Category Archives: Pre-Bankruptcy

Inheritance and the 90 Day Rule

Personal Bankruptcy Story
Fragile X Syndrome Inheritance - Mother Two

Fragile X Syndrome Inheritance - Mother Two (Photo credit: Image Editor)Personal Bankruptcy Story

It is not as uncommon as it may seem that a person who is contemplating filing for bankruptcy protection receives a small inheritance right at the time the debtor feels the need to file. Consider these excerpts from this personal bankruptcy story shared as a blog on a bankruptcy forum recently: “I have known for a while that I will need to file Chapter 7. I had a medical condition with my kidneys that just racked up thousands worth of medical bills. I can’t pay it… My grandfather passed this past September, and he left me a modest inheritance of about $6000.00. The estate will close in April. I am using this money (EVERY CENT) to pay off some of my student loans…The reason I am choosing to pay off my loans with this money is because they are the most burdensome and troubling debt I have. They can never go away and have no consumer protections. My monthly payment is 50% of my income, and it is private, so it cannot be consolidated and the banks will not work with me…How long do I need to wait to file after getting the inheritance and paying the student loans off?”

90 Day Rule

This true personal bankruptcy story is a classic illustration of how a small inheritance can have implications for bankruptcy’s 90 Day Rule. This rule underlies bankruptcy preference law to ensure that a debtor who is assumed to be insolvent uses their limited financial resources to pay their creditors equitably, meaning fairly. In other words, if a debtor has insufficient funds to pay all of its creditors in full, it should not pay some of its creditors to the exclusion of others. For this reason, bankruptcy law has prioritized the order in which unsecured creditors are to be paid.

When you put the 90 Day Rule into practice, the law is somewhat discretionary. It allows a bankruptcy court trustee to recover preferential payments made during this 90 day time frame to bring the payment back to the bankruptcy estate, but it does so at the discretion of the case trustee. If challenged, the bankruptcy court judge ultimately decides whether thepayment was preferential.

Exception to the Rule

Exception to the Rule

Image via Wikipedia

There always can be an exception to any rule. An exception to the 90 Day Rule occurred In re Reep, a 2010 case out of Ohio. A mother loaned a grown daughter $7,000 earmarked to pay off a student loan. She did so within 90 days of the daughter’s bankruptcy filing. The trustee ceased the payment as preferential payment. The Mother petitioned the court in a challenge and won because the loan was earmarked, a stipulated loan owned by the Mother and not the debtor. The Mother won the case, ant the trustee had to give the money back to the student loan company.

Conclusion on Illustrated Question

The question raised by the inheritance illustrated story above most likely involves a preferential payment because the debtor, who was a recipient of inheritance, owns the money being used, and the debtor plans to use the inheritance to pay off a specific loan within the 90 Day Rule to the exclusion of medical bills owed.

It is complicated cases like these that should inspire you to consult with an experienced bankruptcy lawyer if you are considering filing for bankruptcy.

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How Long Do You Have to Live in an Area in Order to File for Bankruptcy?

Many of you who are first time filers have all kinds of questions to ask about bankruptcy. One question that keeps cropping up is, “How long do you have to live in an area in order to file for bankruptcy?

Like most bankruptcy questions, since bankruptcy laws are so complicated, the answer is not as simple as the question seems.

The state in which you should file is a little more simple. Sub-chapter 1408 of the Title 11 U.S. Bankruptcy Code determines which state you should file. This statute states that you can file only in the state in which you have had your domicile, residence, principal assets, or principal place of business for the majority of the last 180 days.

The simple answer, then, is that someone should file bankruptcy in the state they have lived for the greater part of 180 days. That simply means 91 days or better, but the simple answer may tend to get more complicated.

The complexity of the law comes when you understand what the law says about legal venue, or the proper place for legal action. The venue law gets more complicated when you frequently move a lot.

For instance, if you lived in two states for 60 days each and moved to another state, the state you lived 61 days would be the state of venue for your filing.

To top it off, bankruptcy cases are federal in nature, therefore, the jurisdiction of bankruptcy filings are also federal. Many federal courts may turn down or transfer a case if it is filed in an improper venue, while others may not.

Depending on which state you presently reside, you may be allowed to file in that state until you have resided in another state for more than 90 days.

If you plan on moving, even if you have not reached a time line that will affect the status of venue, you might want to talk to a bankruptcy lawyer who can help you better understand bankruptcy laws in your current situation.

That includes answering questions about how long you need to live in an area before you file bankruptcy.

Points to remember when consulting with an attorney is that it might take he or she more than the 91 days in order to prepare bankruptcy documents for you, depending on how busy that particular lawyer will be.

In addition, if you move away during this time, you may have to return to the state in which you filed in order to attend the first court hearing. That meeting is commonly called the 341 Meeting, or the First Meeting of Creditors, and it is a requirement of bankruptcy law you attend. Failure to attend without good reason, and living out of state might not be considered a good reason, may be grounds for dismissal.

If you determine you are in need of relief from the stress associated with debt and you live in or around the metropolitan areas of Portland or Vancouver, Oregon, contact us here today at www.bankruptcyhome.com . We will help you find a bankruptcy attorney in your area that will help you with any questions you may have on bankruptcy law.

 

What is debt settlement?

Bankruptcy is a legal process which allows debtors, who are unable to repay debt owed to a creditor, to either discharge the debt or restructure some of their debt payments.  It is generally considered a last resort, because of the negative impact it has on the credit score of the person declaring bankruptcy, because it can force the person to liquidate assets he would prefer to keep, and because a bankruptcy can stay on your credit report for up to 10 years.

Is debt settlement a good alternative to bankruptcy?

What if you do not want to file for bankruptcy? Is there another way to resolve debt you cannot afford to pay? Yes, through debt settlement. Debt settlement allows debtors to negotiate with the creditor to pay an amount less than the total amount owed. A creditor may be willing to accept debt settlement if they believe you are unable to pay the debt in full and may resort to declaring bankruptcy, in which case the creditor may have to wait in line with other creditors and possibly receive nothing. 

Debt settlement may be preferable to bankruptcy because it will not impact your credit rating or result in any additional negative impact on your credit report. For a creditor to consider a debt settlement, they generally will want to see documentation that proves your financial hardship.  This means you may have to provide pay stubs, bank statements, and possibly other financial documents to prove to the creditor that you cannot afford to pay the amount in full.

If you do not wish to provide evidence of your financial hardship to the creditor, the creditor may still accept a debt settlement proposal, but it will usually be for a higher amount than if you are willing to provide evidence to establish financial hardship.

Some creditors may allow for the structuring of a debt settlement in an installment plan rather than as a lump sum payment, but generally, a creditor will accept a lower amount if you offer a lump sum payment rather than an install plan spread out over several months.

Any amount of debt forgiven by a creditor is generally considered to be income for tax purposes, so you will have to pay taxes on the amount forgiven when you file your federal income tax return in the year the debt forgiveness occurs.

Housing news: sales showed a spike, but prices still going south

You have to pay attention to the entire economy–especially if you’re considering whether to invoke bankruptcy protection

April 27, 2011

By Mike Hinshaw

Last time we looked at various economic-indicator strategies, including the seemingly offbeat idea of following the share prices and sales of leading underwear manufacturers. Besides rising fuel and grocery prices we discussed disturbing numbers regarding sales of new homes.

March new-home sales looked good

The day after that posted, The New York Times reported that “Buyers signed contracts in March at a seasonally adjusted annual rate of 300,000, an 11 percent increase from the month before but down from 384,000 in March 2010, the Census Bureau said Monday.”

Actually, the cited report is a joint release from the Census Bureau and the Department of Housing and Urban Development.

Reportedly, new-home sales in February were the lowest since 1963, when official record-keeping began for such data.

But foreclosures still a major problem

The April 25 NYT article continues:  “In March 2005, when a lack of income or savings was no deterrent to getting a dream home with granite countertops and a walk-in pantry, families and investors flocked to new homes at an annual rate of 1.43 million houses.

“The millions of homes built during the boom have created a drag on the current market as the owners surrender them to foreclosure. Builders cannot compete against relatively new construction offered by banks for large discounts.”

Where do people move? Nearly half of properties labeled ‘distressed’

An April 26 post on a site that tracks people who move cites a report that says “Nearly half of housing market is made up of distressed properties“:

A new report indicates approximately half of the national housing market is made up of distressed properties, the latest indication that the real estate industry has yet to fully recover.

According to a Campbell/Inside Mortgage Finance Housing Pulse Tracking Survey, the distressed property index rose to 48.6 percent in March, the highest level the indicator has reached in the past 12 months.

Despite the increase in foreclosed homes, some real estate agencies have reported more people are moving, as RE/MAX recently announced home sales increased by double-digits last month. However, that’s not the case for everyone, as a real estate agent recently told Campbell Surveys.

“Investors and first time homebuyers are fearful of what is going on nationally,” said a California real estate agent. “Both the gas prices and the weather influence the local market.”

‘Home prices generally falling’

More troubling, an April 26 NYT article says that regardless of any monthly gains or spikes in sales, home prices generally are still falling. “Housing prices slid back in February to their lowest level of the downturn, fresh proof — as if any were needed — that real estate remains one of the most troubled sectors of the economy.

“The Standard & Poor’s Case-Shiller Home Price Index for 20 metropolitan areas dropped 1.1 percent from January, S.& P. said Tuesday.

“By the barest of margins, the index failed to plumb new depths. It is now at 139.27, essentially the same as the low of 139.26 that it reached in April 2009.

Housing prices are falling even though banks have been pulling back on foreclosures, which generally drive neighborhood prices down. They are falling despite low interest rates, which make houses more affordable. And they are falling even though they have already dropped by a third from their heady peaks in mid-decade.”

Too much house?

Most of us who are paying attention realize the mess that the housing sector is in; as alluded to earlier, by the “granite countertop” reference, many of us believe that people are, in general, all-too ready to move into more house than they can sustain.  And by that, I intend not only the obvious mortgage payment but also routine maintenance: Gated communities, sometimes. Custom roofs, too often. Trendy kitchens, etc. When you stretch your budget to the limit to barely cover the purchase of a boat, a horse, a house…but have neither the knowledge nor the funds to maintain your purchase? That’s a problem.

Peddling toxic mortgage packages: ‘Foreclosuregate’

On the other hand, it’s only fair to remember the outlandish, otherworldly climate that built up like giant steamclouds, when everybody and her brother in the mortgage industry was actively peddling “mortage products” by any and every technique known–some invented on the fly–backed up by investor demand (read: Wall Street), with their credit derivative swaps and CDOs and whatever other alphabet-toxic-soup product the “financial engineers” could devise.

Put another way, does anybody recall the last time every Attorney General in the United States of America joined forces on a common cause, as they have done in response to  what has become known as “foreclosuregate” ?

Seriously–I’d like to know of any event that has brought all 50 states’ attorneys general together in an attempt to protect consumers.

CEO pay versus worker pay

While in this mode, let me add an endnote in opposition to the growing plutonomy.  The following is from a Milwaukee-based site, reporting about the ever-increasing gap between workers’ pay and CEO pay:

By the time he broke for lunch on his first day of the new work year, Johnson Controls Chairman of the Board, President and Chief Executive Officer Steven A. Roell had already banked more salary than the average Wisconsin worker would earn all year. Roell earned $17.5 million in compensation in 2010, making him the state’s highest paid CEO, a new report shows.

The gap between executive pay and rank and file wages has never been greater or easier to document than it is today. In fact, the ratio of executive pay to worker salaries must be reported in the proxy statements of publicly traded corporations according to reform legislation passed by Congress in 2010 in the wake of the financial crisis.

Anybody trying to make a living should take these factors into mind: if you’re trying to sell a house, or trying to buy a house; if you’re trying to hire wisely, or trying to find a decent job.

If you’re on the brink on bankruptcy, you should pay special attention. If you’ve only been kinda’ sorta’ thinking about bankruptcy protection, stay tuned. We’ll keep reporting the latest news.

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Whatever you do, before making major, life-changing financial decisions, consider consulting a trained, experience attorney. If you think your home is a candidate for a short sale, be sure to ask your attorney about it–it could greatly affect your standing and strategy for starting over.

For bankruptcy basics, please see:

Bankruptcy FAQ

Introduction to Chapter 7

Introduction to Chapter 13

Historic decision may help those facing bankruptcy

Mortgage lenders facing stiff reprimands, possibly penalties & fines

April 14, 2011

By Mike Hinshaw

Anyone who’s considering or who has filed for bankruptcy protection needs to be aware of the latest news in the ongoing probe of the biggest U.S, mortgage lending banks. This is especially relevant for those who have been driven to bankruptcy protection, or the verge of filing bankruptcy,  in order to save their homes.

Big banks’ bottom lines: 14 major players

Let’s check in with one of my faves, Ms. Diana Olick, from CNBC,com:

It’s not the big penalty from the fifty state attorneys general, but it will hit big bank bottom lines in a big way.


The Office of the Comptroller of the Currency, the Federal Reserve and the Office of Thrift Supervision released enforcement action against fourteen major bank/servicers in the form of consent orders.

Bank of America, JP Morgan Chase, Ally Financial, Wells Fargo, SunTrust, Citibank, HSBC, MetLife, PNC, U.S. Bank, Aurora Bank, EverBank, OneWest Bank and Sovereign Bank will all be hit with no fewer than 16 new requirements for mortgage servicing and loss mitigation.

They will also have to overhaul oversight of third-party vendors, including lawyers, who provide foreclosure services.

“These reforms will not only fix the problems we found in foreclosure processing, but will also correct failures in governance and the loan modification process and address financial harm to borrowers,” according to acting Comptroller of the Currency John Walsh.

Regulators say fines to follow; critics say actions too lenient

An April 14 piece in the LA Times says,”The four major bank regulators said their actions, to be followed by fines, wouldn’t interfere with a wider-ranging investigation conducted by a coalition of state attorneys general and other federal agencies, including the departments of Justice, Treasury and Housing and the Federal Trade Commission.

“The bank regulators have been criticized for failing to stop unsafe lending during the housing boom and for pre-empting state attempts to rein in predatory lending. Their orders Wednesday drew immediate criticism from consumer advocates and members of Congress who said the new measures didn’t go far enough.”

Atlantic says fines should have accompanied consent order

Indeed, an April 13 article in The Atlantic posits yet another slap-on-the-wrist scenario. Yeah, sure–the article argues, of course “All the big names are there” and the action “also applies to two third-party service providers: Lender Processing Services and MERSCORP.”

But, no fines were handed down. Says the Atlantic:

Simply looking at the bullet point titles for the enforcement actions gives you an idea of how mild the penalties must be:

  • Compliance program
  • Foreclosure review
  • Dedicated resources for communicating with borrowers/single point of contact
  • Third-party management
  • Management information systems
  • Risk assessment

Would those enforcement subtitles have you shaking in fear? They all attempt to ensure that foreclosures are processed accurately and fairly in the future, but they fail to penalize banks and servicers for any wrongdoing that may have occurred in the past. This is akin to the OCC saying, “We know you guys made some mistakes, but let’s put the past behind us: the important thing is to do better in the future.”

‘Strongest response so far to bankers’ greed’

An April 13 article at CNNMoney.com is headlined “Fed says it will fine banks for foreclosure mess.” But the reporter doesn’t seem convinced: “The move is the strongest federal response so far to the bankers’ massive, greed-driven misconduct during the crisis of the past half-decade. It comes after a months-long federal review of the banks’ handling of mortgage paperwork and foreclosure actions.

“But in a telling omission, the regulators didn’t say how big the fines they will assess might be — making it impossible to judge whether the action amounts to more than a slap on the wrist.”

Fed PR: ‘monetary sanctions are appropriate’

But the article also quotes from a Federal Reserve press release, which contains the following passage:

The Federal Reserve believes monetary sanctions in these cases are appropriate and plans to announce monetary penalties. These monetary penalties will be in addition to the corrective actions that the banking organizations are expected to take pursuant to the enforcement actions.

The enforcement actions complement the actions under consideration by the federal and state regulatory and law enforcement agencies, and do not preclude those agencies from taking additional enforcement action. The Federal Reserve continues to work with other federal and state authorities to resolve these matters.

Senate probe of Goldman Sachs yields ‘explosive allegations’

In related news, an April 15 MarketWatch piece says, “A Senate subcommittee has accused Goldman Sachs of selling poor quality mortgage securities it bet against and is pushing the Justice Department to investigate Goldman CEO Lloyd Blankfein’s testimony before Congress.

“The explosive allegations — which are related but expand on the case Goldman  has already paid $550 million to the Securities and Exchange Commission to settle — are contained in a 635-page, bipartisan congressional report revealing new details about Wall Street’s role in the financial crisis released late Wednesday.”

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Whatever you do, before making major, life-changing financial decisions, consider consulting a trained, experience attorney. If you think your home is a candidate for a short sale, be sure to ask your attorney about it–it could greatly affect your standing and strategy for starting over.

For bankruptcy basics, please see:

Bankruptcy FAQ

Introduction to Chapter 7

Introduction to Chapter 13

When a Creditor Attaches a Lien on Your Homestead

This personal bankruptcy story was posted on the internet in February of 2011 as comments in a bankruptcy discussion: “Judgment against homestead owner — Lien on excess value of homestead property. A judgment against the owner of a homestead shall become a lien on the value of the homestead property in excess of the homestead exemption from the time the judgment creditor records the judgment with the recording officer of the county where the property is located. Question: [If] I am correct in reading the above, the judgment lien does not attach to the homestead until a person has surplus equity above the 125k allowed by the homestead act?”

The debtor in this personal bankruptcy illustration wants to know what happens to a judgment where the creditor has attached the judgment as a lien on a homestead. Every state has their own homestead exemptions, and each state determines how long the attachments as liens on homesteads can last. State laws also determine how much interest a judgment can also attach to the principal. After a judgment is rendered, the creditor can go down to the courthouse and attach the certified legal documents that particular state accepts as proof in the records that there is a lien placed on the property from a judgment rendered in the courts. Usually, the lien has a beginning date of attachment, the principal owed, and the percent of interest allowed on the unpaid balance if any, normally so much per year in simple interest. Surplus equity has nothing to do with attaching a lien from a judgment on an asset. A judgment attachment is most often a secondary lien that allows the creditor to receive money from the sell of the asset after primary lien holders have been paid and before the owner realizes any equity. If the asset does not sell for more than what the primary loan can be satisfied, the secondary lien holder gets nothing. If the asset is clear of any liens when the attachment is made, the new lien holder becomes the primary holder of record and will be first in line to receive money if the asset is sold or title transferred. So, even if the homeowner refinances, before a mortgage company could gain a title for a secured loan, the lien would have to be removed by satisfying the conditions. The holder of the lien would be paid off in full including any interest due as a part of closing on the new loan.

Homestead exemptions are usually best understood in relationship to filing for bankruptcy protection. Judgment liens are not affected by homestead exemptions unless the owner of the homestead files for bankruptcy protection. The moment you file a bankruptcy, a judge will order all collecting actions to cease, an important feature called the automatic stay. The automatic stay, applicable to all types of bankruptcy filings, means that the mere request for bankruptcy protection automatically stops and brings to a cessation certain lawsuits, foreclosures, utility shut-offs, evictions, repossessions, garnishments, attachments, and debt collection harassment. That means all creditors will have to go through a US Bankruptcy Court trustee in order to deal with their debtors.

When an owner files for bankruptcy, he or she is allowed to keep the homestead exemption in full, and depending on what type of bankruptcy filed, any unsecured debt like the attachment of a lien through judgment may be rendered non-collectable by the bankruptcy court. If this occurs, the homeowner must go back to the courthouse where the lien was attached and have the attachment legally removed. This normally is a simple process requiring legal paperwork from the bankruptcy court orders and filing fees.

If you are in doubt about complicated bankruptcies laws, common sense indicates you will probably need a bankruptcy lawyer in order to properly understand how these complex laws may apply in your situation. If you determine you are in need of relief from the stress associated with debt and you live in or around the metropolitan areas of Albuquerque or Santa Fe, New Mexico, contact us today. We will help you find a bankruptcy attorney in your area that will help you with any questions you may have on bankruptcy law.

Silence Is Not Always Golden In The Valley

This personal bankruptcy story was posted on the internet in January of 2011 as comments in a bankruptcy discussion: “My father still hasn’t filed for bankruptcy and hasn’t gained employment. It’s really seeming very hopeless on the employment side and his depression/unmotivated attitude is keeping him from proactively searching for jobs. And now on top of it all. He totaled my car that I was storing at his apartment until he had a job so he could insure and drive it. I own the car and it’s uninsured. The other persons insurance is saying they will come after me since I’m the owner. I have nothing and don’t really know what to do. There’s a court date next Monday and I’m not sure if I should go or not. Would filing for Bankruptcy now help at all for this?”

The debtor’s good son in this personal bankruptcy illustration has previously asked for advice on whether his father should file bankruptcy or not. His father has no assets or income, and is disabled to boot. The son is taking care of him paying the current basic living expenses- rent and utilities, while the father lives on food stamps. Bill collectors are jamming the airways and mail system trying to collect from the judgment-proof father. In this update, the son wants to know if it is time to file for bankruptcy on behalf of his father after the father totaled his car. The son is thinking of opting out of the court scene to defend himself. The son appears to possess very little assets, but he does have income to protect. Sometimes, being silent is not always golden.

Filing for bankruptcy protection is really designed to protect enough of your assets to give you a fair try for starting over. If you absolutely have no income or assets, as is the case of the father, you are truly judgment-proof. That means creditors can get judgments on you all day long, and there will still be nothing they can get. That also means that there is really no reason to file for bankruptcy in a case like the father until he has something to lose. Once you file for bankruptcy, you have to wait up to 8 years before you can file again.

The son, on the other hand, has something to lose. He could have his wages garnished if the insurance company wins a judgment, and he lives in a state that allows garnishment. He also might have liens attached to any real property he owns, like his car. That means when he sells the car, he will have to pay the lien holder first, that is, if that state allows attachments to vehicles. The son, depending on the outcome of the lawsuit concerning his father’s totaling his car, may need bankruptcy protection much more than the father. Certainly, it might be in his best interest to attend the court date to protect his own interests. Also from the sound of the events, considering hiring an attorney to represent him at the court date might be wise.

As a society, we have come a long way since the days of debtor prisons.  Based on the information provided, neither son or father should go to jail for getting into their predicament. The Constitution provided for our protection against those antiquated ways when it gave Congress the power to legislate bankruptcy law making the primary laws governing bankruptcy federal. State laws supplement the federal laws by clarifying the necessary details. The laws have been designed to protect both creditor and debtor making bankruptcy a legal proceeding designed to allow the honest person or business to work their way out of a bad financial situation, or in some cases, to start afresh.

There is no easy way out of a bad financial situation. They can happen to anyone, and the way out of them amounts to a lot of hard work and determination to overcome. Maybe you have found yourself in a difficult financial situation, and you are considering bankruptcy as an option. If this is the case, you are going to need a bankruptcy lawyer to properly help you understand how the complex bankruptcy laws may apply in your situation. So, if you determine you are in need of relief from the stress associated with debt and you live in or around the metropolitan areas of  McAllen, Edinburg, or Mission, Texas, contact us today. We will help you find a bankruptcy attorney in your area that will help you with any questions you may have on bankruptcy law.

Why Am I So Scared to File?

This personal bankruptcy story was posted on the internet in January of 2011 as comments in a bankruptcy discussion: “I need to file so badly. I have lost everything and I need a place to stay (temporarily staying with a relative and I have to be out at the end of the month) and a car and I have neither. My credit score is in the very low 500s and I don’t have the money to pay anyone. I’m trying to get the money up just for a BK and that’s coming slow. I hope my life improve here and I don’t have anything to lose, so why am I so scared to file? I almost feel like I am jumping in water too deep for me to swim and I’m drowning in the pool I’m in. I was going to try and work with my creditors and see if I can get some pay for deletes, but one of my good friends is telling me to forget them and look out for me. I have to be crazy. I feel like I’m committing an act that I will never recover from. Please someone tell me that it will be okay and I will survive. I need to hear that right now over and over. I’m scared folks. Really scared.”

The debtor in this personal bankruptcy illustration is facing the possibility of having to file for bankruptcy protection and wonders why he is so scared to file. That is a good question, but the very need to ask the question is a good indicator he is probably one of the ones who really needs to file for bankruptcy protection the most. Most likely, our debtor is afraid for a reason. He states he had lost everything and wanted to negotiate with his creditors. Both of these are sure indicators he was in financial trouble, but not only can being scared indicate he has difficult problems facing him, it may also indicate his fears stem more from ignorance of not knowing what he ultimately faces. If the latter is the case, the good news is that education can correct ignorance and help remove the fears.

So, contrary to popular belief, there is life after bankruptcy. As you should be able to see from this illustration, bankruptcy can happen at anytime and to anyone and is no a respecter of persons, but like most things that occur in life, it can be overcome. If you recognize bankruptcy for what it is, a temporary condition in our lives, you should eventually be able to overcome the temporary state of affairs.

Simply put, filing for bankruptcy is a legal proceeding that is designed to protect both creditor and debtor and to allow the honest person or business to work their way out of a bad financial situation, or in some cases, to completely start fresh. This legal proceeding is guaranteed by our Constitution as a legal right for every American citizen needing protection. As a society, we have come a long way since the days of debtor prisons and states. The Constitution provided for our protection against those antiquated ways when it gave Congress the power to legislate bankruptcy law making the primary laws governing bankruptcy federal. State laws supplement the federal laws by clarifying the necessary details. Since bankruptcy is backed by both federal and state laws, there is really no reason to view a bankruptcy protection as anything other than a tool used by our society to potentially help alleviate a bad financial situation between two parties.

Once the bad situation has been eliminated, you can start over with a new start financially. Some advantages bankruptcy protection might offer a bankrupt debtor is that you can obtain an automatic stay which means the mere request for bankruptcy protection automatically stops and brings to a cessation certain lawsuits, foreclosures, utility shut-offs, evictions, repossessions, garnishments, attachments, and debt collection harassment, filing might save your home, you can reschedule secured debts, you can receive protection for co-debtors you can keep all non-exempt property, you can consolidate all your loans under one plan, all or part of your loans may be completely forgiven, and you can extend certain tax obligations, student loans, or other such qualifying debts.

Bankruptcy laws can be complicated, and common sense indicates you will probably need a bankruptcy lawyer in order to properly understand how these complex laws may apply in your situation. If you determine you are in need of relief from the stress associated with debt and you live in or around the metropolitan area of El Paso, Texas, contact us today at www.BankruptcyHome.com . We will help you find a bankruptcy attorney in your area that will help you with any questions you may have on bankruptcy law.

Lack of Business Plan Contributes to Small Business Bankruptcy

Over 50% of the small businesses that start end up non-existent in five years, at least according to current statistics provided by the Small Business Administration. Most all of the businesses that failed either had no five year plan or lacked enough supporting capital to weather small dips in the economy, or both.

Posted on the internet in August of 2008 as a comment in a discussion on bankruptcy, the debtor in this personal bankruptcy story shared how his small business failed because of his failing to develop a business plan: “I took a business risk 3 years ago and didn’t have a plan B. Now I’m finally facing reality and I feel like my life is over. I’ve called a suicide hotline, debt counselor, and now seeking legal help because everything that is being told me says it is going to get much worse. I’m 47 and I am completely screwed. I am still current on all my payments but it can’t last. I’m unable to find a job. And even if I did, it wouldn’t keep me ahead. I want it all to stop. I can’t sleep anymore. I wake up shaking, not knowing where I am, what day it is, or what I’m supposed to do.”

The sad thing about our debtor’s story is that most of what he is experiencing is avoidable with a little preparation and knowledge. Had he made a business plan to prepare for the recession in the economy, he may have saved his business, but after coming to the realization of where his business ended up, knowledge of how to proceed might have alleviated the stressful anxieties that caused him to consider drastic measures.

For instance, when he visited with a local bankruptcy lawyer, he may have found out about the automatic stay. The moment you file a bankruptcy, a judge will order all collecting actions to cease, an important feature called the automatic stay. The automatic stay, applicable to all types of bankruptcy filings, means that the mere request for bankruptcy protection automatically stops and brings to a cessation certain lawsuits, foreclosures, utility shut-offs, evictions, repossessions, garnishments, attachments, and debt collection harassment. That means all creditors will have to go through a US Bankruptcy Court trustee in order to deal with their debtors, and in the case of our debtor in the illustration, the stay would have stopped any debt collection activity that might have been keeping him awake at nights. Surely that kind of knowledge is worth the peace of mind.

Other knowledge our debtor may have benefited from is learning which type bankruptcy he might have filed if he had learned of the need to do so. Basically, there are three different bankruptcies a business or an individual can use to protect themselves from various creditors. They are:

1.                  A Chapter 7 bankruptcy, commonly called liquidation of your assets, is normally the simplest and quickest form of bankruptcy. It is available to individuals, married couples, corporations, and partnerships.

2.                  A chapter 11, used primarily for business bankruptcies, is very similar to a Chapter 13 but the main difference is that a trustee can run the daily business operations of the business.

3.                  A chapter 13 bankruptcy, known as the wage earner’s plan, is the second bankruptcy available to individuals. It enables individuals with regular income to develop a plan to repay all or part of their debts.

If you have found yourself in the same business predicament as the debtor in our illustration and without the knowledge of what to do next, remember that bankruptcy laws are complicated, and common sense indicates you will need a bankruptcy lawyer in order to properly understand how these complex laws may apply in your situation. If you determine you are in need of relief from the stress associated with debt and you live in or around the metropolitan areas of Albany, Schenectady, and Troy, New York, contact us today. We will help you find a bankruptcy attorney in your area that will help you with any questions you may have on bankruptcy law.

When Do You Ethically Start Negotiating Credit Card Debt?

First 4 digits of a credit card
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According to the National Bankruptcy Research Center and the American Bankruptcy Institute, personal bankruptcies were up to 1.53 million, a 9 % increase from 2009. This is the highest level since the 2005 laws were passed that were suppose to make it harder to file for bankruptcy. The financial crisis during this recession is mostly responsible for producing the results, but other factors like rising unemployment, credit card abuse, and upside down mortgages have greatly contributed. What is unusual about this particular recession, many households which have been meeting their financial obligation for years, are having to file for the first time. That means some of these new filers are coming from the middle and upper class ranks. More educated, middle class, and Professionals are filing for bankruptcy protection than ever before.

Generally speaking, when a household which has been meeting their financial obligations for years loses part or all of its income, the normal response in years past has been to rely on instant credit to tide the family over until they can replace the perceived temporary loss. What is different in this recession, is that with outsourcing moving rampantly through our society, it is much harder to replace the income that has been lost. People from all demographics are finding out that if they do get a job to replace the job they lost, it is usually for less income. As a result, the credit they temporarily extended to themselves to maintain their current living expenses becomes a financial albatross tied around their necks which drags them even deeper in debt. With the mortgage crisis looming at the same time, their high mortgage payments add more weight to their financial woes. In addition, new credit regulations have been too few and too late to alleviate the usury rates credit card issuers have sent debtors just before the regulation changes and when debtors began to be late on their payments. The skyrocketing costs to maintain their credit cards, even using the minimum payments, are exorbitant at best, adding more weight to the already loaded albatross. Most debtor’s responses under these loads is to want to negotiate with their credit card companies first because they have no control over their income and secured mortgages. So, when do you ethically start negotiating with your credit card debt?

In my opinion (not a legal opinion), I think the most sensible time to negotiate with your credit card company is the moment you lose income. This timing, again in my opinion, is probably the most ethical time to try to negotiate with them because you are being up front and honest with your situation. Tell your credit card company what has happened with your income, to place the credit card on hold, and then ask for an extension of time and reduction of interest until you can get your income back. Whatever you do, it is not wise at this time to let your credit card company know about how much current money you have in reserve or any accounts thereof. If your negotiations fail, they will use this information in bill collections. What is important that you should convey to them is that you do not have current income to sustain your credit card payments. Too, if you talk to your credit card companies the moment you lose your job, most of the time, you should still have manageable debt. Some credit companies will see the wisdom in your early negotiations. It will most likely come across as responsible, which should make it easier for you to negotiate. By going in and being up front with them as early as possible, they may come nearer working with you, and if they won’t, you get an early heads up as to what it may be like if things get worse. What you might not want to do and will be tempted to do is pay off your credit debt with other credit cards.

If you have failed in early negotiations, failed to tell your credit card company of your predicament, or used other credit cards to pay your debts, then you may be a candidate for bankruptcy protection. Bankruptcy laws can be complicated, and common sense indicates you will probably need a bankruptcy lawyer in order to properly understand how these complex laws may apply in your situation. If you determine you are in need of relief from the stress associated with debt and you live in or around the metropolitan area of Honolulu, Hawaii, contact us today. We will help you find a bankruptcy lawyer in your area that will help you with any questions you may have on bankruptcy law.