Is Bankruptcy The Solution?


The prospect of declaring bankruptcy is frightening.  Not feeling like you are in complete control over your finances can make you feel like a failure.  When you are in a situation in which you are contemplating the pros and cons of bankruptcy it is important to note that you are in complete control.  Bankruptcy allows individuals to regain control over their finances.  It gives you the ability to start over from scratch. There is no need to live in debilitating debt any longer. 

Bankruptcy can be the solution if you can answer yes to 2 or more of the following questions:

  • Are you only making minimum payments on your credit card?
  • Do bill collectors call you regularly?
  • When you are paying bills or sorting through your finances, do you feel anxious?
  • Are you paying for necessities with credit cards?
  • Have you considered debt consolidation?
  • Do you have any idea to how much you owe?

Accessing Your Financial Situation

Answering yes to two or more of these questions is a sure sign you should give your financial status a bit more thought.  Bankruptcy is a situation where relief is offered when you owe more than you can afford to pay. 

It is important first to review your liquid assets.  This includes checking and savings accounts, retirement funds, stocks, bonds, real estate, college savings accounts, and other bank and non-bank assets.  A rough estimate will do.

The next step is to create a list of your debts including all credit cards, car payments, monthly bills, house payments, and such. Declaring bankruptcy is an option out of a tricky financial situation when your assets are less than your debt.

Steps in Declaring Bankruptcy

There are two ways in which an individual can declare bankruptcy.  The most common method is to voluntary file.  The second is for creditors to ask the court to order an individual bankrupt.  For the best outcome and restart to your financial future consulting with a bankruptcy lawyer is important. An attorney specializing in bankruptcy can determine the best option for your individual circumstances. 

Chapter 7 Bankruptcy

Chapter 7 bankruptcy is the most common option for individuals when filing bankruptcy.  Some of the most common reasons that individuals are forced into bankruptcy include unemployment, medical expenses, overextended credit, and divorce.  Chapter 7 bankruptcy is a straightforward option to settle debts.  In this type of bankruptcy any assets you may have that are considered above and beyond necessary will be liquidated.  The cash from these assets will be liquidated and distributed to your creditors. 

Four months later a discharge will be received.  The bankruptcy will stay on your financial record for the next ten years.  This doesn’t have to mean your financial life is over.  Even with a bankruptcy on your record you can begin to rebuild your credit.  Chapter 7 offers a fresh start to individuals quicker than other bankruptcy options such as Chapter 13

If you are experiencing financial hardship take time to schedule a free consultation with Bohikian Law Group.

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



Whats the income limit for Chapter 7?

What is the Income Limit for Chapter 7?

In order to file a Chapter 7 bankruptcy, you must pass a means test which compares your disposable income to the average median income for a family of the same size in your state. Because median incomes vary by state and household size, the income limit for filing a Chapter 7 varies as well.

Why Take a Means Test?

A Chapter 7 bankruptcy is a short process, typically lasting only three to six months. During this time, a trustee helps you to liquidate (sell) your non-exempt property to pay off part of your debt. The Chapter 7 means test is a method of qualification designed to reserve Chapter 7 bankruptcies only for those who truly can’t afford to repay their debts in full.

Taking a Means Test

To begin a means test, compare your current pre-tax annual income to the median income for the same size household in your state. If you make less than your state’s median income, you qualify and are free to file a Chapter 7 bankruptcy. If you make the same, or more than, the median income for your state, then you must continue on with the test.

For second part of the means test, you use your average monthly income for the six months before you plan on filing bankruptcy. By deducting your monthly expenses from your current average monthly income, calculate your disposable income. The lower your disposable income each month, the more likely you may qualify for Chapter 7.

When calculating your disposable income, you subtract your allowed monthly expenses like food, clothing, and living expenses. These can include your utility bills, as well as credit card, mortgage, and car loan payments.

Comparing Median Income

If you’re still wondering whether or not your income qualifies you to file a Chapter 7 bankruptcy, there are a few steps you can take:

  1. Calculate your family’s average gross annual income – To find your gross annual income, multiply your pre-tax monthly income by 12. For example: if your gross monthly income is $2,500, your annual gross income would be $30,000 (2,500 multiplied by 12 equals 30,000).
  2. Compare your annual gross income to your state family median income – Make sure to compare your income to the median income for a family of the same size in your state. You can find the current family median incomes on the US Trustee website at www.justice.gov/ust (go to the means testing information section).
  3. Continue to part two of the means test – If your income is at or above that of a same sized household in your state, you need to continue on to the second part of the means test. If it falls below the median income, you can proceed with filing your Chapter 7 bankruptcy.

When You Don’t Qualify for Chapter 7 Bankruptcy

When you take the means test and continue on to the second part, but it shows that you have a large amount of disposable income, you don’t qualify to file Chapter 7. In this case, you should be able to use this disposable income to repay debts. If you’re a high-income earner that doesn’t qualify for a Chapter 7, you can file a Chapter 13 bankruptcy, instead. A Chapter 13 is known as a repayment bankruptcy and can help you repay your debts over either a three- or five-year period.

The Bottom Line

If you’re thinking about filing bankruptcy, but aren’t sure if you should move forward, make sure you consider all the possible outcomes. For instance, in some cases, you’re required to give up some of your property in order to pay back your creditor’s during a Chapter 7. Consider your options carefully – bankruptcy isn’t to be entered into lightly.

Original Source: https://www.autocreditexpress.com/blog/what-is-the-income-limit-for-chapter-7/

Original Date: Jan 28 2019

Written By: Meghamn Carbary

How to Recover After Declaring Bankruptcy?


Some of the most responsible people find themselves in financial trouble.  At times these issues becomes so bad that there is simply no way they can get out from under them.  One solution for individuals that find themselves in such a situation is to file bankruptcy

Filing for bankruptcy is known to take a toll on individuals both emotionally and financially.  It takes years after filing for bankruptcy for you to rebuild your credit profile.  It is estimated that in 2017 there were upwards of 750,000 bankruptcy filings, not including businesses.  Bankruptcy is a legal action that individuals or businesses can take in order to dismiss a portion or all of an accumulated debt.  It is important to note that this is not done without meeting certain criteria and without consequence.  There are advantages and disadvantages to the bankruptcy process. It is important to understand bankruptcy, how it can impact your financial future, and just how you can survive and thrive after.

Bankruptcy is a legal process that is used to eliminate or lessen the debts that individuals and businesses are responsible for paying.  Due to the complexity of the process it is important that a bankruptcy attorney is hired.  Each bankruptcy is unique and will be evaluated as such.  Courts need to determine what the financial burden is and the ability the individual or business has to pay it. Hiring a bankruptcy lawyer is crucial because of the ramifications it has on your credit, getting new loans, and new credit. 

Bankruptcy is not always a good idea however, for many it can be the only way to achieve financial stability.  Bankruptcy can relieve you from a portion of or all of your debt.  If only a partial portion of your debt is relieved the bankruptcy court will assign a repayment budget for the remaining debt.  Once you have started the bankruptcy proceedings foreclosure on your home, repossession of your car, wage garnishments, utility shut offs, and so forth will cease.  Creditors and collection agencies will no longer be allowed to call you without a fine. 

Each bankruptcy case is unique and requires a one on one evaluation.  Some debts are commonly reduced or dismissed such as credit cards, medical bills, past utility bills, and even sometimes rent.  Others, however, are rarely dismissed through bankruptcy including child support, alimony, taxes, and student loans.  If you are no longer required to pay on your car there is a high probability that it will be repossessed. 

Once the bankruptcy process has been concluded it is time to get back on the saddle.  Let’s face it, we all need credit at one point or another.  Using credit and credit history is how many people buy homes, cars, and larger purchases. Bankruptcy will impact your credit and have a negative effect on your credit report.  You will not be able to get a loan or credit for a while after bankruptcy.  When you do start to accumulate credit again you should expect to pay higher interest rates, increased security deposits, and larger down payments.  When accumulating new credit after bankruptcy it is important to stay within your budget, pay your bills on times, and avoid accumulating debt. 

Filing for bankruptcy is not a decision that should be made without a lot of thought.  If you think you have no way out of your debt it is best to meet with a bankruptcy attorney for a free consultation to determine the pros and cons of this action in regards to your unique situation. 

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



Bankruptcy filings are at a 10-year low, but not for the reasons you might think

There are varying reasons for the light case load over the past decade

New bankruptcy filings are at their lowest point since 2007, according to new court data.

Bankruptcy courts are quiet places these days, at least compared to previous years.

Corporate and consumer bankruptcy filing rates are at their lowest point in about a decade, according to a new report from Supreme Court Chief Justice John Roberts.

September 2010 court statistics show that during the depths of the Great Recession, almost 1.6 million bankruptcy petitions were filed, with 1.53 million consumer cases making up the vast majority of the case load.

Eight years later, the amount of new cases has been cut by more than half. In September 2018, there were more than 770,000 cases filed from broke businesses and individuals looking to get their finances together through court-ordered debt-forgiveness and repayment plans. Consumers accounted for 97% of the cases.

People may not be filing for bankruptcy because it’s too expensive to do so, and they might have too few assets to protect.

In fact, bankruptcy petitions haven’t been so low since 2007, Roberts said Monday in his annual summary of the federal courts.

Yet the relative silence in bankruptcy court halls, at least when it comes to consumer cases, might not be entirely golden.

People may not be filing for bankruptcy because it’s too expensive to do so, and they might have too few assets to protect, bankruptcy experts told MarketWatch. Besides, some added, more cases might be around the corner.

“People can’t afford paying lawyers to file for bankruptcy,” Chicago attorney Lorraine Greenberg said. She cited a 2005 legislative overhaul. The Bankruptcy Abuse Prevention and Consumer Protection Act generated more work for lawyers, who were forced to raise their own rates for clients, she said.

Bankruptcy cases can be expensive

Greenberg said she charges $1,500 up front to file a Chapter 7 case, where debtors sell off their assets and can have certain debts forgiven. That price doesn’t include the court costs and fees debtors also have to incur, she said. Those prices can hover around $350, she noted.

She has about three feet of shelf space devoted to documents from people ready to file bankruptcy cases once they get the money to hire her. “I’m never going to see it. … They have no disposable income to pay their attorney,” she said.

‘Bankruptcy trails recovery. When people have something they have to protect, they file for bankruptcy.’ —Ricardo Kilpatrick, a Michigan-based attorney

One 2017 study pegged average attorneys’ costs on Chapter 7 cases at around $1,200, paid up front. Debtors typically paid around $3,200 for lawyers to file Chapter 13 cases; those fees were paid over time as a part of the case’s resolution. (Chapter 13 allows for court-confirmed installment plans to creditors.)

The flip side of the findings was the fact that older Americans are filing for bankruptcy at out-sized rates, grappling with too little income and health-care costs that are too expensive.

But Ricardo Kilpatrick, a Michigan-based attorney representing creditors in consumer bankruptcy matters, said there were a number of reasons behind the drop-off in petitions, including attorney costs. “Bankruptcy trails recovery,” he said. When people have something they have to protect, they file for bankruptcy,” he said.

Still, Kilpatrick, a past president with the American Bankruptcy Institute, said consumer filings could increase as more people return to the workforce and take on more credit.

Bankruptcy petitions on the decline.
Some bankruptcy lawyers say December has been busy

A strong jobs report Friday said the American economy gained 312,000 new jobs in December. The unemployment rate edged up to 3.9% from the 49-year low of 3.7%. The slight rise could actually be a good thing, indicating that people think it’s easier to land a job.

Kilpatrick recalled conversations last month with four separate lawyers for debtors. Three of the four told him it was the busiest December they’ve had in the last six years, Kilpatrick said.

Chicago attorney Lorraine Greenberg said the Affordable Care Act could help people avoid bankruptcy due to unpaid medical bills.

Reasons for the drop-off might not all be gloomy. Greenberg said there could be a link with increased health care coverage under the Affordable Care Act. “Less people need bankruptcy to wipe out medical bills,” she said.

Another explanation: Recession-era federal mortgage programs that enabled distressed homeowners to work out deals with lenders also helped people avoid filing for bankruptcy, lawyers told MarketWatch. Creditors “became much more accommodating on doing out-of-court work-outs,” Kilpatrick said.

Roberts’ recent report said filings “rose steadily” from 2007 to 2010, “but they have fallen in each of the last eight years.”

That slide in bankruptcy petitions largely coincides with a historic nine-year bull run on Wall Street — a streak that could be close to an end amid worries about an economic slowdown.

The slide in bankruptcy petitions largely coincides with a historic nine-year bull run on Wall Street, a streak that could soon come to an end.

But bankruptcy rates don’t necessarily mirror the country’s overall economic health. “It really has not tracked the economy exactly,” said Henry Sommer, a past president of the National Association of Consumer Bankruptcy Attorneys. Filings were high in the late 1990s when the economy was humming along and consumer credit was easy, he said.

Bankruptcies seem to more closely follow Americans’ debt-to-income ratio, according to Sommer. The figure shows how leveraged a household is, dividing its monthly debt payments by its income. Aggregate household debt to income ratios ramped up in the early 2000s and then started falling in 2008, Federal Reserve data showed.

Despite record levels of credit-card debt, households are still in a better position to pay off their debts than they were during the recession.

The $1.5 trillion gorilla

Another possible factor in the decline of bankruptcies: America’s student-loan crisis. Americans now owe $1.5 trillion in student debt, and the repayments efforts can be soul-crushing for some.

But borrowers have a difficult time legally proving the repayments are an “undue hardship,” which means filing for bankruptcy wouldn’t help them much.

“As a practical matter, it’s virtually non-dischargeable in all cases,” Sommer said of student debt. Courts won’t wipe out “non-dischargeable” debts.

And cash-strapped student-loan borrowers may not be driven to bankruptcy simply because they do not have enough money to rack up other forms of debt, like debt from credit cards, Sommer said.

In fact, consumers between the ages of 18 and 34 had fewer bankruptcies over the last decade per every 1,000 people, compared to people age 65 and older, Foohey’s research has found. “These are people who are saddled with student loans,” she said, making it tough for them to build up other assets.

Original Source: https://www.marketwatch.com/story/bankruptcy-filings-are-at-a-10-year-low-but-thats-not-necessarily-good-news-2019-01-07

Original Date: Jan 8 2019

Written By: Andrew Keshner

Bankruptcy: When There Is No Where Else to Turn For Debt Relief


You have hit the point where there is nothing else you can do, bankruptcy is the only way out of the financial avalanche that is weighing you down.  You tried cutting back, you sold what you could, you have been working day in and day, and still find that you are not making a dent in your debt let alone continue to live a feasible lifestyle.  It is a conclusion that no one wants to get to because it comes with the stigmatism of failure.  The shame that comes with filing bankruptcy maybe real to you, it may be what you are feeling and experiencing however, you should know that there is no disgrace in finally deciding that you need help.  This help can make all the difference in your future.  A future that your past self wasn’t considering when mismanaging income vs debt.

Filing for bankruptcy can be quite confusing.  It is a very serious legal matter that should only be done with proper representation from a bankruptcy attorney.  Here are some things to take into consideration as you take the first steps towards financial freedom.

Bankruptcy is a legal proceeding that puts you in front of a judge where you explain that you can no longer financially afford to pay your debts.  The judge will work with trustees to look into your assets and liabilities to decide if the debt should be discharged or there are means to repay a portion or all of it.  If the court concludes that you cannot payback these debts, they will declare you bankrupt. 

Although bankruptcy can stop foreclosure, repossession, and garnishment of wages it doesn’t cancel all of your debts. Bankruptcy does not clear:

  • Student loans
  • Government debt: taxes, late fees, and penalties
  • Child support
  • Alimony
  • Expenses purchased right before declaring bankruptcy

Once you have filed the paperwork for bankruptcy, all creditors receive notice that they can no longer take steps to collect money from you.  Creditors will no longer be allowed to call, write, or take legal action of their own against you once the bankruptcy process has begun. 

There are many types of bankruptcy that can be filed both consumer and commercial.  The most common consumer bankruptcies files are Chapter 13 and Chapter 7.

In chapter 13 bankruptcy the court will approve a plan for you to repay some or all of your debt over the span of three to five years.  You will keep all of your assets and follow a strict timeline and monthly payment schedule set forth by the court.

In chapter 7 bankruptcy the court will decide what reasonable assets are vs “luxury” items. Things will be sold to pay off debt if they are deemed over and above what is reasonable.  Once you have paid back as much as is thought to be reasonable the remaining unpaid debt will be erased. 

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



Why 20 Million Americans Should File for Bankruptcy

A few years ago, Chris Saltzburg found himself at the intersection of an expensive divorce, the loss of his job and the rapidly declining health of his mother. The debts started piling up. American Express seized his bank account. After making a six-figure salary for most of his career as a model, Saltzburg was broke.

He began researching his options and found that filing for bankruptcy made the most sense. But the process seemed incredibly daunting, and he couldn’t afford to hire a lawyer. Saltzburg’s situation is all too familiar — it happens to people all over the country every day. While many fear the unknown or make false presumptions about filing for Chapter 7 …

More than 20 million Americans would benefit from declaring bankruptcy.

But in 2017, fewer than 500,000 actually did, according to a data analysis by Upsolve, a nonprofit software platform that helps people file for Chapter 7. Saltzburg came across Upsolve while looking for bankruptcy resources, and the company guided him through his filing, free of charge.

Rohan Pavuluri, the founder of Upsolve, was inspired to start the company two years ago after volunteering with Harvard Law School’s Access to Justice Lab, which focuses on finding legal solutions for people who can’t afford lawyers. While developing a method for assisting in bankruptcy filings, Pavuluri quickly realized that tech could be the solution. He joined forces with bankruptcy attorney Jonathan Petts, who helped optimize Upsolve’s toolkit and resources, while the rest of his team coded the platform. Today, users who sign into the app are prompted to upload pay stubs and tax forms, which are then autofilled into their Chapter 7 filing. Other information is autofilled in by a credit check.

Pavuluri zeroed in on bankruptcy because he realized its potential was vastly underutilized, particularly for low-income Americans. Bankruptcy wipes their slate clean, improves their credit scores and can help them get a job. “It’s one of the most powerful poverty-fighting tools around, and we aim to make it accessible at scale,” Pavuluri says. Especially because the reasons people end up in debt resonate with most Americans. “The No. 1 reason [for filing bankruptcy] is medical debts,” he says. “Divorce and people who are victims of an abusive partner are also common.” By offering a free service, Pavuluri is helping people who may never have known that Chapter 7, a type of bankruptcy that liquidates a person’s existing assets to pay their debts, was an option. Currently, the organization is funded through philanthropy — the Chan Zuckerberg Initiative is one of its donors — as well as through the government. It also asks Upsolve clients who’ve had successful outcomes to donate a small amount if they can.

Bankruptcy filings go up when people get their tax refunds.

Michelle White, professor of economics at the University of California, San Diego

In 2005, Congress made changes to the U.S. Bankruptcy Code in an attempt to make it more difficult for some consumers to file for Chapter 7. The Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) now requires anyone filing to meet certain criteria: Your income must fall below the median income for your state, and you must also pass a “means” test that calculates your debt to determine if you qualify. Before BAPCPA, anyone could file for bankruptcy, regardless of their income. “You could be wealthy and still file for bankruptcy — there was no income cap at all,” says Michelle White, professor of economics at the University of California, San Diego, who has studied bankruptcy since the 1990s. Some celebrities even filed for Chapter 7 before the code change went into effect. R&B singer Toni Braxton filed for Chapter 7 bankruptcy in 1998, alleging she was broke after being insufficiently paid by her recording label at the time, LaFace Records.

When White first began studying bankruptcy, she too was surprised at the number of people who not only qualified but would benefit from filing. It’s understandable, though, White says, that so many people don’t file. “The deterrent is usually the cost [of legal fees],” she says. “Bankruptcy filings go up when people get their tax refunds.” Surprisingly, the number of Americans who could benefit from filing for Chapter 7 is slightly higher than it was prior to BAPCPA. As of May, consumer debt levels were predicted to reach an all-time high by the end of 2018, according to consumer lending company, LendingTree. “Now, more than ever, people need the lifeline of bankruptcy to get back on their feet,” Pavuluri says.

Still, there are some financial situations that can’t be helped simply by filing for bankruptcy. Sometimes Pavuluri has to turn away people who don’t qualify for Chapter 7, usually because they’re homeowners or they earn above the median income, and direct them to a local attorney.

But the people who do file aren’t the only ones who could benefit. A crop of Americans with improved credit scores and the chance to increase their incomes could drive further economic growth. If Upsolve and other bankruptcy advocates can move the needle on the number of Americans who file for Chapter 7, the whole country would likely reap the benefits.

Original Source: https://www.ozy.com/acumen/why-20-million-americans-should-file-for-bankruptcy/90717

Original Date: Nov 29 2018

Written By: Molly Fosco

Five Things To Not Do Before Filing Bankruptcy

Believe it or not there are some things that you should not do before you file for Chapter 7 and 13 bankruptcy.  Finding debt relief in bankruptcy is not as simple as filing a few pieces of paper, appearing before a federal judge and whoosh all of your bills are gone.  There are a lot of considerations that go into the act of declaring bankruptcy and seeking relief from your debt.

One of the first steps to take when considering the different options available to you is to determine your totally debt.  When you are in a situation where you are experiencing stress financially, it may be tempting to do whatever you can to free yourself from that pressure.  However, bankruptcy discharge is a very serious, legal action therefore it is crucial that you understand what is going to happen before, during, and after bankruptcy.

Don’t Rush

Bankruptcy is a federally governed method of debt elimination.  There are limitations on how often you can file for bankruptcy.

  • Chapter 7 bankruptcy discharge is something that can only be done once every eight years.
  • Chapter 13 bankruptcy discharge is something that can only be done once every six years.

If you are considering bankruptcy due to medical debt but are still experiencing severe health issues it is probably important to wait until your health has stabilized before filing.  The last thing you want to do is to find yourself accumulating more and more debt after you have already discharged your initial debt. There are a number of problems that crop up when bankruptcy comes into view like unemployment, foreclosure, eviction, and car repossession.   It is important to file bankruptcy at a point when you know you are going to be able to get back on your feet once a discharge is granted.  The last thing you want is to have your debt cleared only to find yourself swimming in debt a year later when no relief can be given.

Don’t Wait Too Long

There are times however that bankruptcy can’t wait and that it is in your best interest to file for bankruptcy right away.  If a wage garnishing is in place, it is important to file sooner rather than later so that you have more money to pay bills.  Filing for bankruptcy in a timely manner is also important if a creditor has a lawsuit against you.  Your bankruptcy attorney will want to make sure to look at the complaint to see if it includes any allegations of fraud.  If it does, the matter will go into judgment and you likely won’t be able to wipe out this debt in bankruptcy.

A creditor that has won money in a judgement against you, the lien that accompanies it allows the creditor to take wages directly from your check, attach to your bank accounts, repo cars, and foreclose on your home in an effort to reclaim the money that is owed.  If you file for and receive a bankruptcy discharge before the creditor wins a case against you, filing bankruptcy will stop the lawsuit in its track and wipe out that debt as well.

Don’t Drain Retirements Account

Retirement funds are protected from bankruptcy.  It is important not to withdrawal funds from your retirement accounts in order to pay off debts.  Before taking money from any type of account that is labeled for retirement speak with a bankruptcy lawyer to figure out the best option for you.  Most often you will find that your attorney will recommend that you do not deplete your accounts to better your financial situation.

Don’t Provide Information That Is Inaccurate

It is crucial to be completely open when it comes to your bankruptcy paperwork.  You are required to provide accurate information on your paperwork including your assets, debt, income, expenses, and financial history.  Misrepresenting information could lead to penalty of perjury.

Don’t Add in New Debt or Move Assets

Any debt that is incurred seventy to ninety days before filing bankruptcy paperwork, unless it is a necessity, a creditor may object.  Debt within this time frame may be considered fraudulent. As a rule, don’t take out cash advances or use credit cards to buy luxury items.  It is also critical that you don’t try to hide or move assets for safekeeping before filing for bankruptcy.  If you have sold property to pay for expenses before declaring bankruptcy it will be important to document the way in which you spent the money to pay for necessities.

As with any legal procedure it is important that the rules are followed to prevent any sort of confusion when it comes to discharging your debt.

 

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

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.