Archive for the ‘bankruptcy planning’ Category

Which Option Is Best For Me…Chapter 7 or Chapter 13?

August 16, 2013 Leave a comment

It is my job to know whether a Chapter 7 or a Chapter 13 is the better option for my clients.  The questions that I ask at the initial consultation asked to make this determination.  Most clients want to file a Chapter 7, but that is not always the best option for them.  Each case is different and the rest of this blog will show the differences between the two options so you can have a better understanding of both.

A Chapter 7 is less expensive than a Chapter 13 and it is cheaper.  In my initial consultation it is important for me to determine what type of debt my clients have.  There are three types of debt: priority, secured and general unsecured.  Priority debt consists of recent tax debt and domestic support obligations, such as alimony or child support.  If someone owes taxes from the last few years and/or a domestic support obligation, a Chapter 7 will not get rid of this debt.  Secured debt is another type of debt.  Secured debt consists of car loans, mortgages or statutory liens.  Secured debt can be taken from you if you are not making the payments.  If the client is current with their mortgages and car loans a Chapter 7 may still be a good option for them.  However, if they are delinquent on secured debts, a Chapter 13 may be in their best interest.  Alternatively, if someone has a high interest rate on a vehicle or the monthly payment leaves them with no disposable income, a Chapter 13 may be a good way to stretch out those payments on the vehicle to free up some other money to take care of other things they may need or start savings.  The last type of debt is unsecured debt.  Unsecured debt is credit card debt, medical bills, old utility bills, pay day loans, etc.  This type of debt is discharged in a Chapter 7, which means it is wiped out.  This type of debt is the reason that many potential clients feel they need to file bankruptcy.

As I said, Chapter 7’s are quicker than Chapter 13’s.  They usually last 4 months or so, while the Chapter 13 will last from 36-60 months, but Chapter 13’s do have some advantages over Chapter 7 bankruptcies.  Below I will list some of the reasons why people may want to file a Chapter 13, rather than a Chapter 7.

For some people, a Chapter 7 is not an option.  They may not be eligible.  In order to be eligible for a Chapter 7 you are not allowed to have filed one in the last 8 years.  Additionally, some people make too much money or have too much monthly disposable income to be able to file a Chapter 7.  If any of these restrictions apply, you can still file a Chapter 13.  Another great reason to consider a Chapter 13 is if you are behind on your mortgage or car payment.  Rather than lose your house to foreclosure or your car to repossession, you could file a Chapter 13 and get protection under the law.  A case filing will stop all attempts at the mortgage company selling your house or the car creditor picking up your car.  A Chapter 13 will also allow you to catch up on your back mortgage payments over the course of 5 years and stretch out your car payments over the same amount of time.

Chapter 13 bankruptcies are also a great option for people who are “upside down” on their house and have a 2nd or even a 3rd mortgage.  In a Chapter 13, if you have no equity in your house in regards to the 1st mortgage, then we can “strip off” the second mortgage.  That means these 2nd or 3rd mortgages would become unsecured debts and could be discharged at the end of the Chapter 13 and you would still be able to keep your house.  Some people are also often behind on tax debt or domestic support payments and need time to catch up.  They might be afraid of a bank levy or a criminal charge.  A Chapter 13 will give them the time to become current without facing further penalties.  These debts can be paid through the plan in a structured way to make it easier to handle for the debtor.

A Chapter 13 is also the only option when you are trying to discharge a debt that was assigned to you in a divorce decree.  It is a good idea if you have gotten a divorce to show the decree to your attorney.  If you have assigned debts through that divorce that you want to discharge it cannot be done through a Chapter 7.  A good, knowledgeable bankruptcy attorney will be able to sort through all of this paperwork and let you know what the best option is for you.

Additionally, I often have clients who have filed a Chapter 7 bankruptcy in the last 8 years, but they are getting garnished by a new creditor.  They come to see me hoping to stop the garnishment but cannot file a Chapter 7.  Often it is a good idea to file a Chapter 13 to stop the garnishment.  We can always file a Chapter 7 later to discharge the debt, but the Chapter 13 will stop the garnishment to free up money so you can pay your rent and utilities and not get further behind on your bills.  These garnishments are often up to 25% of your paycheck, which can be devastating to many people.

Another advantage of Chapter 13 bankruptcies is that they can often be cheaper up front since attorney fees can be paid over the course of 5 years.  We are very willing to work with clients on payment arrangements in a Chapter 13 if they are employed and have the ability to make the monthly plan payments to the Trustee.

This decision on what kind of bankruptcy to file is a complicated one and should not be taken lightly.  We have experienced lawyers here that deal with all types of cases every single day.  It is our job to analyze your debts, assets, income and expenses and have in-depth knowledge of the bankruptcy code.  If you are considering bankruptcy or would like to speak with an experienced bankruptcy attorney in the St. Louis area, please do not hesitate to give our office a call.  We offer free consultations at five different locations across the St. Louis area.

Why Should I Hire an Attorney for Bankruptcy?

July 10, 2013 Leave a comment

You may be asking yourself, “Why do I need to hire an attorney to file bankruptcy?” You may also think, “I’ve done some research and I’ve seen the forms to fill out. It seems simple enough.”  The answer is: Bankruptcy isn’t as easy as a process as you may think. Time and again, we have people come to us telling us that they tried to file bankruptcy for themselves but their case was dismissed. In truth, the cost of fixing errors that are made in representing yourself can add up and you probably would have been better off having an attorney handle your case in the first place.

Representing yourself in a bankruptcy matter is referred to as filing pro se. Just like a traffic ticket, you are welcome to represent yourself in bankruptcy. However, as many people find out later (when it is too late), it is often necessary to have appropriate representation from an attorney with experience to make sure your interests are protected and you get the most favorable outcome available to you in the matter.

Last week, I saw a number of pro se cases that had problems when the petitioners came to their First Meeting of Creditors. This is a meeting where you are asked questions by the trustee of your bankruptcy to make sure everything in your petition is correct. Frequently, pro se filers make mistakes that require amendments to their petitions and coming back to attend future meetings. While it is not impossible for a mistake to be made in a petition filed by an attorney, the chances of having your bankruptcy go smoothly without any problems is a lot better if you have representation.

An attorney will know where your debts and assets need to be listed to prevent problems. Many times I will hear pro se filers say things like “I didn’t think I needed to list THAT.” Your attorney will be able to tell you what needs to be listed and what does not. Also, your attorney will be able to give you advice on when the best time to file will be. If a petition is filed too soon or too late, there may be debts that would have been discharged but will not be if the petition was filed at the wrong time. Finally, your attorney will know how to properly use the available exemptions to protect your property. This can become an issue if you have moved from one state to another within the last two years prior to filing. Some states provide for more property to be exempted from the bankruptcy estate than others. In some situations, the even more generous Federal exemptions may be available to a petitioner.

If you are considering bankruptcy and would like more information about your options, call our office and make an appointment to see one of our attorneys. We offer free consultations and you can discuss what chapter of bankruptcy will best suit your situation.

I’ve filed Bankruptcy Before, Can I file Again?

            Yes, you can file bankruptcy multiple times. In fact, there is no limit to the number of times that you can file. However, if you have received a discharge in a previous case, a certain amount of time must pass before you can receive a discharge again. The amount of time that must elapse depends on which chapter you previously filed, and which chapter your plan on filing now.

            If you have previously filed a Chapter 7 bankruptcy, you must wait eight years to file and receive a discharge in a new Chapter 7. If you have filed a Chapter 7 in the last eight years and received a discharge you can still receive the protection of bankruptcy (automatic stay) by filing a Chapter 13.  If more than four years has elapsed since you filed your Chapter 7, you can receive a discharge in your new filing.

            If you previously received a discharge through a Chapter 13, you can receive a discharge in a Chapter 7 if six years has passed since your Chapter 13 filing. Note, that the clock starts as soon as your case is filed, not when you receive your discharge. If six years, has not passed, you can receive a discharge through another Chapter 13 as long as two years has passed since the previous Chapter 13 filing.

            But what if you can’t receive a discharge? Can you still benefit from filing? Absolutely! Student loans and taxes are generally not dischargeable in a Chapter 7. After your Chapter 7 has concluded, student loan creditors can resume garnishing up to 25% of your paycheck. The IRS is even worse. They can take over 90% of your paycheck to pay on back taxes.  Even though you may not be eligible for a discharge, you can still receive the protection of bankruptcy by filing a Chapter 13 and your student loan creditors will not be able to garnish your wages. A small monthly payment may give you up to five years of protection from lawsuits, garnishments, levies and liens.

            Just because you have previously filed a bankruptcy doesn’t mean you can’t file again. Even if you can’t receive a discharge, you can still enjoy the protection that bankruptcy provides. Schedule your appointment today with one of our experienced bankruptcy attorneys. He or she will be able to evaluate your situation and determine what is best for you.

Dealing With Family Gifts and Loans

When filing bankruptcy, it is often easy to overlook personal loans and gifts. However, this type of debt or property may have a significant impact on your bankruptcy filing. Not disclosing information regarding real estate that has been gifted to you, an outstanding loan to a family member or co-owned bank accounts can cause some unexpected problems with your bankruptcy filing.

Listing All Assets

Regardless of the size of an asset, when you file for bankruptcy it must be listed. This includes any interests in real estate that you may own with another person, a bank account which is also listed under your name, or a pending income tax refund. Failure to leave these assets off your bankruptcy filing can result in problems with your filing. If you are not controlling the asset, you must still list them and can explain why you are not the true owner of the property. Often older parents put their children on their bank account in the case of an emergency so that the daughter or son can make financial decisions for their parents. Likewise, parents are often listed on the bank account of the minor child. Even though the debtors name is on a bank account and must be listed on the bankruptcy petition, it is not the debtor’s asset a trustee or creditors could take an interest in.



Debts to Family Members

Oftentimes when we are having difficulties making ends meet, we borrow money from friends and family members. These debts must be included in a bankruptcy filing for numerous reasons. First, they are unsecured, legitimate debts. Second, you are required to list all of your debt. You cannot exclude the creditors which are more favorable to you. While it may be easy to ignore debts to friends and family members, they are unsecured creditors under the law and must be listed as creditors. Often, clients wish to repay friends and family members or a doctor they want to continue to see. You can do this after the bankruptcy is over. Even though you will not have a legal obligation and creditors can’t request money from you, you are free to repay after discharge if you choose to do so.

Repaying Loans to Family

It may be tempting to repay loans to friends and family members prior to filing bankruptcy. However, it is important to discuss this possibility with a bankruptcy attorney before you take this step. You have to list all payments within the last 12 months to insiders on your bankruptcy petition. In most cases, the trustee will ask you this question also at the 341 meeting. In some cases, this may fall under a clause in the bankruptcy code called preference. In effect, you have given preference to a debt owed to a friend or family member over your credit card payments. In these cases, the trustee of the bankruptcy may order these payments reversed and paid to all unsecured creditors equally. This can cause some problems later on when the relative or friend does not have the money anymore you paid him 6 months ago. For example if you re-pay your father in law before filing bankruptcy and it is not disclosed until the 341 meeting, the trustee will ask you father in law to repay it. You might not want to get you father in law involved in your bankruptcy proceeding. After you father in law pays back the money to the trustee, you still might feel an obligation to repay him after the bankruptcy case is over.

There are also situations in which a relative or friend might be relatively safer from request by the trustee. If the money was paid to a relative in a different state whose only income is social security and does not have the money anymore. It is unlikely that the trustee would go after that relative. Pursuing such a claim might not be successful. Even if the trustee obtains a judgment for repayment of the money to the trustee, the relative might be “judgment proof” if the only income is social security.

Full Disclosure

When you are meeting with your bankruptcy attorney it is critical that you make full disclosure of all debts that are owed including those to friends and family members. It is also important that you disclose all payments made during the prior year. Your bankruptcy lawyer can only help you if you are completely open and honest about all debts that you owe and all payments that you have made against these debts.

When you have outstanding loans to friends and family members, they may be discharged in Chapter 7 bankruptcy. However, once your bankruptcy is discharged, you have the right to repay any debts that were discharged including those to friends and family members. Failing to disclose these loans and payments can cause additional legal problems.

How Excessive Medical Bills May Affect Bankruptcy Proceedings

Medical Bills and Bankruptcy

It is estimated that approximately 60 percent of all bankruptcies that are filed are due to excessive medical bills. Those filing bankruptcy due to these costs are not necessarily those who are poor or uninsured. In fact, of the people who file for medical bankruptcy, over 60 percent attended college, over 65 percent own a home, and roughly 20 percent include a family member who is either an active duty military member or a veteran.
Due to the many restrictions, deductibles, copayments, and limits on health insurance policies, medical bills can still oftentimes spiral out of control. So it may not be surprising that nearly 80 percent of those who file bankruptcy based on medical expenses are insured.
In any case, the coupling of out-of-control medical expenses along with mounting credit card debt and higher than expected mortgage payment adjustments, can lead one to an unmanageable amount of debt.
Those who file for bankruptcy can do so for nearly any amount of debt, provided that they are unable to pay it. In 2009, the average amount of medical debt owed by a bankruptcy filer who had medical insurance was approximately $17,000. For those without insurance coverage, the average was closer to $27,000.

How Bankruptcy Based on Medical Bills Works
When filing bankruptcy, your debts need to be classified as either secured or unsecured. Debts that are secured include your home or car – in other words, debts that are secured by a physical item that may serve as collateral for the debt that is owed.
Conversely, unsecured debt is that in which there is no physical collateral to back up the amount that is owed. For example, amounts owed for services such as home repairs or medical services as well as payday loans and personal loans are considered to be unsecured debt.
Because medical expenses are considered to be a type of unsecured debt, these debts will be eliminated through a Chapter 7 or a Chapter 13 bankruptcy filing.
One of the first steps in the process of deciding which chapter you should file under is to make a list of all of your creditors. This list should include the names of all creditors, in addition to their address, your account number with that creditor, and the amount that you owe them.
You will then need to decide, based upon your overall situation, whether Chapter 7 or Chapter 13 bankruptcy is the right choice for you. Keep in mind that there are pros and cons to each type. Making this decision may best be done via the advice of an attorney.

Where to Turn?
The filing of bankruptcy for medical debt can be an especially complex issue. Therefore, it is important to seek the services and advice of an attorney who specializes in the area of bankruptcy. Because bankruptcy laws are federal and state related, a lawyer in your state of residence will be best able to guide you on what options you have available, based on your specific situation. Our bankruptcy lawyers in the St. Louis and Metro East area have experience and offer a free consultation.

Five Things Not to Do When You Owe Too Much Money

When a layoff or catastrophic, unmanageable debt begins to pile on, many people look to extreme or knee-jerk reactions in finding solutions to manage their financial situation without first consulting an attorney or financial advisor.  Here are five common conundrums to keep yourself from acting on when you owe more than you can afford and are facing bankruptcy.

More information at bankruptcy attorney St. Louis.

1. Borrowing from your retirement to pay off debt.  Retirement funds and nest eggs sitting within 401k’s and IRA’s are protected from both creditors and bankruptcy trustees.  Most people will need this money upon retirement, and therefore it is categorized as a protected asset that cannot be touched during the bankruptcy process.  There is only one way creditors can grab cash from these coffers, when individuals voluntarily withdraw it to pay debt.  Unfortunately, while this may handle minimum payments for a period of time, it usually is not a final solution and on top of the liquidation of the retirement assets, the individual is now responsible for the taxes associated with the premature withdrawals.

2. Do not pay off debt to family members.  While most people sitting in debt would prefer to pay off debt to the people closest to them rather than creditors, it could put family members in peril.  This could be considered “insider preferences”, and any repayment or transfer of assets to family could be recouped by the bankruptcy trustee and land a lawsuit in the hands of a family member.

3. Don’t borrow from retirement to pay off family members.  A combination of these two could leave you without a retirement, responsibility for taxes owed from borrowing from your retirement, and trouble for the recipient of the transfer for insider preferences.  This combination can be caustic.

4. Do not transfer away assets before bankruptcy.  Under the bankruptcy code, a transfer of assets can be deemed fraudulent conveyance, which can have severe consequences, and may even restrict or disqualify the bankruptcy relief one is seeking.  With the advice of an attorney, certain assets can be exempt which creditors cannot touch.  However, if these assets are transferred, they are no longer protected.

5. Don’t exhaust your short term savings.  If one is facing an uncertain future, such as a layoff or change in income, it is important to keep short term savings on hand to cover the important human needs of shelter and food before paying off creditors.  Seeking advice from a financial advisor or an attorney can better protect your relief fund.

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