If you are planning to file a personal bankruptcy, it is important to understand that you have different types of debt which are treated differently in your filing. The main classifications of debt are priority debts, secured debts and unsecured debts. Below is a general explanation of each: Priority Debt The law provides certain types of debt with priority, which generally means that this type of debt must be paid in full and it is typically paid before other types of debt are paid. The most common examples of priority debts are taxes and child support payments. Secured Debt A secured loan is one in which the borrower pledges an asset as collateral to the lender. This type of transaction grants the lender the authority to foreclose or seize the property pledged as collateral if the borrower defaults on the loan. The collateral can then be sold or auctioned by the lender and the proceeds applied to pay all or a portion of the borrower’s…Read More
If you are trying to decide whether bankruptcy is the right debt relief option for you, we can help. Let us review your individual finances and help you understand all of your legal options. Below are also a few tips to consider prior to filing your Chapter 7 or Chapter 13 case: Work with a seasoned bankruptcy lawyer: Selecting the ‘right’ attorney is one of the most important decisions you can make. You want to work with somebody you trust and that you feel confident can handle all of the issues that may arise in your filing. Use your initial consultation to ask questions and see how well the lawyer answers them. Be sure you also discuss how the law firm will charge you and what legal services will be included for that fee. Continue making your mortgage payments: If you want to keep your home, you should remain current on your house payments. This is also true for your other secured loans, such as…Read More
Many married couples who are struggling financially seek debt relief by filing for bankruptcy. Once the decision to seek bankruptcy protection has been made, you must also decide whether one or both spouse should file. Although every case is different and you should confer with a knowledgeable bankruptcy attorney, below are a few factors to consider in deciding whether to file jointly: Debt The amount of debt you have is one of the most important factors in determining how to approach your bankruptcy filing. If most of a couple’s bills are held only by one spouse, a single filing by him or her could be a good option. However, this can be tricky since many debts are marital or joint debts and if only one spouse files bankruptcy, he or she will only be permitted to discharge his or her liability for the marital debts and all separately-held debts. This means that the non-filing spouse will still be obligated to pay for the full amount…Read More
A common concern our clients have when they are considering filing for bankruptcy is whether they can keep their vehicle. Below is a quick summary of how vehicles are treated in Chapter 7 and Chapter 13 filings: Chapter 7 When you file a Chapter 7 case, there are three primary options for how to handle your vehicle: Surrender: If you cannot afford your car payments or you no longer need it, you can voluntarily surrender it to your lender. The Chapter 7 process requires the lender to treat the surrender as payment in full because any deficiency balance that remains due on the vehicle is treated as unsecured debt, which is discharged or eliminated in your case. Redemption: If a debtor has sufficient funds to make a lump sum payment equal to the vehicle’s value, it can be redeemed. It is important to understand that what your car is worth is often much lower than what you owe on it. In other words, you may…Read More
If you do not have a power of attorney (POA), this blog is for you! A POA is a written document authorizing another person to act on your behalf in business and/or personal matters. It is important for you to take action to get a POA to help ensure you and your finances are protected if something should happen to you. Nobody knows what their future holds, so creating a POA while you are able to do so is essential. You can appoint a trusted individual to act as your agent or attorney in fact, which means they can make personal and/or financial decisions on your behalf if you become unable to do so for yourself. If it makes you nervous to consider granting this type of authority to another person, you should understand that a POA has a fiduciary obligation to you. In other words, the law requires your POA to act in your best interests and in accordance with your wishes at all…Read More
In 2005, the Bankruptcy Code was amended. Numerous changes were made, including the addition of the “means test,” which is a mathematical formula that is applied to a debtor’s finances to determine whether they qualify to file a Chapter 7 bankruptcy. The test is designed to determine if a debtor is abusing the system by filing for debt relief when the debtor actually has the ability to pay his or her debts. If you pass the test, you are allowed to file for debt relief under Chapter 7. If you fail the means test, the court assigns a “presumption of abuse” to your case and you have the burden of proof to overcome this designation. Even state has a “median income” for the applicable size of your household. If a debtor’s income is less than the state’s median income, the means test is not applied. Additionally, if the debtor is a disabled veteran or the majority of the debtor’s debt was incurred while serving active…Read More
If you have more than one mortgage loan on your home and you are struggling to pay your bills, it is time to consider obtaining relief from your debt by filing a personal bankruptcy case. A significant benefit of filing a Chapter 13 case is a procedure commonly referred to as “lien stripping.” It allows a debtor with multiple mortgages and a home that is “underwater” to treat inferior mortgage liens as unsecured debt. The Following Is An Example Illustrating How Lien Stripping Works: John owns a house that is worth $200,000. John owes $225,000 on his first mortgage and $25,000 0n his second mortgage. Although John has a steady job, he cannot afford to pay both mortgages in addition to all of his other bills. John decides to file a Chapter 13 case and argue that his second mortgage should be treated as unsecured debt in his Chapter 13 repayment plan because there is no equity in his home to support the second mortgage…Read More
One of the most powerful tools a debtor obtains by filing for bankruptcy protection is the automatic stay. The stay goes into effect as soon as you file your bankruptcy petition and it prohibits creditors from taking any further collection actions against you while your case is pending. Thus, the stay can be very helpful when you are facing a financial emergency such as: Foreclosure: If your home is going through foreclosure, filing a Chapter 7 or Chapter 13 can temporarily halt it. Depending on your financial situation, you can use this time to negotiate with your mortgage lender or it at least allows you to remain in your home for a few additional months. In a Chapter 13 filing, you can catch-up your delinquent mortgage payments through your repayment plan. Eviction: If you rent your home and your landlord is threatening to evict you, filing a bankruptcy can help. However, it is important to understand that you must file your bankruptcy case before your…Read More
Most individuals who file for bankruptcy do so under Chapter 7 or Chapter 13. While both types offer you comprehensive relief from your debt, they each have advantages and disadvantages. Thus, it is important to confer with a knowledgeable bankruptcy attorney to determine which type of filing is right for you. In fact, a lawyer can review your unique financial situation and help you understand what type of bankruptcy you qualify for and how it will impact your life. Chapter 7 In order to file for Chapter 7 protection, you must pass the means test. The “test” is actually a mathematical formula that the bankruptcy court uses to determine whether an individual is abusing the system in an attempt to discharge debt that he or she can afford to pay. We will discuss the means test in future blogs, so please check back or contact our office to schedule an appointment. The greatest advantage of filing a Chapter 7 is your ability to discharge or…Read More
If you are parents of minor children, one of the most important decisions you can make is who to appoint as the guardian of your children if you both should die or become incapacitated. It is natural for parents to struggle (and therefore postpone) with this very difficult decision. No parent wants to think about somebody else raising their children. To make matters worse, the individual that may be best for raising your children may not be the wisest choice for managing their finances for them. Most parents include the appointment of a guardian for their children as part of their estate plan. A guardian is the individual who will have physical custody of your kids and raise them until they are adults. If your estate plan includes a trust, you will also need to name a guardian (also called a trustee) of the assets you leave to your children. The person you name to be the guardian of your children and the person you…Read More