Tag: bankruptcy

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Filing for bankruptcy might be a challenging thing to do. Although it solves your financial problems, it does create others. Some of those problems can be really serious too. Filing for bankruptcy will affect every financial aspect of your life. Thus, it’s important to consult a proficient legal firm like The Recovery Law Group, regarding the short and long term effects of bankruptcy before filing for it. You can reach them at Recovery Law Group or 888-297-6203.

Chapter 7 and Chapter 13 are the highly sought-after forms of bankruptcy. In Chapter 7 bankruptcy, you get rid of your debts by losing some of your precious assets, while in Chapter 13 bankruptcy you repay the debts by adhering to a court-ordered monthly repayment plan that is affordable for you. Both of these bankruptcy cause a decline in your three-digit FICO credit score, the amount of which depends on your credit score before the bankruptcy (expected decline is of around 150 or more points).

Most of the financial aspects of your life depend on your credit scores. Thus, a decline in the credit score poses a lot of problems. Some of these problems are:

• Borrowing money will either be impossible for you or you’ll get it with a high rate of interest.
• In case you lose your house in foreclosure, you’ll face problems in renting another one. Most landlords will ask for higher security deposits. Some might completely refuse to rent it to you.
• Getting a new car will be difficult unless you’re buying it with cash. You will either get a loan with a higher interest rate or won’t get it at all.
• Even getting a new mobile plan will become arduous, as the service providers might get worried whether you’ll be able to pay your bills every month or not.
• You’ll have to live as a cash consumer for a year or two, as getting things on credit will become difficult for you.

Apart from a decline in the credit score, there are a few more adverse impacts of filing for bankruptcy.

• Bankruptcies won’t disappear from your credit report easily. A Chapter 7 filing will remain on it for 10 years, while a Chapter 13 filing will be there for 7 years. If you’ll pay your bills on time and won’t be under any new debts, the negative impact of these filings on your credit report will decrease.
• Filing for bankruptcy will cause a decrease in your credit-based insurance score which will, in turn, increase your vehicle insurance payment. Insurers charge such motorists with higher rates of interest as such people tend to file maximum claims.
• Even Fannie Mae and Freddie Mac won’t be able to approve your mortgage loan for the first 2 years of your bankruptcy. The Federal Housing Administration (FHA loans) won’t let you apply for a mortgage before the completion of one year of your bankruptcy.
• Filing for bankruptcy can even keep you off getting a new job, as the employer might ask for an employment screening, which is an overview of your credit report. It lists Chapter 10 and Chapter 13 bankruptcies, which are less than 10 and 7 years old, respectively. However, the employer can’t run the screening without your written permission. But still, the presence of bankruptcy might stop your employment, especially if it’s in a financial sector or law enforcement.

Thus, it is advisable to find better options than bankruptcy. Bankruptcy should be your ultimate last option.

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To go bankrupt means to run out of enough money to pay your debts or to have liabilities more than the assets. In bankruptcy, an individual files for a specific chapter bankruptcy depending on his or her situation. The two most common bankruptcies are Chapter 7 and Chapter 13 bankruptcy. Although filing for bankruptcy helps you in discharging your debts, it is an avoidable serious decision.

Inability to get new loans because of low credit scores (Chapter 7 filing has more adverse effects than Chapter 13 filing), surrendering the personal property, the uncertain dischargeable status of the debts, different filing fee for each Chapter bankruptcy and costly legal help are some of the negative aspects of filing for bankruptcy. Thus, it’s important to completely understand the pros and cons of bankruptcy and the possibility of other options before you decide to file for it.

Given below are a few ways that might help you to save or earn some extra money to clear your debts faster and to avoid bankruptcy.

• Get rid of unnecessary expenses like streaming services, magazine subscriptions, extra data plans, eating out, gym memberships, etc.
• Take a part-time job like working at a coffee shop, baby-sitting, walking your neighbor’s dog, etc. You can also have a room-mate if you have a spare room. You can even use your car to sign up as a driver for Uber or similar services.
• Being a cash consumer can be a major lifesaver. Plan a weekly budget of necessary expenses and use cash to make purchases. Dwindling cash will stop you from going over-budget every week. Sometimes, a check can be used for making larger payments for necessary stuff.
• You can sell your unwanted belongings like branded sneakers, purses, sunglasses, extra furniture, books, and collection of movies, collectibles, or other fashion items, on online selling portals or by having a yard sale.
• You can refinance your house to get cash out of it. In refinancing, your mortgage, which is your secured debt (it has a low rate of interest than credit cards) can be used to repay unsecured debts with a high rate of interest. This way you won’t have to make high-interest payments in the future.
• You can try to negotiate a lower rate of interest or a repayment plan with your creditor, as most of them wouldn’t want to lose the lent money and would be glad to settle the situation with you.
• Last but not least, you can borrow money from your friends and family. But make sure that you’re clear about how you are going to repay them and discuss those terms with them, to avoid any stress and confusion in the future.

If even after following the above mentioned austere living conditions don’t fetch you sufficient money to repay your creditors, you might want to go for bankruptcy. Filing for bankruptcy is a serious decision, but it will give you the required relief when you won’t have any other options. You can consult experienced bankruptcy attorneys of Los Angeles & Dallas, TX, regarding all your possibilities at https://www.staging.recoverylawgroup.com/ or 888-297-6203.

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Once you’re certain about filing bankruptcy, you must determine the bankruptcy that suits your situation – Chapter 7 or Chapter 13. Given below is an overview of the two types of bankruptcy (Chapters 7 & 13), to help you make the right decision.

Chapter 7 Bankruptcy

It involves liquidation of the debtor’s secured assets (a house or a car) and discharge of unsecured debts (unpaid medical bills, credit card bills, etc.). Its paperwork contains a list of all the properties of the debtor and the possible state or federal ‘exemptions’ for each of them. ‘Exemptions’ work as following:

• An item, not covered by an exemption, can be sold by the trustee to repay your unsecured debts.
• You can keep the items covered by the exemption.
• If the exemption is less than the item’s worth, you’ll get the difference.
• You might be allowed to keep non-covered exemption properties by purchasing them, provided you don’t use the salary, earned post-filing bankruptcy, or a loan from friends and family.

Federal exemptions include real estate, personal property, motor vehicle, jewelry, household items such as appliances, clothes and furnishings, tools, machinery, computer equipment, life insurance policy, retirement accounts and wildcard exemption. You can discuss them in detail with the best bankruptcy lawyers of Los Angeles & Dalla, TX, by visiting www.staging.recoverylawgroup.com or calling 888-297-6203.

If you think you would take 5 or more years to repay your debts, have limited assets or your debts’ amount is more than 40% of your annual income, then it might be appropriate for you to file Chapter 7 bankruptcy.

Eligibility

It is for those who can’t repay the debts due to insufficient disposable income and thus, need their debts to be pardoned. A higher disposable income will lessen the possibility to file this bankruptcy. The candidature is decided based on results of the statements of the debtor’s monthly income (it should be below the median of the debtor’s state) and the means test calculation.

Steps to File Chapter 7 Bankruptcy

1. Complete the necessary credit counseling, 180 days prior to filing (agencies given on the United States Courts website).
2. Finish the paperwork to prove you’ve passed the means test.
3. Lodge a petition at your local bankruptcy court and confirm the necessary paperwork to be brought. An automatic stay will start that’ll stop the creditors from enforcing the collection of debts from you.
4. Meet the trustee and the creditors and answer their questions about your finances.
5. The trustee will determine your eligibility. In case the trustee declares you ineligible for Chapter 7, you can apply for Chapter 13.
6. Discuss the handling of your non-exempt property and secured debts with the trustee.
7. Under your trustee’s guidance, find an approved agency on the United States Courts website, complete the financial management course and submit your certificate of completion.
8. Get your discharge.

Chapter 13 Bankruptcy

It involves creating a repayment plan for a set period of time (usually 3-5 years) that allows the debtor to repay a decided amount as monthly installments, without liquidation. It has both ‘exempt’ (home, cars, personal or household items) and ‘non-exempt’ (luxuries like a boat, extravagant collection, etc.) properties. Every state has its own rules of ‘exemption’. However, ‘non-exempt’ assets can either be paid for or can be sold.

Your disposable income (calculated by a means test) determines the amount of debt you owe to credit card companies (unsecured debt). Your secured debts (your home, car, etc.) will be put up as collateral which the creditor could take back in case you fail to stick to the repayment plan. Once the agreed-upon amount of debt is paid, your unsecured debts might get discharged.

If you don’t wish to lose any of your assets (including non-exempt items) and think that you’ll be able to repay your debts on time over a period of 3-5 years, then in Chapter 13 might be the right choice for you.

Eligibility

You must provide evidence of your regular income. You should have less than $1,257,850 in secured debt and less than $419,275 in unsecured debt (These amounts are as of April 2019 and are adjusted after every 3 years for inflation).

Steps to File Chapter 13 Bankruptcy

1. Complete the necessary credit counseling, 180 days prior to filing.
2. Complete all the paperwork including tax return, income verification, the amount owed to creditors, your monthly living expenses and list of all your property, accounts and leases.
3. Lodge a petition which will, in turn, start an automatic stay.
4. Create and submit a repayment plan within 14 days of lodging petition.
5. Even if your papers not yet approved, start following the plan within the first 30 days of filing.
6. Meet the trustee and the creditors and answer their questions about your finances and the proposed plan.
7. The judge will declare the approval of the plan in a court hearing. If not approved, you might be asked to make changes in the plan.
8. Follow the plan diligently for the next 3-5 years.
9. Find an approved agency and complete the financial management course.
10. Get your discharge.

In case your creditors are harassing you even after the onset of the automatic stay, you can inform the bankruptcy court which will decide the next action.

Things to Do After Filing Bankruptcy

• In addition to following the approved plans and court orders, work on rebuilding your credit scores.
• Make sure none of your accounts is shown as ‘outstanding’ or ‘delinquent’ and are shown as ‘discharged’ or ‘included in bankruptcy’ on your credit report.
• Apply for a low limit credit card.
• Reinforce responsible and smart habits of paying your bills on time and budgeting.

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A bankruptcy filing is a legal process that frees an individual or businesses from the financial obligation of repaying the debts they owe. In some cases, it’s an ideal opportunity for creditors to claw back some of the debts that are due to them. This process has its own pros and cons. So, it’s better to make every possible effort like doing a part-time job, making only necessary expenses, etc. to supervise your debt obligations before going ahead with bankruptcy. It’ll be better to consult a competent bankruptcy law firm like The Recovery Law Group (https://www.staging.recoverylawgroup.com/ or call 888-297-6203), before starting with the filing process.

Steps to File Bankruptcy

Here’s an outline of the entire process to help you file for bankruptcy successfully.

1. Compile all your financial records like debts, assets, income, and expenses to properly understand your situation. It will also keep you prepared for anything that the court will ask for.
2. Hire an experienced attorney to guide you through the entire process.
3. Complete the mandatory pre-bankruptcy credit counseling within 180 days before filing bankruptcy. The United States Courts website lists the agencies that are eligible to conduct the counseling and will also provide you with a completion certificate which will be required for your filing.
4. Take help from your lawyer to help you with all the required paperwork for the proceeding. As soon as it’s done, an automatic stay will stop your creditors from suing you or seizing your wages.
5. Once the petition will be accepted, you and your creditors will be called for a meeting by a bankruptcy trustee to ask you questions regarding your case.
6. Your eligibility to file for bankruptcy will be determined after a review of your paperwork by the trustee.
7. In the case of Chapter 7 filing, the trustee will determine the need to sell your non-exempt property (jewelry, appliances, cars or home, exceeding the exemption limit) to repay creditors.
8. Any secured debt will be returned to the creditors now, or you may also be allowed to redeem the collateral by paying its worth.
9. You must take a debtor education course from an eligible credit counseling agency, before discharging your case.
10. Your debts will be pardoned and no repayment will be required after 3-6 months of filing. Then, your case is closed.

Different Types of Bankruptcy

Chapter 7

It uses liquidation (selling of assets exempting some personal property) to repay the existing debts. The debtor can be an individual, a corporation, a partnership or any other business entity. You can consult The Recovery Law Group to know more about the federal and state exemption rules.

In order to be eligible for Chapter 7 bankruptcy, you need to have your income less than the median level income for your state. If not, you’ll have to pass the ‘means test’, which will determine your capability to repay the debt while managing your necessary expenses. If you have enough to repay the debt, you’ll have to file Chapter 13 bankruptcy.

Chapter 11

This bankruptcy usually involves a corporation or a partnership. It helps in the reorganization of business affairs, assets and debts by proposing a plan of action to repay the debt while keeping the business alive.

Chapter 13

This bankruptcy allows the debtor to repay the debt to the creditor in monthly installments over a period of 3-5 years. There is no liquidation of assets involved in it. The debtor can either be self-employed or unincorporated and should have unsecured and secured debts below $394,725 and $1,184,400, respectively.

The other rarely-used types of bankruptcies like Chapter 12 and Chapter 15 are for ‘family farmers or fishermen’ and cross-border cases, respectively.

Pros and Cons of Filing a Bankruptcy

Pros

• It eliminates the tension of repayment to an extent by helping the debtors to clear some of their debts. Washing away the debts relieves the debtors of their financial burden.
• The creditors and collection agencies stop pestering the debtors with constant phone calls or letters.

Cons

• It is a costly process as it involves filing and attorney fees.
• It has a negative impact on the credit report. Chapter 7 bankruptcy stays on the report for up to 10 years and Chapter 13 for 7 years, and that adversely affects the credit score.
• Low credit score makes it difficult to apply for loans, get low rates of interest, get a new job, low vehicle insurance premium, start a new business or even get a new home.

Life Post Bankruptcy

Below are a few steps that might help you to improve your financial condition after bankruptcy and maintain your solvency.

• Monitor your expenses – Implement a 50/30/20 budget, in which 50% is spent on basic needs (rent, food, etc.), 30% on wants (entertainment) and rest 20% goes into savings. Categorize your income and expenses as needs, wants and savings for a better understanding of the budget.
• Emergency Fund – Set aside an emergency fund, to be used only under pre-decided circumstances. It can also aid in avoiding the usage of credit cards in emergencies.
• Rebuild your Credit – Repay new or carry over debts (alimony, student loans, child support, tax claims, and other governmental debts) on time. Apply for new lines of credit, but not too many at once. Request a co-signer, with excellent credit, to apply for loans with you to get beneficial rates and terms. Use secured credit cards that use collateral to safeguard their financial interest.

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The current American bankruptcy law doesn’t require you to publish any bankruptcy notice in the newspaper. In case you are a public figure or a celebrity, the gossip magazines will themselves make a hue and cry about it. Otherwise, neither will anyone probably care about you going bankrupt nor will it be made a public announcement in any newspaper or magazine.

However, your credit report will show your bankruptcy, which will be considered by your future lenders and creditors, but you can minimize its adverse impact by rebuilding your credit after bankruptcy. You can know more about the steps to rebuild your credit by consulting the best attorneys of Los Angeles and Dallas, TX, at Recovery Law Group. Visit Recovery Law Group or contact on 888-297-6203 to avail the services.

Now, the reason, why some people might think it is still necessary to publish a notice, is that it was required to do so in the legal history in the past.

Bankruptcy History

‘An Act to Relieve Insolvent Debtors’, passed by the British Parliament in 1712, urged a legal necessity to publish an advertisement in the newspaper, about the meeting of creditors in each and every bankruptcy case. This was done in order to eliminate the chances of occurrence of any kind of secretive proceedings that would give the insiders benefit over the other uninformed creditors.

The publication law proved to be a boon for the newspapers, as they charged money to print these advertisements. The first newspaper which is regularly published in London, The London Gazette, was the most famous of such newspaper. It is still in business, today.

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Filing for Chapter 7 bankruptcy can be a distressing process. While losing one’s home, huge tax bills or pestering debt collectors are more crucial concerns, the prospect of losing one’s wedding ring, heirloom jewelry or just a necklace, a pair of earrings or a special wristwatch can be an additional stress.

When you file for Chapter 7 bankruptcy, you are expected to surrender certain assets (not all), which are then sold by the trustee, to repay your creditors with the proceeds. The items that you have to surrender depend on the state in which you live. Each state, including the District of Columbia, has laws, called Exemptions. These laws are passed with the idea, that a person gone bankrupt, should not be deprived of basic necessities for living – clothing, shelter, car, furniture, etc. Under these laws, some items of property are exempted regardless of their value, while others are exempted only up to a certain dollar amount. The freedom to choose between state exemptions or federal bankruptcy exemptions depends on the state in which you live. You can know more about state and federal exemptions by visiting Recovery Law Group or calling 888-297-6203.

Common Exemptions to Protect Your Jewellery

Let’s discuss some common exemptions that can help you to save your jewelry. The availability of these exemptions varies from state to state.

• Exemption of Wedding or Anniversary Ring – While some states don’t ask their debtors to give up the wedding or anniversary ring, regardless of its value, others allow it to be retained only up to a certain dollar amount. Some states don’t have this exemption at all.
• Exemption of Jewellery – Many states allow this exemption only up to a certain dollar amount. Others can be quite liberal.
• Exemption of Heirloom – Some states have this exemption to let you safeguard your ancestral jewelry that has been passed down in your family for generations. Whether you can keep the jewelry of unlimited value, or only of a certain dollar amount, depends on your state.
• Exemption of Wearing Apparel – There is a specific mention about keeping the wearing apparels, often to an unlimited value, in many state bankruptcy courts. Some states also allow the debtors to keep cufflinks, mid-priced watch, and other small jewelry items, under this exemption.
• Wildcard Exemption – This exemption lets you apply a certain dollar amount (as low as $200 to as high as $25,000) to any kind of property. So, in case your state has this exemption, you can use some or the complete value to protect your jewelry.

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Yes, it is mandatory to list all your debts while filing for bankruptcy. When you ‘borrow’ money from your mother, it’s considered a debt, which you’re expected to repay. While filing for bankruptcy, you are supposed to fill the bankruptcy papers, known as petition or schedules. These papers are a financial statement, so, the information filled in them needs to be accurate. If your schedules are found to be inaccurate by the court, it can deny your case. Thus, you must list all your debts, including the one you owe to your mother, on your bankruptcy papers.

Listing the debt you owe to your mother can prove to be beneficial for her. According to IRS Publication Topic 453 – Bad Debt Deduction, if your debt gets discharged in your bankruptcy, your mother can say that you won’t ever be able to repay her the debt. The ‘uncollectable’ status of the debt will give her the ‘absolute proof of loss’, and she’ll become eligible for tax relief. Under normal circumstances, before deducting a debt as a ‘bad debt’, the lender would sue the debtor and would make reasonable efforts to get the repayment. But in this case, the discharged debt in bankruptcy will eliminate the need to follow those steps, for your mother. It is advisable to consult a tax advisor to determine her eligibility for the tax deduction. Further intimation regarding the necessity to list all the debts in the bankruptcy papers and the benefits of it for the creditors, can be known by consulting the best attorneys in Los Angeles and Dallas, TX, at Recovery Law Group. They can also be reached at 888-297-6203.

Now, if you’re worried that listing your mom as your creditor in bankruptcy papers might make her think that you don’t trust her and hurt her feelings, you must follow some of these practical strategies to avoid the embarrassment.

She’s your mom and thus, is completely aware of your struggles with money. So, your decision to file bankruptcy won’t be a surprise for her. Explain to her that you’re legally bound to list all your debts in the bankruptcy papers. Failure to do so can pose serious repercussions for you. Also, tell her that you’ll be legally allowed to repay the debts after bankruptcy. There are strong chances that your mother won’t ask you to repay the debt and will be happy to let you discharge your debts in bankruptcy.

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Dependency on asset-protection trusts and offshore accounts to safeguard one’s assets has been in vogue for the past several years, and a large number of people have put their faith in these trusts to protect their assets. In the beginning, it might seem like a sensible idea. However, hoodwinking a bankruptcy trustee can put you on a razor edge.

Many a time, the distribution of funds may not take place, as it can transpire only at an independent trustee’s liking and even a foreign bank may claim the same thing. Although a bankruptcy court can’t compel a bank or a legal entity to present the money, it can hold the debtor in contempt of court until the loan is paid. Under such circumstances, if a bank or a trustee decides to withhold the distribution, the debtor can find himself behind bars.

More often, bankruptcy courts have been facing an additional similar kind of issue. In re Caterers Ltd. of 1990, a debtor first agreed to have received the money from the auction of a property, which was indebted to the bankruptcy estate, and later refused to repay, since it was all spent. This had put the court in a tight spot, as it had to face the dilemma of whether it should relieve the debtor from civil contempt and imprisonment, on account of his incapability to repay the spent money, or not.

At last, the court decided not to relieve him off the civil contempt. The court adjudged that a debtor, who is already guilty of incapability to comply, cannot defend himself in a court by propounding an impossibility of compliance. Moreover, the debtor cannot make groundless claims about his or her inability to act in accordance with the court’s orders and must provide substantially detailed evidence to support the same.

The debtor often shows his inability to comply with the bankruptcy court, when his assets are safeguarded by the asset-protection trusts or other offshore accounts. As discussed above, if the court finds any of these asset-transfers to be deceptive, then it may nullify the transfer and solicit the hand-over of the assets to the bankruptcy estate, and the debtor is held in contempt.

The court does not have any authority over the trustees or managers of the third-party trusts, but it is required to have the legal hold over the assets in question. Since a bankruptcy court is federal, a jurisdictional defense is normally unavailable there. This means that federal law empowers a bankruptcy court to have countrywide legal authority over the assets. In order to know more about the ill-effects of trusts or third-part managers on bankruptcy, visit the website https://www.staging.recoverylawgroup.com/ or contact 888-297-6203.