are part of what keep people from filing bankruptcy, says co-author of the report Robert Lawless, a professor at the University of Illinois College of Law.

“Bankruptcy laws give the honest but unfortunate debtor a fresh start. It goes into the American idea of everyone deserving a second start,” Lawless says. “The discharge is the core of the fresh start: A chance to start financial life anew.”

But the prolonged depletion of assets during the “sweatbox” means that by the time people file, they’re unable to have a true fresh start, he adds.

With less in the bank, it’s harder for them to find sturdy financial footing post-bankruptcy.

When to consider bankruptcy

Kristen Holt, CEO of GreenPath Financial Wellness based in Michigan, says clients often tell the nonprofit credit counseling agency that they wish they had reached out for help sooner.

“We encourage them to call a credit counseling agency the moment they begin to feel stress,” she says.

Here are some factors that can help you determine if bankruptcy is right for you:

  • Your debts are more than 40% your income. This debt-to-income ratio is a marker of potential financial distress, according to the Federal Reserve, and can indicate that your debts are too high to pay off on your own.
  • You’re using debt to pay for other debts. At this point, you’re slipping further down the debt spiral, and it can be hard to recover without a serious financial windfall.
  • Your debts are ones that could be wiped out in bankruptcy. Unsecured consumer debts, like credit cards, medical bills and personal loans, can all be discharged in bankruptcy. Other debts, like student loans and some court judgments, cannot be eliminated.
  • You’re forgoing essentials. Sixty-percent of long strugglers surveyed in the law review report went without medical attention while in the sweatbox. And nearly 32% went without food.

The two most common forms of consumer bankruptcy are Chapter 7 and Chapter 13. Which is best for you depends on your specific financial situation. Consult with a bankruptcy attorney and nonprofit credit counselor if you’re considering filing.

If you do file for bankruptcy, it’s not the end of your financial life.

Your credit score is likely to improve in the months after filing. A 2014 report from the Federal Reserve Bank of Philadelphia found that the average credit score among those who filed Chapter 7 bankruptcy in 2010 went up more than 80 points — from 538.2 to 620.3 — between when they filed and when their cases were discharged.

Original Source: https://www.usatoday.com/story/money/personalfinance/2018/06/20/financial-damage-why-waiting-file-bankruptcy-can-hurt-you/715663002/

Original Date: June 20 2018

Written By: Sean Pyles

The Truth About Bankruptcy In 2018

Many people these days find themselves in serious financial trouble and things have gotten so bad that they feel that they don’t know what to do anymore. Being in that situation has to be extremely scary as your creditors are not likely going to be understanding when you cannot pay them even the minimum amount due.

 

It gets even worse for you if you own your home and you are not able to afford your mortgage and the bank is threatening to take away your home. There is are not really whole on of things for you to do if you have gotten to the point where you can longer afford make all of your payments. One of the last resorts is a legal proceeding called bankruptcy.

What is bankruptcy

A bankruptcy is a legal proceeding in which you face a judge and you tell them that you no longer have the means to continue to pay your debts. The judge will appoint a trustee and they will evaluate your debts and your income in order to determine if they think your debts should be discharged. Fortunately, if you own your home, a foreclosure can be stopped, and you will not lose your home. However, there are certain debts that are not covered by bankruptcy and you will still responsible for paying them once your bankruptcy has been discharged.

 

Here are a few examples of debts that cannot be discharged by a bankruptcy;

  • Student Loans
  • Tax debts, fines or penalties from the government
  • Court-ordered child support payments
  • Court ordered alimony payments

 

Filing Bankruptcy will temporarily stop the harassing phone calls from creditors wanting their money, but once you have filed bankruptcy, they must immediately cease all forms of contact until after your bankruptcy has been finally decided by the judge. All decisions by the courts are final and when they discharge your case you will ready to start over.

 

However, you might really want to be sure that you think it completely through because you will have poor credit for many, many years once it hits your credit report. Once it is where it normally stays for at least 7 years and it will likely keep you from getting any new credit.

 

There are things that you can consider before taking the bankruptcy route that will not put your credit at risk and that includes finding a lender to request a debt consolidation loan. This will make it possible for you to pay off the debts and stave off foreclosure and bankruptcy.

 

Bohikian Law Group specializes in chapter 7 and chapter 13 bankruptcies in Michigan. Contact us today to find a bankruptcy attorney that will help you in debt relief at http://www.bohikianlaw.com/ today.

Why Should You File for Bankruptcy?

You are always going to have bills to pay, but what happens if they come in faster than you can pay them, or you are barely paying the minimum payment every month?  You may feel like you are drowning in debt, especially if you need to continue using your charge cards to pay for everyday necessities.

While filing for bankruptcy is never a person’s top choice, you may have no choice but to hire a bankruptcy lawyer, so you can get back on track with your life.  After all, once you have gone through the process and then work hard to improve your credit, you will find that your life is much easier in the future.

An attorney specializing in bankruptcy can walk you through all the steps of the process, starting with whether or not you have a good reason to file.  Your bankruptcy lawyer may even encourage you not to file for bankruptcy if they do not think that you have a good enough reason.

Here are 5 reasons why you should file for bankruptcy:

  1. Your Home is in Foreclosure

A bankruptcy will immediately put a stop to the foreclosure on your home.  This is important, even if you are not planning on staying in your home, because you may not need to pay the difference of the unpaid mortgage balance if the proceeds from the sale are not enough.

  1. You are Being Evicted

If you happen to rent an apartment or a house, filing for bankruptcy can prevent you from being evicted.  You will still need to catch up on your rent payments, but a bankruptcy can give you a little more time.

  1. Your Car is Being Repossessed

Filing for bankruptcy can prevent a lender from repossessing your car if you are behind on payments.  This will allow you to catch up on payments, so you can keep your car.

  1. You Have Medical Debt

If you have major medical debt from an illness, you should talk to a bankruptcy lawyer, so you are not responsible for all those bills.  They can give you your options, so you do not lose your home or other assets.

  1. You Just Got Divorced

Financial changes occur after a divorce and you may find that it is difficult to live the lifestyle that you are used to with just your income.  If you find yourself in debt after getting a divorce, you will want to speak to an attorney specializing in bankruptcy to see what options you may have.

 

No one ever wants to have a lot of debt to deal with, but bankruptcy may or may not be your best option.  They only way you will know if you should file is to speak with a bankruptcy lawyer and see what they recommend for the situation that you are in.

Bohikian Law Group specializes in chapter 7 and chapter 13 bankruptcies in Michigan. Contact us today to find a bankruptcy attorney that will help you in debt relief at http://www.bohikianlaw.com/ today.