How to Get Out of Debt With the Get Out of Debt Guy » bankruptcy lawyer

Houston, Texas Bankruptcy Lawyer – Find the Right One for You

Damon Day — Thu, 01 Mar 2012 18:07:13 +0000

Throughout the years this site has helped a variety of folks in Houston, TX to resolve their specific debt problems. Seldom will a person seek out our guidance with the hope that we decide they ought to seek bankruptcy relief. More often than not it’s the exact opposite which is actually the case. Consumers come to us seeking out simple solution which will allow them to prevent the need to seek bankruptcy relief. It is true that you can find perfectly realistic alternatives for individuals in some situations to prevent consumer bankruptcy. However, as a debtor your goal really should not be avoiding going bankrupt. Your objective is to find the right solution that makes the best sense for yourself and your family.

Find a Bankruptcy Attorney in Houston, Texas

The easiest way to insure you’ll find the correct option is to make sure you thoroughly explore all of the different remedies, specifically bankruptcy. It is crucial to consult with a seasoned bankruptcy lawyer in Houston, Texas. Keep in mind, booking a no cost appointment with an actual Houston bankruptcy lawyer doesn’t mean you’re going to be committing to file for bankruptcy. It just means you are speaking to a professional about looking into a possible financial option in greater detail. When ever that you are looking for alternate options to help become debt free, meeting with a bankruptcy lawyer should definitely be part of the process.

If you’d like us to help you find a good consumer advocate bankruptcy attorney in Houston, Texas please be sure to follow this link . If we currently have a bankruptcy lawyer in Houston already in our nationwide database, we can pass your information directly to them to enable them to schedule a time to assist you to find out what an individual bankruptcy filing would probably look like for your specific circumstances. In the event we don’t know an excellent Houston lawyer, we can do the research to assist you to locate one in your area.

If you’re a consumer advocate attorney here in Houston, TX, possess substantial experience, an impressive reputation assisting families file both chapter seven and chapter thirteen bankruptcy cases and would want to be considered as our featured bankruptcy lawyer or firm in Houston, you can contact us by filling out the form below this article.

Meeting With A Houston, TX Bankruptcy Attorney Is Part Of The Process

It is hard for individuals to find honest answers to make the right financial decisions. Almost everywhere you look you can find someone simply attempting to sell some sort of debt reduction program instead of taking the time to educate you with actual info about the true advantages and drawbacks associated with every alternative available. With the deck so stacked against individuals it’s really important for you to explore all possible alternatives, including bankruptcy.

Many consumers maintain a tremendous misconception of what bankruptcy is and how you can be effected when you file. The vast majority of misconception is usually propagated by debt relief sales people who are earning money by keeping the public terrified about the possibility of filing for bankruptcy. Keep in mind, bankruptcy is essentially the one legally binding way to make certain that your obligations would be wiped out, giving you a new start. When you meet with a debt relief sales person who discourages you against meeting with a personal bankruptcy lawyer to explore the possibility, then the person you’re talking to could be more focused on selling you their product than they are in actually helping you look for the best option. The fact is that, a lot of the agencies you’ll consider for help in the debt solutions services market are going to fit into the classification of attempting to sell you a specific program as compared with actually trying to assist you.

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We’ve had numerous consumers come to us for help after they were sold in to credit card debt relief solutions that had hardly any likelihood at success. Had those consumers received reliable advice from the start, they may have filed for bankruptcy, eliminated their bills quickly, saved many thousands in fees, years of stress and already been successfully on their way to great fico scores and a much more solid financial foundation.

You should not easily write off personal bankruptcy as being a bad or even “to be avoided at all costs” solution until you have taken enough time to explore it just as you would cccs, debt negotiation or some other solution. Always take your time to research all the options available. Personal bankruptcy isn’t inherently good or bad. It is merely a solution having advantages and drawbacks that must be weighed against the advantages and disadvantages of any other option .

Speak with a personal bankruptcy lawyer here in Houston, Texas today so that you can make a well informed decision about how to best clear up your financial obligations. You will come away from that meeting with a couple of insights. Either you may discover that a few of the details you may have been told concerning bankruptcy had been incorrect and filing would actually be a sensible financial option, or maybe bankruptcy will not likely make good financial sense in your own circumstances on account of specific issues and you now know for sure you want to refrain from filing at any cost. In either case, spending 1 hour with a knowledgeable bankruptcy attorney in Houston, TX will give you the information you need to understand and enable you to ultimately make some hard decisions with a great deal more peace of mind than you had before.

If you are a Bankruptcy Attorney in Houston or the surrounding area, feel that you are a great option for local consumers looking for assistance in understanding their debt relief options and would like to be featured in this article, please use the contact form below.

Fill out my online form.

All About Bankruptcy – Chapter 7 Bankruptcy – Chapter 13 Bankruptcy

Steve Rhode — Thu, 25 Aug 2011 18:26:22 +0000

From How to Get Out of Debt

Article I, Section 8, of the United States Constitution authorizes Congress to enact “uniform Laws on the subject of Bankruptcies.” Under this grant of authority, Congress enacted the “Bankruptcy Code” in 1978. The Bankruptcy Code, which is codified as title 11 of the United States Code, has been amended several times since its enactment. It is the uniform federal law that governs all bankruptcy cases.

The procedural aspects of the bankruptcy process are governed by the Federal Rules of Bankruptcy Procedure (often called the “Bankruptcy Rules”) and local rules of each bankruptcy court. The Bankruptcy Rules contain a set of official forms for use in bankruptcy cases. The Bankruptcy Code and Bankruptcy Rules (and local rules) set forth the formal legal procedures for dealing with the debt problems of individuals and businesses.

There is a bankruptcy court for each judicial district in the country. Each state has one or more districts. There are 90 bankruptcy districts across the country. The bankruptcy courts generally have their own clerk’s offices.

The court official with decision-making power over federal bankruptcy cases is the United States bankruptcy judge, a judicial officer of the United States district court. The bankruptcy judge may decide any matter connected with a bankruptcy case, such as eligibility to file or whether a debtor should receive a discharge of debts. Much of the bankruptcy process is administrative, however, and is conducted away from the courthouse. In cases under chapters 7, 12, or 13, and sometimes in chapter 11 cases, this administrative process is carried out by a trustee who is appointed to oversee the case.

A debtor’s involvement with the bankruptcy judge is usually very limited. A typical chapter 7 debtor will not appear in court and will not see the bankruptcy judge unless an objection is raised in the case. A chapter 13 debtor may only have to appear before the bankruptcy judge at a plan confirmation hearing. Usually, the only formal proceeding at which a debtor must appear is the meeting of creditors, which is usually held at the offices of the U.S. trustee. This meeting is informally called a “341 meeting” because section 341 of the Bankruptcy Code requires that the debtor attend this meeting so that creditors can question the debtor about debts and property.

A fundamental goal of the federal bankruptcy laws enacted by Congress is to give debtors a financial “fresh start” from burdensome debts. The Supreme Court made this point about the purpose of the bankruptcy law in a 1934 decision:

[I]t gives to the honest but unfortunate debtor…a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt.

Local Loan Co. v. Hunt, 292 U.S. 234, 244 (1934). This goal is accomplished through the bankruptcy discharge, which releases debtors from personal liability from specific debts and prohibits creditors from ever taking any action against the debtor to collect those debts. This publication describes the bankruptcy discharge in a question and answer format, discussing the timing of the discharge, the scope of the discharge (what debts are discharged and what debts are not discharged), objections to discharge, and revocation of the discharge. It also describes what a debtor can do if a creditor attempts to collect a discharged debt after the bankruptcy case is concluded.

You may be interested in reading How to Find a Good Bankruptcy Lawyer or Bankruptcy Attorneys

Chapter 7, entitled Liquidation, contemplates an orderly, court-supervised procedure by which a trustee takes over the assets of the debtor’s estate, reduces them to cash, and makes distributions to creditors, subject to the debtor’s right to retain certain exempt property and the rights of secured creditors. Because there is usually little or no nonexempt property in most chapter 7 cases, there may not be an actual liquidation of the debtor’s assets. These cases are called “no-asset cases.” A creditor holding an unsecured claim will get a distribution from the bankruptcy estate only if the case is an asset case and the creditor files a proof of claim with the bankruptcy court. In most chapter 7 cases, if the debtor is an individual, he or she receives a discharge that releases him or her from personal liability for certain dischargeable debts. The debtor normally receives a discharge just a few months after the petition is filed. Amendments to the Bankruptcy Code enacted in to the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 require the application of a “means test” to determine whether individual consumer debtors qualify for relief under chapter 7. If such a debtor’s income is in excess of certain thresholds, the debtor may not be eligible for chapter 7 relief.

Chapter 13, entitled Adjustment of Debts of an Individual With Regular Income, is designed for an individual debtor who has a regular source of income. Chapter 13 is often preferable to chapter 7 because it enables the debtor to keep a valuable asset, such as a house, and because it allows the debtor to propose a “plan” to repay creditors over time – usually three to five years. Chapter 13 is also used by consumer debtors who do not qualify for chapter 7 relief under the means test. At a confirmation hearing, the court either approves or disapproves the debtor’s repayment plan, depending on whether it meets the Bankruptcy Code’s requirements for confirmation. Chapter 13 is very different from chapter 7 since the chapter 13 debtor usually remains in possession of the property of the estate and makes payments to creditors, through the trustee, based on the debtor’s anticipated income over the life of the plan. Unlike chapter 7, the debtor does not receive an immediate discharge of debts. The debtor must complete the payments required under the plan before the discharge is received. The debtor is protected from lawsuits, garnishments, and other creditor actions while the plan is in effect. The discharge is also somewhat broader (i.e., more debts are eliminated) under chapter 13 than the discharge under chapter 7.

All About Chapter 7 Bankruptcy

Alternatives to Chapter 7

Debtors should be aware that there are several alternatives to chapter 7 relief. For example, debtors who are engaged in business, including corporations, partnerships, and sole proprietorships, may prefer to remain in business and avoid liquidation. Such debtors should consider filing a petition under chapter 11 of the Bankruptcy Code. Under chapter 11, the debtor may seek an adjustment of debts, either by reducing the debt or by extending the time for repayment, or may seek a more comprehensive reorganization. Sole proprietorships may also be eligible for relief under chapter 13 of the Bankruptcy Code.

In addition, individual debtors who have regular income may seek an adjustment of debts under chapter 13 of the Bankruptcy Code. A particular advantage of chapter 13 is that it provides individual debtors with an opportunity to save their homes from foreclosure by allowing them to “catch up” past due payments through a payment plan. Moreover, the court may dismiss a chapter 7 case filed by an individual whose debts are primarily consumer rather than business debts if the court finds that the granting of relief would be an abuse of chapter 7. 11 U.S.C. § 707(b).

If the debtor’s “current monthly income”(1) is more than the state median, the Bankruptcy Code requires application of a “means test” to determine whether the chapter 7 filing is presumptively abusive. Abuse is presumed if the debtor’s aggregate current monthly income over 5 years, net of certain statutorily allowed expenses, is more than (i) $10,950, or (ii) 25% of the debtor’s nonpriority unsecured debt, as long as that amount is at least $6,575. (2) The debtor may rebut a presumption of abuse only by a showing of special circumstances that justify additional expenses or adjustments of current monthly income. Unless the debtor overcomes the presumption of abuse, the case will generally be converted to chapter 13 (with the debtor’s consent) or will be dismissed. 11 U.S.C. § 707(b)(1).

Debtors should also be aware that out-of-court agreements with creditors or debt counseling services may provide an alternative to a bankruptcy filing.

Background

A chapter 7 bankruptcy case does not involve the filing of a plan of repayment as in chapter 13. Instead, the bankruptcy trustee gathers and sells the debtor’s nonexempt assets and uses the proceeds of such assets to pay holders of claims (creditors) in accordance with the provisions of the Bankruptcy Code. Part of the debtor’s property may be subject to liens and mortgages that pledge the property to other creditors. In addition, the Bankruptcy Code will allow the debtor to keep certain “exempt” property; but a trustee will liquidate the debtor’s remaining assets. Accordingly, potential debtors should realize that the filing of a petition under chapter 7 may result in the loss of property.

Chapter 7 Eligibility

To qualify for relief under chapter 7 of the Bankruptcy Code, the debtor may be an individual, a partnership, or a corporation or other business entity. 11 U.S.C. §§ 101(41), 109(b). Subject to the means test described above for individual debtors, relief is available under chapter 7 irrespective of the amount of the debtor’s debts or whether the debtor is solvent or insolvent. An individual cannot file under chapter 7 or any other chapter, however, if during the preceding 180 days a prior bankruptcy petition was dismissed due to the debtor’s willful failure to appear before the court or comply with orders of the court, or the debtor voluntarily dismissed the previous case after creditors sought relief from the bankruptcy court to recover property upon which they hold liens. 11 U.S.C. §§ 109(g), 362(d) and (e). In addition, no individual may be a debtor under chapter 7 or any chapter of the Bankruptcy Code unless he or she has, within 180 days before filing, received credit counseling from an approved credit counseling agency either in an individual or group briefing. 11 U.S.C. §§ 109, 111. There are exceptions in emergency situations or where the U.S. trustee (or bankruptcy administrator) has determined that there are insufficient approved agencies to provide the required counseling. If a debt management plan is developed during required credit counseling, it must be filed with the court.

One of the primary purposes of bankruptcy is to discharge certain debts to give an honest individual debtor a “fresh start.” The debtor has no liability for discharged debts. In a chapter 7 case, however, a discharge is only available to individual debtors, not to partnerships or corporations. 11 U.S.C. § 727(a)(1). Although an individual chapter 7 case usually results in a discharge of debts, the right to a discharge is not absolute, and some types of debts are not discharged. Moreover, a bankruptcy discharge does not extinguish a lien on property.

How Chapter 7 Works

A chapter 7 case begins with the debtor filing a petition with the bankruptcy court serving the area where the individual lives or where the business debtor is organized or has its principal place of business or principal assets. (3) In addition to the petition, the debtor must also file with the court: (1) schedules of assets and liabilities; (2) a schedule of current income and expenditures; (3) a statement of financial affairs; and (4) a schedule of executory contracts and unexpired leases. Fed. R. Bankr. P. 1007(b). Debtors must also provide the assigned case trustee with a copy of the tax return or transcripts for the most recent tax year as well as tax returns filed during the case (including tax returns for prior years that had not been filed when the case began). 11 U.S.C. § 521. Individual debtors with primarily consumer debts have additional document filing requirements. They must file: a certificate of credit counseling and a copy of any debt repayment plan developed through credit counseling; evidence of payment from employers, if any, received 60 days before filing; a statement of monthly net income and any anticipated increase in income or expenses after filing; and a record of any interest the debtor has in federal or state qualified education or tuition accounts. Id. A husband and wife may file a joint petition or individual petitions. 11 U.S.C. § 302(a). Even if filing jointly, a husband and wife are subject to all the document filing requirements of individual debtors. (The Official Forms may be purchased at legal stationery stores or downloaded from the internet at www.uscourts.gov/bkforms/index.html. They are not available from the court.)

The courts must charge a $245 case filing fee, a $39 miscellaneous administrative fee, and a $15 trustee surcharge. Normally, the fees must be paid to the clerk of the court upon filing. With the court’s permission, however, individual debtors may pay in installments. 28 U.S.C. § 1930(a); Fed. R. Bankr. P. 1006(b); Bankruptcy Court Miscellaneous Fee Schedule, Item 8. The number of installments is limited to four, and the debtor must make the final installment no later than 120 days after filing the petition. Fed. R. Bankr. P. 1006. For cause shown, the court may extend the time of any installment, provided that the last installment is paid not later than 180 days after filing the petition. Id. The debtor may also pay the $39 administrative fee and the $15 trustee surcharge in installments. If a joint petition is filed, only one filing fee, one administrative fee, and one trustee surcharge are charged. Debtors should be aware that failure to pay these fees may result in dismissal of the case. 11 U.S.C. § 707(a).

If the debtor’s income is less than 150% of the poverty level (as defined in the Bankruptcy Code), and the debtor is unable to pay the chapter 7 fees even in installments, the court may waive the requirement that the fees be paid. 28 U.S.C. § 1930(f).

In order to complete the Official Bankruptcy Forms that make up the petition, statement of financial affairs, and schedules, the debtor must provide the following information:

1. A list of all creditors and the amount and nature of their claims;
2. The source, amount, and frequency of the debtor’s income;
3. A list of all of the debtor’s property; and
4. A detailed list of the debtor’s monthly living expenses, i.e., food, clothing, shelter, utilities, taxes, transportation, medicine, etc.

Married individuals must gather this information for their spouse regardless of whether they are filing a joint petition, separate individual petitions, or even if only one spouse is filing. In a situation where only one spouse files, the income and expenses of the non-filing spouse is required so that the court, the trustee and creditors can evaluate the household’s financial position.

Among the schedules that an individual debtor will file is a schedule of “exempt” property. The Bankruptcy Code allows an individual debtor (4) to protect some property from the claims of creditors because it is exempt under federal bankruptcy law or under the laws of the debtor’s home state. 11 U.S.C. § 522(b). Many states have taken advantage of a provision in the Bankruptcy Code that permits each state to adopt its own exemption law in place of the federal exemptions. In other jurisdictions, the individual debtor has the option of choosing between a federal package of exemptions or the exemptions available under state law. Thus, whether certain property is exempt and may be kept by the debtor is often a question of state law. The debtor should consult an attorney to determine the exemptions available in the state where the debtor lives.

Filing a petition under chapter 7 “automatically stays” (stops) most collection actions against the debtor or the debtor’s property. 11 U.S.C. § 362. But filing the petition does not stay certain types of actions listed under 11 U.S.C. § 362(b), and the stay may be effective only for a short time in some situations. The stay arises by operation of law and requires no judicial action. As long as the stay is in effect, creditors generally may not initiate or continue lawsuits, wage garnishments, or even telephone calls demanding payments. The bankruptcy clerk gives notice of the bankruptcy case to all creditors whose names and addresses are provided by the debtor.

Between 21 and 40 days after the petition is filed, the case trustee (described below) will hold a meeting of creditors. If the U.S. trustee or bankruptcy administrator (5) schedules the meeting at a place that does not have regular U.S. trustee or bankruptcy administrator staffing, the meeting may be held no more than 60 days after the order for relief. Fed. R. Bankr. P. 2003(a). During this meeting, the trustee puts the debtor under oath, and both the trustee and creditors may ask questions. The debtor must attend the meeting and answer questions regarding the debtor’s financial affairs and property. 11 U.S.C. § 343. If a husband and wife have filed a joint petition, they both must attend the creditors’ meeting and answer questions. Within 14 days of the creditors’ meeting, the U.S. trustee will report to the court whether the case should be presumed to be an abuse under the means test described in 11 U.S.C. § 704(b).

It is important for the debtor to cooperate with the trustee and to provide any financial records or documents that the trustee requests. The Bankruptcy Code requires the trustee to ask the debtor questions at the meeting of creditors to ensure that the debtor is aware of the potential consequences of seeking a discharge in bankruptcy such as the effect on credit history, the ability to file a petition under a different chapter, the effect of receiving a discharge, and the effect of reaffirming a debt. Some trustees provide written information on these topics at or before the meeting to ensure that the debtor is aware of this information. In order to preserve their independent judgment, bankruptcy judges are prohibited from attending the meeting of creditors. 11 U.S.C. § 341(c).

In order to accord the debtor complete relief, the Bankruptcy Code allows the debtor to convert a chapter 7 case to case under chapter 11, 12 or 13 (6) as long as the debtor is eligible to be a debtor under the new chapter. However, a condition of the debtor’s voluntary conversion is that the case has not previously been converted to chapter 7 from another chapter. 11 U.S.C. § 706(a). Thus, the debtor will not be permitted to convert the case repeatedly from one chapter to another.

Role of the Case Trustee

When a chapter 7 petition is filed, the U.S. trustee (or the bankruptcy court in Alabama and North Carolina) appoints an impartial case trustee to administer the case and liquidate the debtor’s nonexempt assets. 11 U.S.C. §§ 701, 704. If all the debtor’s assets are exempt or subject to valid liens, the trustee will normally file a “no asset” report with the court, and there will be no distribution to unsecured creditors. Most chapter 7 cases involving individual debtors are no asset cases. But if the case appears to be an “asset” case at the outset, unsecured creditors (7) must file their claims with the court within 90 days after the first date set for the meeting of creditors. Fed. R. Bankr. P. 3002(c). A governmental unit, however, has 180 days from the date the case is filed to file a claim. 11 U.S.C. § 502(b)(9). In the typical no asset chapter 7 case, there is no need for creditors to file proofs of claim because there will be no distribution. If the trustee later recovers assets for distribution to unsecured creditors, the Bankruptcy Court will provide notice to creditors and will allow additional time to file proofs of claim. Although a secured creditor does not need to file a proof of claim in a chapter 7 case to preserve its security interest or lien, there may be other reasons to file a claim. A creditor in a chapter 7 case who has a lien on the debtor’s property should consult an attorney for advice.

Commencement of a bankruptcy case creates an “estate.” The estate technically becomes the temporary legal owner of all the debtor’s property. It consists of all legal or equitable interests of the debtor in property as of the commencement of the case, including property owned or held by another person if the debtor has an interest in the property. Generally speaking, the debtor’s creditors are paid from nonexempt property of the estate.

The primary role of a chapter 7 trustee in an asset case is to liquidate the debtor’s nonexempt assets in a manner that maximizes the return to the debtor’s unsecured creditors. The trustee accomplishes this by selling the debtor’s property if it is free and clear of liens (as long as the property is not exempt) or if it is worth more than any security interest or lien attached to the property and any exemption that the debtor holds in the property. The trustee may also attempt to recover money or property under the trustee’s “avoiding powers.” The trustee’s avoiding powers include the power to: set aside preferential transfers made to creditors within 90 days before the petition; undo security interests and other prepetition transfers of property that were not properly perfected under nonbankruptcy law at the time of the petition; and pursue nonbankruptcy claims such as fraudulent conveyance and bulk transfer remedies available under state law. In addition, if the debtor is a business, the bankruptcy court may authorize the trustee to operate the business for a limited period of time, if such operation will benefit creditors and enhance the liquidation of the estate. 11 U.S.C. § 721.

Section 726 of the Bankruptcy Code governs the distribution of the property of the estate. Under § 726, there are six classes of claims; and each class must be paid in full before the next lower class is paid anything. The debtor is only paid if all other classes of claims have been paid in full. Accordingly, the debtor is not particularly interested in the trustee’s disposition of the estate assets, except with respect to the payment of those debts which for some reason are not dischargeable in the bankruptcy case. The individual debtor’s primary concerns in a chapter 7 case are to retain exempt property and to receive a discharge that covers as many debts as possible.

The Chapter 7 Discharge

A discharge releases individual debtors from personal liability for most debts and prevents the creditors owed those debts from taking any collection actions against the debtor. Because a chapter 7 discharge is subject to many exceptions, though, debtors should consult competent legal counsel before filing to discuss the scope of the discharge. Generally, excluding cases that are dismissed or converted, individual debtors receive a discharge in more than 99 percent of chapter 7 cases. In most cases, unless a party in interest files a complaint objecting to the discharge or a motion to extend the time to object, the bankruptcy court will issue a discharge order relatively early in the case – generally, 60 to 90 days after the date first set for the meeting of creditors. Fed. R. Bankr. P. 4004(c).

The grounds for denying an individual debtor a discharge in a chapter 7 case are narrow and are construed against the moving party. Among other reasons, the court may deny the debtor a discharge if it finds that the debtor: failed to keep or produce adequate books or financial records; failed to explain satisfactorily any loss of assets; committed a bankruptcy crime such as perjury; failed to obey a lawful order of the bankruptcy court; fraudulently transferred, concealed, or destroyed property that would have become property of the estate; or failed to complete an approved instructional course concerning financial management. 11 U.S.C. § 727; Fed. R. Bankr. P. 4005.

Secured creditors may retain some rights to seize property securing an underlying debt even after a discharge is granted. Depending on individual circumstances, if a debtor wishes to keep certain secured property (such as an automobile), he or she may decide to “reaffirm” the debt. A reaffirmation is an agreement between the debtor and the creditor that the debtor will remain liable and will pay all or a portion of the money owed, even though the debt would otherwise be discharged in the bankruptcy. In return, the creditor promises that it will not repossess or take back the automobile or other property so long as the debtor continues to pay the debt.

If the debtor decides to reaffirm a debt, he or she must do so before the discharge is entered. The debtor must sign a written reaffirmation agreement and file it with the court. 11 U.S.C. § 524(c). The Bankruptcy Code requires that reaffirmation agreements contain an extensive set of disclosures described in 11 U.S.C. § 524(k). Among other things, the disclosures must advise the debtor of the amount of the debt being reaffirmed and how it is calculated and that reaffirmation means that the debtor’s personal liability for that debt will not be discharged in the bankruptcy. The disclosures also require the debtor to sign and file a statement of his or her current income and expenses which shows that the balance of income paying expenses is sufficient to pay the reaffirmed debt. If the balance is not enough to pay the debt to be reaffirmed, there is a presumption of undue hardship, and the court may decide not to approve the reaffirmation agreement. Unless the debtor is represented by an attorney, the bankruptcy judge must approve the reaffirmation agreement.

If the debtor was represented by an attorney in connection with the reaffirmation agreement, the attorney must certify in writing that he or she advised the debtor of the legal effect and consequences of the agreement, including a default under the agreement. The attorney must also certify that the debtor was fully informed and voluntarily made the agreement and that reaffirmation of the debt will not create an undue hardship for the debtor or the debtor’s dependants. 11 U.S.C. § 524(k). The Bankruptcy Code requires a reaffirmation hearing if the debtor has not been represented by an attorney during the negotiating of the agreement, or if the court disapproves the reaffirmation agreement.11 U.S.C. § 524(d) and (m). The debtor may repay any debt voluntarily, however, whether or not a reaffirmation agreement exists. 11 U.S.C. § 524(f).

An individual receives a discharge for most of his or her debts in a chapter 7 bankruptcy case. A creditor may no longer initiate or continue any legal or other action against the debtor to collect a discharged debt. But not all of an individual’s debts are discharged in chapter 7. Debts not discharged include debts for alimony and child support, certain taxes, debts for certain educational benefit overpayments or loans made or guaranteed by a governmental unit, debts for willful and malicious injury by the debtor to another entity or to the property of another entity, debts for death or personal injury caused by the debtor’s operation of a motor vehicle while the debtor was intoxicated from alcohol or other substances, and debts for certain criminal restitution orders.11 U.S.C. § 523(a). The debtor will continue to be liable for these types of debts to the extent that they are not paid in the chapter 7 case. Debts for money or property obtained by false pretenses, debts for fraud or defalcation while acting in a fiduciary capacity, and debts for willful and malicious injury by the debtor to another entity or to the property of another entity will be discharged unless a creditor timely files and prevails in an action to have such debts declared nondischargeable. 11 U.S.C. § 523(c); Fed. R. Bankr. P. 4007(c).

The court may revoke a chapter 7 discharge on the request of the trustee, a creditor, or the U.S. trustee if the discharge was obtained through fraud by the debtor, if the debtor acquired property that is property of the estate and knowingly and fraudulently failed to report the acquisition of such property or to surrender the property to the trustee, or if the debtor (without a satisfactory explanation) makes a material misstatement or fails to provide documents or other information in connection with an audit of the debtor’s case. 11 U.S.C. § 727(d).

Footnotes

The “current monthly income” received by the debtor is a defined term in the Bankruptcy Code and means the average monthly income received over the six calendar months before commencement of the bankruptcy case, including regular contributions to household expenses from nondebtors and including income from the debtor’s spouse if the petition is a joint petition, but not including social security income or certain payments made because the debtor is the victim of certain crimes. 11 U.S.C. § 101(10A).
To determine whether a presumption of abuse arises, all individual debtors with primarily consumer debts who file a chapter 7 case must complete Official Bankruptcy Form B22A, entitled “Statement of Current Monthly Income and Means Test Calculation – For Use in Chapter 7.” (The Official Forms may be purchased at legal stationery stores or downloaded from the internet at www.uscourts.gov/bkforms/index.html. They are not available from the court.)
An involuntary chapter 7 case may be commenced under certain circumstances by a petition filed by creditors holding claims against the debtor. 11 U.S.C. § 303.
Each debtor in a joint case (both husband and wife) can claim exemptions under the federal bankruptcy laws. 11 U.S.C. § 522(m).
In North Carolina and Alabama, bankruptcy administrators perform similar functions that U.S. trustees perform in the remaining 48 states. These duties include establishing a panel of private trustees to serve as trustees in chapter 7 cases and supervising the administration of cases and trustees in cases under chapters 7, 11, 12, and 13 of the Bankruptcy Code. The bankruptcy administrator program is administered by the Administrative Office of the United States Courts, while the U.S. trustee program is administered by the Department of Justice. For purposes of this publication, references to U.S. trustees are also applicable to bankruptcy administrators.
A fee is charged for converting, on request of the debtor, a case under chapter 7 to a case under chapter 11. The fee charged is the difference between the filing fee for a chapter 7 and the filing fee for a chapter 11. 28 U.S.C. § 1930(a). Currently, the difference is $755. Id. There is no fee for converting from chapter 7 to chapter 13.
Unsecured debts generally may be defined as those for which the extension of credit was based purely upon an evaluation by the creditor of the debtor’s ability to pay, as opposed to secured debts, for which the extension of credit was based upon the creditor’s right to seize collateral on default, in addition to the debtor’s ability to pay.

You may be interested in reading How to Find a Good Bankruptcy Lawyer or Bankruptcy Attorneys

All About Chapter 13 Bankruptcy

Background

A chapter 13 bankruptcy is also called a wage earner’s plan. It enables individuals with regular income to develop a plan to repay all or part of their debts. Under this chapter, debtors propose a repayment plan to make installments to creditors over three to five years. If the debtor’s current monthly income is less than the applicable state median, the plan will be for three years unless the court approves a longer period “for cause.” (1) If the debtor’s current monthly income is greater than the applicable state median, the plan generally must be for five years. In no case may a plan provide for payments over a period longer than five years. 11 U.S.C. §1322(d). During this time the law forbids creditors from starting or continuing collection efforts.

This chapter discusses six aspects of a chapter 13 proceeding: the advantages of choosing chapter 13, the chapter 13 eligibility requirements, how a chapter 13 proceeding works, what may be included in chapter 13 repayment plan and how it is confirmed, making the plan work, and the special chapter 13 discharge.

Advantages of Chapter 13

Chapter 13 offers individuals a number of advantages over liquidation under chapter 7. Perhaps most significantly, chapter 13 offers individuals an opportunity to save their homes from foreclosure. By filing under this chapter, individuals can stop foreclosure proceedings and may cure delinquent mortgage payments over time. Nevertheless, they must still make all mortgage payments that come due during the chapter 13 plan on time. Another advantage of chapter 13 is that it allows individuals to reschedule secured debts (other than a mortgage for their primary residence) and extend them over the life of the chapter 13 plan. Doing this may lower the payments. Chapter 13 also has a special provision that protects third parties who are liable with the debtor on “consumer debts.” This provision may protect co-signers. Finally, chapter 13 acts like a consolidation loan under which the individual makes the plan payments to a chapter 13 trustee who then distributes payments to creditors. Individuals will have no direct contact with creditors while under chapter 13 protection.

Chapter 13 Eligibility

Any individual, even if self-employed or operating an unincorporated business, is eligible for chapter 13 relief as long as the individual’s unsecured debts are less than $336,900 and secured debts are less than $1,010,650. 11 U.S.C. § 109(e). These amounts are adjusted periodically to reflect changes in the consumer price index. A corporation or partnership may not be a chapter 13 debtor. Id.

An individual cannot file under chapter 13 or any other chapter if, during the preceding 180 days, a prior bankruptcy petition was dismissed due to the debtor’s willful failure to appear before the court or comply with orders of the court or was voluntarily dismissed after creditors sought relief from the bankruptcy court to recover property upon which they hold liens. 11 U.S.C. §§ 109(g), 362(d) and (e). In addition, no individual may be a debtor under chapter 13 or any chapter of the Bankruptcy Code unless he or she has, within 180 days before filing, received credit counseling from an approved credit counseling agency either in an individual or group briefing. 11 U.S.C. §§ 109, 111. There are exceptions in emergency situations or where the U.S. trustee (or bankruptcy administrator) has determined that there are insufficient approved agencies to provide the required counseling. If a debt management plan is developed during required credit counseling, it must be filed with the court.

How Chapter 13 Works

A chapter 13 case begins by filing a petition with the bankruptcy court serving the area where the debtor has a domicile or residence. Unless the court orders otherwise, the debtor must also file with the court: (1) schedules of assets and liabilities; (2) a schedule of current income and expenditures; (3) a schedule of executory contracts and unexpired leases; and (4) a statement of financial affairs. Fed. R. Bankr. P. 1007(b). The debtor must also file a certificate of credit counseling and a copy of any debt repayment plan developed through credit counseling; evidence of payment from employers, if any, received 60 days before filing; a statement of monthly net income and any anticipated increase in income or expenses after filing; and a record of any interest the debtor has in federal or state qualified education or tuition accounts. 11 U.S.C. § 521. The debtor must provide the chapter 13 case trustee with a copy of the tax return or transcripts for the most recent tax year as well as tax returns filed during the case (including tax returns for prior years that had not been filed when the case began). Id. A husband and wife may file a joint petition or individual petitions. 11 U.S.C. § 302(a). (The Official Forms may be purchased at legal stationery stores or downloaded from the Internet at www.uscourts.gov/bkforms/index.html. They are not available from the court.)

The courts must charge a $235 case filing fee and a $39 miscellaneous administrative fee. Normally the fees must be paid to the clerk of the court upon filing. With the court’s permission, however, they may be paid in installments. 28 U.S.C. § 1930(a); Fed. R. Bankr. P. 1006(b); Bankruptcy Court Miscellaneous Fee Schedule, Item 8. The number of installments is limited to four, and the debtor must make the final installment no later than 120 days after filing the petition. Fed. R. Bankr. P. 1006(b). For cause shown, the court may extend the time of any installment, as long as the last installment is paid no later than 180 days after filing the petition. Id. The debtor may also pay the $39 administrative fee in installments. If a joint petition is filed, only one filing fee and one administrative fee are charged. Debtors should be aware that failure to pay these fees may result in dismissal of the case. 11 U.S.C. § 1307(c)(2).

In order to complete the Official Bankruptcy Forms that make up the petition, statement of financial affairs, and schedules, the debtor must compile the following information:

1. A list of all creditors and the amounts and nature of their claims;
2. The source, amount, and frequency of the debtor’s income;
3. A list of all of the debtor’s property; and
4. A detailed list of the debtor’s monthly living expenses, i.e., food, clothing, shelter, utilities, taxes, transportation, medicine, etc.

When an individual files a chapter 13 petition, an impartial trustee is appointed to administer the case. 11 U.S.C. § 1302. In some districts, the U.S. trustee or bankruptcy administrator (2) appoints a standing trustee to serve in all chapter 13 cases. 28 U.S.C. § 586(b). The chapter 13 trustee both evaluates the case and serves as a disbursing agent, collecting payments from the debtor and making distributions to creditors. 11 U.S.C. § 1302(b).

Filing the petition under chapter 13 “automatically stays” (stops) most collection actions against the debtor or the debtor’s property. 11 U.S.C. § 362. Filing the petition does not, however, stay certain types of actions listed under 11 U.S.C. § 362(b), and the stay may be effective only for a short time in some situations. The stay arises by operation of law and requires no judicial action. As long as the stay is in effect, creditors generally may not initiate or continue lawsuits, wage garnishments, or even make telephone calls demanding payments. The bankruptcy clerk gives notice of the bankruptcy case to all creditors whose names and addresses are provided by the debtor.

Chapter 13 also contains a special automatic stay provision that protects co-debtors. Unless the bankruptcy court authorizes otherwise, a creditor may not seek to collect a “consumer debt” from any individual who is liable along with the debtor. 11 U.S.C. § 1301(a). Consumer debts are those incurred by an individual primarily for a personal, family, or household purpose. 11 U.S.C. § 101(8).

Individuals may use a chapter 13 proceeding to save their home from foreclosure. The automatic stay stops the foreclosure proceeding as soon as the individual files the chapter 13 petition. The individual may then bring the past-due payments current over a reasonable period of time. Nevertheless, the debtor may still lose the home if the mortgage company completes the foreclosure sale under state law before the debtor files the petition.11 U.S.C. § 1322(c). The debtor may also lose the home if he or she fails to make the regular mortgage payments that come due after the chapter 13 filing.

Between 21 and 50 days after the debtor files the chapter 13 petition, the chapter 13 trustee will hold a meeting of creditors. If the U.S. trustee or bankruptcy administrator schedules the meeting at a place that does not have regular U.S. trustee or bankruptcy administrator staffing, the meeting may be held no more than 60 days after the debtor files. Fed. R. Bankr. P. 2003(a). During this meeting, the trustee places the debtor under oath, and both the trustee and creditors may ask questions. The debtor must attend the meeting and answer questions regarding his or her financial affairs and the proposed terms of the plan.11 U.S.C. § 343. If a husband and wife file a joint petition, they both must attend the creditors’ meeting and answer questions. In order to preserve their independent judgment, bankruptcy judges are prohibited from attending the creditors’ meeting. 11 U.S.C. § 341(c). The parties typically resolve problems with the plan either during or shortly after the creditors’ meeting. Generally, the debtor can avoid problems by making sure that the petition and plan are complete and accurate, and by consulting with the trustee prior to the meeting.

In a chapter 13 case, to participate in distributions from the bankruptcy estate, unsecured creditors must file their claims with the court within 90 days after the first date set for the meeting of creditors. Fed. R. Bankr. P. 3002(c). A governmental unit, however, has 180 days from the date the case is filed file a proof of claim.11 U.S.C. § 502(b)(9).

After the meeting of creditors, the debtor, the chapter 13 trustee, and those creditors who wish to attend will come to court for a hearing on the debtor’s chapter 13 repayment plan.

The Chapter 13 Plan and Confirmation Hearing

Unless the court grants an extension, the debtor must file a repayment plan with the petition or within 14 days after the petition is filed. Fed. R. Bankr. P. 3015. A plan must be submitted for court approval and must provide for payments of fixed amounts to the trustee on a regular basis, typically biweekly or monthly. The trustee then distributes the funds to creditors according to the terms of the plan, which may offer creditors less than full payment on their claims.

There are three types of claims: priority, secured, and unsecured. Priority claims are those granted special status by the bankruptcy law, such as most taxes and the costs of bankruptcy proceeding. (3) Secured claims are those for which the creditor has the right take back certain property (i.e., the collateral) if the debtor does not pay the underlying debt. In contrast to secured claims, unsecured claims are generally those for which the creditor has no special rights to collect against particular property owned by the debtor.

The plan must pay priority claims in full unless a particular priority creditor agrees to different treatment of the claim or, in the case of a domestic support obligation, unless the debtor contributes all “disposable income” – discussed below – to a five-year plan.11 U.S.C. § 1322(a).

If the debtor wants to keep the collateral securing a particular claim, the plan must provide that the holder of the secured claim receive at least the value of the collateral. If the obligation underlying the secured claim was used to buy the collateral (e.g., a car loan), and the debt was incurred within certain time frames before the bankruptcy filing, the plan must provide for full payment of the debt, not just the value of the collateral (which may be less due to depreciation). Payments to certain secured creditors (i.e., the home mortgage lender), may be made over the original loan repayment schedule (which may be longer than the plan) so long as any arrearage is made up during the plan. The debtor should consult an attorney to determine the proper treatment of secured claims in the plan.

The plan need not pay unsecured claims in full as long it provides that the debtor will pay all projected “disposable income” over an “applicable commitment period,” and as long as unsecured creditors receive at least as much under the plan as they would receive if the debtor’s assets were liquidated under chapter 7. 11 U.S.C. § 1325. In chapter 13, “disposable income” is income (other than child support payments received by the debtor) less amounts reasonably necessary for the maintenance or support of the debtor or dependents and less charitable contributions up to 15% of the debtor’s gross income. If the debtor operates a business, the definition of disposable income excludes those amounts which are necessary for ordinary operating expenses. 11 U.S.C. § 1325(b)(2)(A) and (B). The “applicable commitment period” depends on the debtor’s current monthly income. The applicable commitment period must be three years if current monthly income is less than the state median for a family of the same size – and five years if the current monthly income is greater than a family of the same size. 11 U.S.C. § 1325(d). The plan may be less than the applicable commitment period (three or five years) only if unsecured debt is paid in full over a shorter period.

Within 30 days after filing the bankruptcy case, even if the plan has not yet been approved by the court, the debtor must start making plan payments to the trustee. 11 U.S.C. § 1326(a)(1). If any secured loan payments or lease payments come due before the debtor’s plan is confirmed (typically home and automobile payments), the debtor must make adequate protection payments directly to the secured lender or lessor – deducting the amount paid from the amount that would otherwise be paid to the trustee. Id.

No later than 45 days after the meeting of creditors, the bankruptcy judge must hold a confirmation hearing and decide whether the plan is feasible and meets the standards for confirmation set forth in the Bankruptcy Code. 11 U.S.C. §§ 1324, 1325. Creditors will receive 28 days’ notice of the hearing and may object to confirmation. Fed. R. Bankr. P. 2002(b). While a variety of objections may be made, the most frequent ones are that payments offered under the plan are less than creditors would receive if the debtor’s assets were liquidated or that the debtor’s plan does not commit all of the debtor’s projected disposable income for the three or five year applicable commitment period.

If the court confirms the plan, the chapter 13 trustee will distribute funds received under the plan “as soon as is practicable.” 11 U.S.C. § 1326(a)(2). If the court declines to confirm the plan, the debtor may file a modified plan. 11 U.S.C. § 1323. The debtor may also convert the case to a liquidation case under chapter 7. (4) 11 U.S.C. § 1307(a). If the court declines to confirm the plan or the modified plan and instead dismisses the case, the court may authorize the trustee to keep some funds for costs, but the trustee must return all remaining funds to the debtor (other than funds already disbursed or due to creditors). 11 U.S.C. § 1326(a)(2).

Occasionally, a change in circumstances may compromise the debtor’s ability to make plan payments. For example, a creditor may object or threaten to object to a plan, or the debtor may inadvertently have failed to list all creditors. In such instances, the plan may be modified either before or after confirmation. 11 U.S.C. §§ 1323, 1329. Modification after confirmation is not limited to an initiative by the debtor, but may be at the request of the trustee or an unsecured creditor. 11 U.S.C. § 1329(a).

Making the Plan Work

The provisions of a confirmed plan bind the debtor and each creditor. 11 U.S.C. § 1327. Once the court confirms the plan, the debtor must make the plan succeed. The debtor must make regular payments to the trustee either directly or through payroll deduction, which will require adjustment to living on a fixed budget for a prolonged period. Furthermore, while confirmation of the plan entitles the debtor to retain property as long as payments are made, the debtor may not incur new debt without consulting the trustee, because additional debt may compromise the debtor’s ability to complete the plan. 11 U.S.C. §§ 1305(c), 1322(a)(1), 1327.

A debtor may make plan payments through payroll deductions. This practice increases the likelihood that payments will be made on time and that the debtor will complete the plan. In any event, if the debtor fails to make the payments due under the confirmed plan, the court may dismiss the case or convert it to a liquidation case under chapter 7 of the Bankruptcy Code. 11 U.S.C. § 1307(c). The court may also dismiss or convert the debtor’s case if the debtor fails to pay any post-filing domestic support obligations (i.e., child support, alimony), or fails to make required tax filings during the case. 11 U.S.C. §§ 1307(c) and (e), 1308, 521.

The Chapter 13 Discharge

The bankruptcy law regarding the scope of the chapter 13 discharge is complex and has recently undergone major changes. Therefore, debtors should consult competent legal counsel prior to filing regarding the scope of the chapter 13 discharge.

A chapter 13 debtor is entitled to a discharge upon completion of all payments under the chapter 13 plan so long as the debtor: (1) certifies (if applicable) that all domestic support obligations that came due prior to making such certification have been paid; (2) has not received a discharge in a prior case filed within a certain time frame (two years for prior chapter 13 cases and four years for prior chapter 7, 11 and 12 cases); and (3) has completed an approved course in financial management (if the U.S. trustee or bankruptcy administrator for the debtor’s district has determined that such courses are available to the debtor). 11 U.S.C. § 1328. The court will not enter the discharge, however, until it determines, after notice and a hearing, that there is no reason to believe there is any pending proceeding that might give rise to a limitation on the debtor’s homestead exemption. 11 U.S.C. § 1328(h).

The discharge releases the debtor from all debts provided for by the plan or disallowed (under section 502), with limited exceptions. Creditors provided for in full or in part under the chapter 13 plan may no longer initiate or continue any legal or other action against the debtor to collect the discharged obligations.

As a general rule, the discharge releases the debtor from all debts provided for by the plan or disallowed, with the exception of certain debts referenced in 11 U.S.C. § 1328. Debts not discharged in chapter 13 include certain long term obligations (such as a home mortgage), debts for alimony or child support, certain taxes, debts for most government funded or guaranteed educational loans or benefit overpayments, debts arising from death or personal injury caused by driving while intoxicated or under the influence of drugs, and debts for restitution or a criminal fine included in a sentence on the debtor’s conviction of a crime. To the extent that they are not fully paid under the chapter 13 plan, the debtor will still be responsible for these debts after the bankruptcy case has concluded. Debts for money or property obtained by false pretenses, debts for fraud or defalcation while acting in a fiduciary capacity, and debts for restitution or damages awarded in a civil case for willful or malicious actions by the debtor that cause personal injury or death to a person will be discharged unless a creditor timely files and prevails in an action to have such debts declared nondischargeable. 11 U.S.C. §§ 1328, 523(c); Fed. R. Bankr. P. 4007(c).

The discharge in a chapter 13 case is somewhat broader than in a chapter 7 case. Debts dischargeable in a chapter 13, but not in chapter 7, include debts for willful and malicious injury to property (as opposed to a person), debts incurred to pay nondischargeable tax obligations, and debts arising from property settlements in divorce or separation proceedings. 11 U.S.C. § 1328(a).

The Chapter 13 Hardship Discharge

After confirmation of a plan, circumstances may arise that prevent the debtor from completing the plan. In such situations, the debtor may ask the court to grant a “hardship discharge.” 11 U.S.C. § 1328(b). Generally, such a discharge is available only if: (1) the debtor’s failure to complete plan payments is due to circumstances beyond the debtor’s control and through no fault of the debtor; (2) creditors have received at least as much as they would have received in a chapter 7 liquidation case; and (3) modification of the plan is not possible. Injury or illness that precludes employment sufficient to fund even a modified plan may serve as the basis for a hardship discharge. The hardship discharge is more limited than the discharge described above and does not apply to any debts that are nondischargeable in a chapter 7 case. 11 U.S.C. § 523.

Footnotes

The “current monthly income” received by the debtor is a defined term in the Bankruptcy Code and means the average monthly income received over the six calendar months before commencement of the bankruptcy case, including regular contributions to household expenses from nondebtors and including income from the debtor’s spouse if the petition is a joint petition, but not including social security income or certain payments made because the debtor is the victim of certain crimes. 11 U.S.C. § 101(10A).
In North Carolina and Alabama, bankruptcy administrators perform similar functions that U.S. trustees perform in the remaining forty-eight states. The bankruptcy administrator program is administered by the Administrative Office of the United States Courts, while the U.S. trustee program is administered by the Department of Justice. For purposes of this publication, references to U.S. trustees are also applicable to bankruptcy administrators.
Section 507 sets forth 10 categories of unsecured claims which Congress has, for public policy reasons, given priority of distribution over other unsecured claims.
A fee of $25 is charged for converting a case under chapter 13 to a case under chapter 7.

You may be interested in reading How to Find a Good Bankruptcy Lawyer or Bankruptcy Attorneys

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@GetOutOfDebtGuy

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Carolyn Writes In And Wants a New Mortgage In Bankruptcy

Steve Rhode — Wed, 05 May 2010 11:01:00 +0000

From How to Get Out of Debt

“Dear Steve,

My husband and I are in bankruptsy, we have a 3 year plan with one year left on the plan. Our mortgage company has us on an ARM and wont remodify our loan.

How can we get out of chapter 13 and get into a fix rate mortgage?

Carolyn”

The Answer:

Dear Carolyn,

I’m afraid it isn’t as easy as it sounds. Before you do anything to impact your bankruptcy I would advise you to talk to two people, your bankruptcy lawyer and a mortgage broker.

There are so many different types of mortgage loans available that it would be unwise for you to do anything here without getting the specifics about what mortgage loans are actually available for someone that has just emerged from bankruptcy.

I’m not sure that breaking out of your bankruptcy is an idea even worth considering if you have other debts in your bankruptcy. If the Chapter 13 bankruptcy plan fails or stops before a successful completion then your creditors could come back after you for the full amount due.

If the mortgage is the only debt left in the bankruptcy plan than I have seen situations when it can make sense to let the bankruptcy fail and then go for a loan, but there examples are rare.

There is no way I would make any move here without input and a coordinated approach by your bankruptcy attorney and the mortgage broker that will handle any possible mortgage refinance that may be available to you.

Just remember that no matter what you do right now, your credit score and recent credit history are horrible because of the bankruptcy and the chances of you getting a really good fixed rate mortgage are slim at best.

Big Hug!

@GetOutOfDebtGuy

The Answer:

My Husband and I Are Considering Filing Chapter 7 Bankruptcy in Oklahoma. – Amber

Steve Rhode — Fri, 08 Jan 2010 13:55:03 +0000

From How to Get Out of Debt

Amber

“Dear Steve,

My husband and I are considering filing chapter 7 bankruptcy in Oklahoma. The only thing that I have in my name is $5,000 worth of property. My grandparents gave it to me and the way the deed is wrote up is that I can’t ever sell it. It can only be passed down to the family or possibly sold within the family. We don’t have anything else in our name. Could I get my property exempt from being taken? There isn’t anything on the property, but we want to keep it. It’s the only thing we have.

Thanks.

Amber”

The Answer:

Dear Amber,

I could look that up and give you an answer but you need to go and see a local bankruptcy attorney and ask him or her your question. The bankruptcy attorney will be happy to explain everything and answer all of your questions before you decide to go bankrupt.

If you don’t know of a local bankruptcy attorney you can click here to schedule a free bankruptcy consultation.

A bankruptcy attorney that is licensed in Oklahoma will know what the laws are in Oklahoma and what tricks or techniques might be available to help you with the property situation.

Whatever you do, don’t rely on anyone but an Oklahoma bankruptcy attorney for an answer to your situation.

Big Hug!

@GetOutOfDebtGuy

My Husband is in the Navy and We are Drowning. – Tracy

Steve Rhode — Fri, 08 Jan 2010 13:55:02 +0000

From How to Get Out of Debt

Tracy

“Dear Steve,

I had excellent credit 2 years ago then my husband who is in the Navy got a job transfer from Florida to Texas- Our Florida home took 2 years to sell and we sold with a shortsale of 118,000- not forgiven by our lender, we also lived on credit cards for 2 years while paying 2 households- now we are 40,000 in credit card debt and have the 118,000- shortsale-

I spoke to one attorney who said because I keep a few children in my home we are over the means test limit- How can we make to much to file when I bring in 1700 (before deductions) a month, 950.00 in child support , and my husbands income is 4300.00 a month- but we are living pay check to pay check with no savings and one bad thing happens we are sunk-

I am current on all my credit card bills but am thinking I need to start saving some of that money for an emergency- as we have none- If you go by my taxes it shows I only make around 500 a month after expense- so what is the proper figure I should give to my new attorney I am going to see????

How to figure what I make each month keeping a few kids in my home? How can we make to much? what toi do with all this debt?

Tracy”

The Answer:

Dear Tracy,

I certainly think a second opinion is in order. I’m not sure why the first bankruptcy attorney said you did not qualify for bankruptcy.

I’ll ask some bankruptcy friends to comment on your question and see if we can’t shed some light on the issue.

Big Hug!

@GetOutOfDebtGuy

Diana Is Struggling to Make Credit Card Payments And Afraid

Steve Rhode — Wed, 16 Dec 2009 21:43:42 +0000

From How to Get Out of Debt

Diana

“Dear Steve,

I have approximately $25,000 in credit card debt, drained my savings and struggling to meet my payments. I can pay my mortgage and normal billing but not the cards

I am so confused about wha is available out there and frankly scared that I may not do the right thing with a repuable company. Can you help.

Diana”

The Answer:

Dear Diana,

It is normal to feel scared and afraid but I don’t want you to feel that way anymore. Consider yourself protected from this point on.

I wish you had found me before you started draining your savings account to get by and pay bills. I would have pulled you away from the checkbook, lovingly tossed cold water on you and said, “Diana dearest, what are you doing?”

Savings is there to be used in case of an emergency but not to continue living a life you can’t afford. Unless you can face the underlying issues that are leaving you financial abandoned, then dribbling cash from a savings account will only leave it bone dry and you, without further financial transportation. It is not a solution.

You should give yourself a real pat on the back that you reached a point and found the courage to reach out for help. That’s a huge step. And now that you’ve done that, you are absolutely right, who can you trust?

Now that you are tapped out there are really only a few logical options so let’s talk about them.

One of those options would be to explore entering a debt management program where you would make one monthly payment to the debt management company and they would divide it up amongst your creditors and pay them a new amount that might eliminate interest and fees.

But that’s not really a good solution for you at this point since you really don’t sound like you have the spare cash to be able to pay anything on a continual basis. I surely don’t want to see you enter a payment arrangement in a debt management program just because you are scared of your creditors. If you can’t make all the payments in the debt management program and eliminate your debt over five to seven years then you are throwing good money after bad.

You could immediately run and go bankrupt and discharge, get rid, of all your unsecured debt. Bankruptcy would eliminate the credit card debt but you could probably keep the house and car. I would suggest that if you consider bankruptcy as an option that you contact a bankruptcy attorney and ask for a free bankruptcy review to discuss your specific situation.

Another option, that will sound silly, but it’s not, is to do nothing at this time. You see the reason you have found yourself in this situation is either because your debt suddenly increased or your income dropped.

I suspect it is either a combination of those issues or primarily caused by a reduction in income. If that is truly the case then an option is to ignore the credit card bills that you can’t pay for right now and focus on trying to increase your income or get a second job. You might want to take a look at the America’s Job Bank page I created to help people find jobs.

This is a reasonable course to follow if you don’t want to go bankrupt right now, for your own reasons, and want to take a stab at repairing the situation. You’ll always have bankruptcy to fall back on in case a credit card company sues you or you just can’t increase your income to meet the financial demands.

If you do this the collection calls and letters will continue to come. Don’t let them rattle you, bankruptcy will be your fallback plan in case nothing else works out.

As far as being scared about working with a reputable company, that is less of an issue. Most every bankruptcy lawyer and debt management company does what they say they will do. Just watch out for a company that wants to sell you credit repair services as a solution or says if you pay them they will give you a debt consolidation loan.

While your situation feels dire, the reality is that it is a fairly common scenario that millions and millions of people are facing and suffering in silence with every single day.

If you need more help or advice, don’t hesitate to contact me.

Big Hug!

@GetOutOfDebtGuy

The Answer:

BB Owes American Express $40,000, She Can’t Pay It, Bill Collectors Are Starting to Call

Steve Rhode — Tue, 15 Dec 2009 17:36:06 +0000

From How to Get Out of Debt

“Dear Steve,

I’m in approximately $80,000 of credit card debt with an unfortunate and sudden drastic change in finances due to situations beyond my control.

I owe American Express $40,000 along with other credit card debt. I have never been late on my payments except this month.

American Express along with a few more creditors has already begun to call me. I have not as of yet returned the calls.

I’m pondering bankruptcy or perhaps some sort of credit counseling or debt consolidation plan? Do I just write each creditor explaining my situation?

At this point I only have approximately $500 dollars a month and just one of my American Express accounts requires a monthly payment of $516.

Please help, I’m desperately awaiting your advice.

What would you suggest I do? I inquired about bankruptcy and was advised I’d need to wait perhaps 3-6 months as bills are behind. Suggestion?????

BB”

The Answer:

Dear BB,

It is amazing how people are really as good to creditors as their last payment. Whatever has caused this sudden and drastic change was not expected or planned for but it has now left you in a very difficult situation.

American Express is a difficult company to deal with and their bill collectors have limited tools to use to really help you to get out of debt. The pressure they apply and approach to their debtors actually does more to drive people into bankruptcy as crazy as that sounds.

There really isn’t any reason to write to your creditors. If you have been late on a payment, they already know that. Besides a preemptive letter to your creditors seems to go nowhere and vanish into the ether.

You are much better off explaining your situation, nicely, to the collector on the phone when they call.

If your situation is temporary and you will be able to return to your previous financial standing in a couple of months then you’ve got some other options but from the way I interpret your question it sounds as if this is not a temporary reduction in income and it is more dire and long-term.

I am surprised that you were told to hold off on bankruptcy unless you were using your American Express cards up to recently. It would not be the best scenario for you to use credit cards you include in bankruptcy within 90 days of going bankrupt.

I would seek a second opinion from another bankruptcy lawyer in your area and ask for a free bankruptcy review.

In the meantime you should consider not sending any more payments to the credit card accounts you can’t afford to pay. This will damage your credit report and lower your credit score but there is no upside in draining any money that you may have currently on hand that may be needed to make necessary ends meet or to pay for bankruptcy when you file.

With credit card debts of $80,000, your monthly minimum payment on those accounts is about $1,600, and that $500 is not going to be enough to please all of the creditors. Any repayment plan at that level is almost certainly to fail.

If bankruptcy is really in your future then throwing good money after bad is not going to accomplish a thing. But that does not mean you can go out and party with that extra cash. Save it up to go bankrupt.

Big Hug!

@GetOutOfDebtGuy

The Answer:

How to Find a Good Bankruptcy Lawyer or Bankruptcy Attorney

Steve Rhode — Wed, 02 Dec 2009 18:37:11 +0000

From How to Get Out of Debt

So the time has come that you feel as if you need to explore bankruptcy. At least you want to talk to a bankruptcy lawyer about what bankruptcy would mean for you.

People often can’t see that finding a bankruptcy attorney does not mean you are going to file bankruptcy, it means you are going to talk to a professional about what bankruptcy would mean if you decide to go that route.

I always, always think that as part of any exploration to solve debt problems, meeting with a local bankruptcy attorney should be part of that process. You can’t weigh your options unless you explore them.

Get a Free Bankruptcy Evaluation With a Local Bankruptcy Attorney.

If you would like for us to, we’d be happy to try to locate a local bankruptcy attorney for you in your area. We’ll just need a brief bit of information to start.

You Need to Know This About Bankruptcy

Article I, Section 8, of the United States Constitution authorizes Congress to enact “uniform Laws on the subject of Bankruptcies.” A fundamental goal of the federal bankruptcy laws enacted by Congress is to give debtors a financial “fresh start” from burdensome debts. The Supreme Court made this point about the purpose of the bankruptcy law in a 1934 decision:

[I]t gives to the honest but unfortunate debtor…a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt.

For more information about how bankruptcy works see All About Bankruptcy – Chapter 7 Bankruptcy – Chapter 13 Bankruptcy.

What Katie Said About Her Bankruptcy Experience

HI ALL!

This is Katie again, I just wanted to touch base…its been over 6 months since my last post…and what a difference a little faith, time, and persistence can make.

I made the hard, but right, decision to declare bankruptcy. (Something I should have done years before, but instead of listening to my gut, I fell into the traps of a debt management program which was way over my head and totally unaffordable).

It was not a fun process, but it was not as difficult as I had imagined in all my late night episodes of stress and sleeplessness. My attorney was a good man. The phone calls stopped instantly, the rest of the process took a bit longer. The day in front of the trustee I was TERRIFIED…but surprised to see a room full of people who looked an awful lot like myself….ready to move on, ashamed of our mistakes, but not ashamed of who we are who or the right we have to a fresh start.

I can’t say I was celebrating following my meeting of the creditors, but I definitely felt a huge load of my back for the first time in years.

I have since been discharged…the attorney has been paid in full…My husband and I are living on cash and doing well, have some money (not much, but a little) saved…he has a great new job, and we have baby due in September….yikes!!!!!!

There is a light at the end….do not give up hope or be too hard on yourself.

Do yourself a favor…If you talk to a debt counseling agency about your options, I would suggest also meeting with a bankruptcy attorney to discuss them. Always best to get both sides ….and if you truly cannot afford the payment offered by a debt counseling agency, than DO NOT SIGN UP…you will spend to much time spinning your wheels and increasing your frustration.

Steve – I want to thank you again for your website…he really spoke to me on a day when I needed someone to understand. I cannot express to you enough how much it meant to me on that day in August last year to come across this page and read your words. They were a huge comfort to me on a horrible day during a difficult time in my life.

Thanks again.

Katie

Thinking About Filing Your Own Bankruptcy Petition?

If you are thinking of filing your own bankruptcy petition without the assistance of a bankruptcy attorney, I would strongly advise you to not do this. The consequences and pitfalls for making a mistake are potentially very big.

Bankruptcy is a Process

Bankruptcy is a process. And a good bankruptcy lawyer is familiar with that process. For the most part it is a technical exercises and because of that, I feel, the most important aspect to look for is good communication. You want to make sure whatever bankruptcy lawyer you select treats you with kindness, professionalism, and compassion. This also extends to the office staff of the bankruptcy attorney as well. You need to make sure you feel comfortable contacting them and they properly care for you.

I asked some bankruptcy attorneys what they felt was important in selecting a bankruptcy attorney. here is what they said.

Advice from Bankruptcy Attorney – Mark

One thing that I would say right at the outset: don’t choose an attorney based on priced. You often get what you pay for. Most good attorneys charge about the same amount. If you find someone who is significantly below everyone else, you should think twice about why that might be.

As for what I’d look for in a good bankruptcy attorney: experience. How long has the attorney been practicing? If the client has a tough bankruptcy case, is the attorney qualified to handle it? During the initial intake process, did the attorney’s staff make it easy or make things difficult? You can learn a lot about a firm just by paying attention to the support staff — and how they treat you. If the support staff seems to have little patience or time for you, there’s a good chance your attorney will be similar. Pay attention.

Also, does your potential bankruptcy attorney do most of his or her work in the district that you reside in? There are a LOT of local rules that must be followed. If you’re not practicing in a particular district, there’s a good chance that you won’t know all of the little rules that are followed in that district. Cases are dismissed all the time because procedural rules are not followed properly. Something to think about.

Advice from Bankruptcy Attorney – Carl

As for advice specific to bankruptcy attorneys, I think the biggest mistake consumers make is the shop by price first. You want someone who cares about your case and has the time to devote to regardless of the price. There are plenty of bankruptcy mills that might be able to file your case for a low fee, but not necessarily get the most out of the bankruptcy process.

I am biased, but I think choosing a member of the National Association of Consumer Bankruptcy Attorneys is important. I’ve never belonged to professional organization that has done more for my professional development AND been an advocate for the clientele of its members. There are plenty of good attorneys who are not NACBA members and not all NACBA members are good attorneys, but it is a good resource for both attorneys and debtors.

You want someone who makes bankruptcy one of their primary area of practice. When the reform law passed in 2005, a lot of the dabblers got out. I had done mainly creditor to work up to that point and I either had to get serious or get out. I decided to get serious, but now bankruptcy is “sexy” again as a practice area and people are drifting back in.

Some bankruptcy attorneys do not how to handle things like adversary proceedings, lien strips, cram downs, redemptions and a whole host of other things. Experience and results count.

Advice from Bankruptcy Attorney – Jeff

First and foremost, you want an attorney that works in the disctrict you will be filing in. Each district is different and there may be subtle differences in the Local Rules.

Experience is always crucial, but more importantly is whether the attorney does primarily bankruptcy work. Bankruptcy is very complex with some very short time commitments. It is difficult to provide services in other areas and stay on top of your bankruptcy case load. For example, our Local Rules have just changed, requiring deficient filings and other required documents to be filed no later than 14 days after the case is filed.

An area we pride ourselves in is having an attorney speak directly with the prospective client during the initial contact. Prospective Clients can plan on spending 15 to 20 minutes asking and answering quetions with our attorneys. Our goal is to quickly understand the issues and make a determination on which chapter is appropriate to file under. We can then also provide a quote of the fees the prospective client will be charged. If we are unsure after the initial phone conversation, we will let the prospective client know and quote them two separate prices (Ch 7 and Ch 13).

I personally believe that being able to speak directly to an attorney is priceless. Clients can get a good idea if they want to work with this attorney. If a client calls a firm and the intake is done by someone other than an attorney, then the client may not have enough information to make a good decision about hiring that firm. We strongly believe we are retained over other local attorneys because of the fact that when a client calls they are talking to an attorney that will engage them, understand their position, and give them good feedback.

I also think you should consider meeting with at least two bankruptcy attorneys face-to-face to decide which is best for you. Now, you may feel embarrassed or ashamed about your situation, but trust me, a good bankruptcy lawyer has seen just about every situation and is not there to judge you. Bankruptcy attorneys are there to help you.

Get a Free Bankruptcy Evaluation With a Local Bankruptcy Attorney.

Once you have found a local bankruptcy attorney and you have a meeting scheduled, make sure your spouse or partner goes with you to the meeting. Things will work out better if you are both there, if married, to ask all your questions and both hear the answers.

What to do After the Meeting With the Bankruptcy Lawyer

After you meet with the bankruptcy attorney, do nothing. Don’t commit to filing bankruptcy or not filing bankruptcy at the end of that free consultation appointment. I suggest you go home and sleep on what you learned. The next day you can then decide to move ahead if you think it is a good option for you.

The only reason to rush into a bankruptcy filing is if your home is one the auction block in the next few days and you need to file bankruptcy to stop the foreclosure sale.

After a day or so, if you feel bankruptcy is right for you then take action and get the process moving forward. If you can’t afford the bankruptcy fees all at once, talk to the bankruptcy attorney and ask about installment or payment plans to help you get the ball rolling.

Bankruptcy Attorneys I Really Like

Here is a listing of bankruptcy attorneys I really like and who have been great friends to this site. These folks are just really great people in my book.

California

Carl Starrett, II: Serving: The greater San Diego area.

Ohio

Jeff Jackson: Serving Counties of Delaware ● Franklin ● Union ● Morrow ● Logan ● Knox ● Madison and the communities of: Bellefontaine ● Columbus ● Dublin ● Delaware ● London ● Marysville ● Mount Gilead ● Mount Vernon ● Powell ● Westerville ● Worthington

Oklahoma

Dan Nunley: Serving Eastern Oklahoma in cities including Bartlesville, Bixby, Bristow, Broken Arrow, Claremore, Cleveland, Collinsville, Glenpool, Grove, Henryetta, Jay, Jenks, Mannford, McAlester, Muskogee, Owasso, Pawhuska, Pryor, Sapulpa, Sand Springs, Skiatook, Tahlequah, Tulsa, Vinita and counties including Adair, Atoka, Bryan, Carter, Cherokee, Choctaw, Coal, Craig, Creek, Delaware, Haskell, Hughes, Johnston, Latimer, Leflore, Love, Mayes, McCurtain, McIntosh, Marshall, Murray, Muskogee, Nowata, Okfuskee, Okmulgee, Osage, Ottawa, Pawnee, Pittsburgh, Pontotoc, Pushmataha, Rogers, Seminole, Sequoyah, Tulsa, Wagoner and Washington.

@GetOutOfDebtGuy

Free Bankruptcy Resources

Click Here to Find a Caring, Compassionate and Kind Bankruptcy Attorney in Your Area

Easily Rebuild Your Credit After Bankruptcy
The Truth About Bankruptcy Success Rates
How to Get Out of Debt Calculator
How Long After Bankruptcy Can I Buy a House?
Is Bankruptcy Sinful and Bad or Right and Moral? An Examination
How to Get Out of Debt. The Honest and Unvarnished Truth
The Emotional Seven Stages of Debt
Getting a Job After Bankruptcy

Crystal Went Bankrupt But Did Not Include All Her Debts. She Left Out Two Payday Loans. Oh Crystal.

Steve Rhode — Thu, 04 Dec 2008 16:37:59 +0000

From How to Get Out of Debt

“Dear Steve,

Hello…my situation is that I filed bankruptcy earlier this year. At that time, I didn’t include (2) payday loans which I was under the impression were not considered under Chapter 7. These loans are out of Delaware. I thought I could control them afterward the filing.

Since the filing, I was laid off my job, had to move home, had car issues, needed surgery, etc. Fortunately, I started working again about 1 1/2 months ago. To “catch up”, I preceeded to obtain (3) other payday loans and again, thought I could control them. The previous (2) are not in collections and I’m now paying them bi-weekly.

These payday loans are like a tsunami and the (2) weeks come around way too often. Other than these, I’d really be on track. I’m really coming apart at the seams and the fees are out of control. Will a debt consolidation plan be the way or a “payday loan consolidation” be the best way? Will either plan be acceptable even with a Chapter 7 history?

Thank you.

Crystal”

The Answer:

Dear Crystal,

I asked a beloved friend of mine, who is a bankruptcy lawyer for some feedback about your situation as well. You will see that have a slightly different views on the issue but that’s what I love about collaboration, it brings out the best in people. I’ll post the lawyer feedback below, but first, I do have something to say about payday loans.

A payday loan is a short term loan where you pay a fee to get cash in hand now but must repay that money within a short period of time. In certain situations, they can be a benefit. For example, the car breaks down and needs repairs, you need the car to get to work to earn money and you’ll be able to afford to pay for the repair with your next check, in that case a payday loan might be a perfectly good option.

A payday loan is a financial tool, just like a credit card, overdraft or a bank loan. It is not the tool itself that is inherently bad, it is how it is used and abused.

The minute you start taking out new payday loans to cover you when you could not pay back the old ones, is nothing but really bad news. The minute you start doing that, enormously loud warning sirens need to go off in your head.

Readers might say that the multiple payday loans are the sign of an irresponsible lender, and if they are from the same payday lender then I would agree. But in my years of experience I have seen many people get one payday loan here and one there, shooting themselves in the foot without disclosing the previous payday loans to the new lenders.

And some people will feel very critical about the existence of payday lenders at all but there is a large segment of the population that still relies on check cashing and payday lenders for financial services. Many people don’t have bank accounts, can’t get credit from Main Street lenders for emergency situations or distrust banks. in fact, Kinecta Federal Credit Union in California recently purchased the largest check cashing and payday lender chain in the state to be better able to reach that part of the population that relies on these service providers. See “The Good Side of Check Cashing and Payday Loans“)

Crystal, I’ll let my lawyer friends words give you some specific direction about what you can do now and what you should have done when you filed bankruptcy. Let’s let others learn from this painful situation so they don’t have to repeat the same issues.

Dear Crystal:

Before getting to some solutions to your payday loan debts, you should know that payday loans are the most addictive and costly way to borrow money. When you get out of these debts, as explained below, never go to a payday lender again! If you have an emergency need for cash, you are far better off to join and go to a local credit union for a small short-term loan, or even to pawn some property rather than to get a payday loan. The amounts borrowed seem small, but the costs are truly “loan shark” rates– well over 300% interest per year. The payday lenders get around this by saying it’s only meant to be a short term loan, but as you’ve found out, it’s much easier to roll the loan over than pay it off and you end up paying $100 to borrow $100. Below are some solutions to your problems. As soon as you can, please try to start a savings account and “emergency fund” of your own money to fall back on instead of needing an outside source. If you can save even $5 a week, it will build up and then you can be your own lender! There are at least three pieces to the situation you have described.

1. When you file a bankruptcy, you’re supposed to list all of your debts, regardless of whether or not you think they will be affected by the bankruptcy. But you’re in luck, because your personal liability on the loans you owed before the date your bankruptcy was filed was most likely discharged (forgiven) by your bankruptcy. The problem is that these two lenders don’t know that you filed the bankruptcy because they were not listed and did not get notice. This is what bankruptcy lawyers call “the omitted creditor problem.” This can be hard to explain to the lenders since it’s the result of interplay between section 523(a)(3) of the Bankruptcy Code and the Bankruptcy rules and procedures governing “no asset” chapter 7 cases and the filing of claims. Most chapter 7 cases are “no asset,” meaning that you were able to protect or “exempt” all of you property when you filed and there was nothing for your Chapter 7 Trustee to sell for the benefit of your creditors. If your case was a no asset case, then contact the two lenders you owed but did not list, give them proof of your filing and have them agree that their debts are discharged. If you cannot convince them of this, you’ll have to contact your bankruptcy lawyer’s office to get an official explanation letter sent.

2. The payday loans you got after the date you filed your bankruptcy case are not affected by your bankruptcy, but you still may have relief. First, many payday loans made on the Internet are not legal or enforceable under the laws of your state. There are two ways that can happen: The first is that your state may have specific laws against payday lending. The second is that your payday lenders may have failed to comply with other state laws governing creditors. For instance, companies seeking to collect a debt in state A may be required to register with state A’s Department of Insurance or other office. Your bankruptcy lawyer’s office or the state Attorney General’s consumer protection division can help you find out what applies in your state. The state offices are listed at: www.consumeraction.gov/state.shtml

3. There’s plenty you can and should do to protect yourself right now. The payday lenders either hold one of your checks or have been given access to your bank account. As soon as possible, close any bank accounts for which you’ve given out information. You can open a new account at the same bank or credit union and you should explain what’s going on to your financial institution. If the debts are legal and valid, then you can ask them to waive the interest going forward and allow you to pay off the debt on your own. Be sure to get everything in writing, including how they will report the debt on your credit reports. And remember that you have rights under federal law not to be harassed.

Hang in there and fight! You can do it!

Well Crystal, that’s an awful long answer for you but I hope you can see that you do have some options. I agree, you should go back and talk to your bankruptcy lawyer and ask for help in addressing those original two payday loans that you didn’t include.

While payday lenders are tougher to work with, they may agree to accept payments through a debt management plan to help repay those debts that you took on after your bankruptcy. Since you recently filed Chapter 7 bankruptcy, that’s not available to you again for a number of years.

The credit counseling group isn’t going to care that you went bankrupt because they are not going to give you a debt consolidation loan, but instead, a possible way out of your debt you are in now with an orderly monthly repayment program.

Big hug, from both of us.

Steve

Photo: Steve Rhode

The Answer:

Jason Has Not Paid His Mortgage in 10 Months And Wants to Keep His House

Steve Rhode — Fri, 21 Nov 2008 02:22:30 +0000

From How to Get Out of Debt

“Dear Steve,

I fell behind on my mortgage payments then I stop paying my mortgage payments and let things get worse.

I fell behind in my mortgage and then gave up and stop paying it. I’ve been in foreclosure for about ten or more months. In a few weeks there will be a court case not sure if it will be final but i was served papers from the bank ten months ago or so. Can I stop all this and keep my house or is it too late now that i woke up and want to fix this mess?

Please help me if you can, thank you.

Jason”

The Answer:

Dear Jason,

The biggest issue we need to deal with after ten or more months of avoiding dealing with this is how much time you really have left.

I suspect that you don’t have a lot to enter into a long protracted negotiation process. You have three options:

Call The Lender Directly

You could call the lender directly and see what options they have to help you reinstate the mortgage.

Call a HUD Approved Housing Counselor

You could discuss your case with a local housing counselor and see what options they may have for you. You can find one online here.

You Could File Bankruptcy

You could talk to a local bankruptcy lawyer to see how a chapter 13 bankruptcy can protect your house and get you back on a payment plan to repair the delinquent mortgage situation.

Please come back and let me know which option you choose and what the outcome is.

Steve

The Answer:

I’m Afraid I’m Going To Get Laid Off. How Will I Pay My Bills? What Will I Do?

Steve Rhode — Fri, 24 Oct 2008 17:16:57 +0000

From How to Get Out of Debt

“Dear Steve,

When I read the news I get so afraid that I will get laidoff. Business at work seems to be slow and I find myself surfing the internet more at work and reading more of these stories about the pink slips that are coming.

I’ve got bills and credit card debt to payoff and a wife and kids to care for and I’m afraid. What should I do, or maybe, what can I do now?

James”

The Answer:

Dear James,

I’m afraid you are right, the news is not good about jobs in the near future. As an employer even I am not immune from facing those same pressures and potentially reducing staff. Even sites like one of my favorites, The Consumerist, has just laid off some really good writers.

Rather than blow smoke up your ass and give you hollow good news I’d like to give you some honest and from the heart advice that you can use.

Losing Your Job Does Not Mean You Suck – When pink slips and job loss notices are distributed it does not mean that you are not a valuable member of the team. In my past I had to once layoff 18 members of a 70 person team. It was horrible at it and cried each time I had to do it. Maybe that shows a weakness in me, I’m not sure. Regardless, it was painful for all concerned.
As an employer it was not a decision that I took lightly. I fully realized that these were the lives of good people that were going to be hurt by the failure of my business to produce enough income to support them. I was deeply hurt that I had failed them by not finding my magic wand to save them.

Decisions to let people go were based on a number of factors that had nothing to do with who they were as individuals. Sometimes business is just business and what had to happen to save the remaining jobs.

I guess what I’m trying to say here is that if you’ve been working hard, contributing ideas and help to the company, and doing your best, you could still lose your job but that it not a negative reflection about you.

Layoff decisions in big companies come from slash and burn policies to reduce a specific head count or certain departments. Again, that is not personal it is personnel.

You might find my America’s Job Bank page helpful for looking for a new position.
Let’s Assume That You Are Going To Lose Your Job And Start Implementing a Plan – It is always better to plan for the worst and enjoy the best, if that is what fate is going to give you. And so much that life has to offer is fate or divine intervention or just random luck.
Even before you get notice I think you should consider the following advice now.
1. Talk Honestly With Your Family Now – Even if you’ve always maintained a facade as a strong provider it is time to sit down with your spouse and lay out the facts. Once the two of you are on the same page then it is time to sit down with the children and be open about the facts now. Let them know what your concerns and worries are. Let them know that there might have to be cuts and ask them to help where they can to reduce expenses. Keep the entire family in the loop so there are no bombshell surprises.
2. Don’t Buy Another New Thing On Credit – If you might find yourself in a hole, you can stop digging it deeper right now. You can use your credit cards to make a purchase but make sure you are paying for what you buy in full each month. If things get really bad and bankruptcy might be in your future, which it might, then recent credit purchases can pose a problem.
3. Cut Where You Can But Don’t Eliminate – It is important to prepare for an eventually but you don’t have to run for the bunker right now. If the family is used to going out to eat twice a week, trim it back to once a week and then maybe once every other week. You don’t need to cut out things that bring happiness completely.
4. When You Face Fear, Bring Hope – You are facing uncertain times and these moments make us face our fears. Actually they just make us focus on our fears and make us feel desperate. The reality is that anyone can lose their job at anytime, and for any reason. Even in your best days there was always a possibility that you could be unemployed. You would have been hopeful then if that had happened, be hopeful now.
5. Evaluate Most Every Purchase – As you are your wife go forward from this point, spend money wisely and thoughtfully. Start asking yourself why you are buying this thing and if you really need it. Here are some helpful pre-purchase questions to ask yourself, in your head. If you ask them to yourself out loud in line, people will stare.
  Pre-Purchase Checklist
  - I feel like I really want this. Why?
  - What does this thing represent to me?
  - Once I buy this, how will it make me feel?
  - If I don’t buy this, how will it make me feel?
  (This list is from page 122 of my book The Path to Happiness and Wealth which you can download for free as my gift to you.)
  If you find that you are purchasing an item because it makes you feel better, you deserve it or it reduces your stress; put it back. Now is not the time for medicating yourself with shopping. Now is the time to be a good steward with what money you do have.
  
  That means that if you feel like you must buy a name brand of a particular item that is more expensive and you have not evaluated the less expensive alternative, do it now. Just because you have always bought the name brand of an item does not mean that the extra expense is justified, it primarily means that you have associated a benefit from purchasing that product.
  
  Not that long ago I travelled all over doing some price comparisons and found where I could buy the things we normally use for the least amount of money. You might want to do this also to find out where your money buys the most. Read the article.
6. Let’s Assume That You Will Not Be Able To Find a Replacement Job – It is better to deal with the issues of not being able to find a job that pays the same amount as you are making, now.
  There are certain realities to go along with that situation. If you do not have enough income to support your current lifestyle, you are going to have to layoff part of your current lifestyle. I guess that’s what trickle down economics is all about, at least in down times.
  
  You might have to go bankrupt, talk to your mortgage lender about a loan modification, buy generic instead of name brand, drive the family car till is falls apart, etc. All of these things are a reality.
What Happens When You Lose Your Job – If you’ve been working this plan then you will be better prepared to deal with the pain and misfortunate of losing your income. At least by thinking about these things in advance you will have better prepared yourself for the eventualities. The most likely solutions when you are not bringing in enough money are:
1. Only pay the essential bills; food, shelter, clothing, utilities, etc. You will notice that credit cards and other unsecured debts are not on that list.
2. Look at credit counseling and see if that is a payment you can afford with your new limited income.
3. Talk to a bankruptcy attorney and find out if bankruptcy is right for you. Many bankruptcy lawyers offer a free bankruptcy review.
4. Reduce your lifestyle. Move to cheaper housing, rent if you have to. Trim back on expenses that you can’t pay for in cash. Get out of your car lease or refinance your car loan to lower your transportation costs.
5. Think of your savings account money as water that can’t replaced in a drought. Consume it as carefully and wisely as you can. When it’s gone, it’s gone.

As always, I’m here for you when you need my help. I wish I was there to give you a big hug, goodness knows you sound as if you could use one. We don’t have to tell anybody.

Steve

The Answer:

The Personal Finance Brain Trust Tackles – Trying to Make Ends Meet But Still In Trouble

Steve Rhode — Mon, 20 Oct 2008 18:32:46 +0000

From How to Get Out of Debt

This weeks personal finance brain trust question was one that I received online.

My wife and I are both working, paying rent and land payment (have been trying to sell it), 3 kids and other debts and bills we are struggling from pay to pay and never get ahead. We have also borrowed money from family to help, but are still in trouble.

What can we do to ease the pressure.

Help!

WC – A 27-year-old writer living in Chicago and writing about personal finance through The Writer’s Coin.

This is the type of question that really gets to me. This is a case where money-saving tips and tricks come up short. This isn’t about cutting corners and saving money, these are situations that require life changes.

Gradual but drastic changes in how people live their lives. As Eminem so eloquently put it in the movie 8 Mile: “Do you ever wonder at what point you got to stop living up here and start living down here?”

It’s easy to cut corners and maximize a budget when you’re cutting things like movies and dinners out on the town. This question hits at the core of problems people have around the country: much more serious problems that require bigger changes.

It’s going to be hard, but my advice for this person would be to drastically change the way he/she handles their money. It may not be fun, but you have to stop living beyond your means, and if you’re “struggling” you shouldn’t be living at the level you are right now. Follow Eminem’s advice.

Patrick Bryan – Living in Northern Ireland, Patrick helps people in a very different environment and economy but yet, mush is universal and much is the same. Visit Patrick’s Northern Ireland blog on debt.

It is difficult to fully answer your question without more information and the first thing I would encourage you to first carry out an income and expenditure analysis.

Keep track of all your spending for at least a week but preferably 30 days.

Hopefully this will show you where your money is going and perhaps suggest ways to economise. It is amazing how much we can all spend on little things like newspapers, magazines, coffee etc. All of these are small expenses but can quickly add up to a lot of money each month.

Of course if your shortfall is high each month then more drastic action might be called for. It seems to me that you might have to give up on your dream of being a homeowner for a while. If you are struggling with rent and a land payment then by the time you develop the land you will probably end up with a property which between mortgage payment, taxes and maintenance will cost you more each month than renting. I have seen too many people over the past few years struggle to be a homeowner in order to build equity, only to end up repossessed because they can’t afford the running costs.

Now could be a good time to offload that land cheaply, put your finances in order and perhaps even put away some rainy day money in a zero risk readily accessible deposit account.

Patrick – Patrick writes two excellent blogs, Cash Money Life and the Military Finance Network.

The first thing you want to do is create a master list of all your income and all your regular expenses. With this list you will then determine if you have enough monthly income to cover everything. As you list your recurring expenses, look for ways to reduce them such as dropping cable or satellite TV, stopping monthly subscriptions, etc. You can also look to further reduce expenditures by buying generic products, reducing your utility usage, etc.

After you have cut expenses, look at the paper again. If the expenses side of the paper is larger than the income side of the paper, you are still in a losing situation. The only solution is to either cut more expenses or bring in more income. You may be able to cut recurring expenses by requesting rate reductions from creditors, reducing luxuries, and selling items that have recurring payments (such as the land or a car). To bring in more income you can try working overtime, taking on part time work, starting a side business, or holding a garage sale to sell unneeded items and make extra cash.

The only way to get ahead of the curve is to bring in more income than your current monthly expenses, there is no other way.

Steve Rhode – A personal finance blogger and founder of the Myvesta Foundation, a global scoial enterprise that helps people find solutions for money troubles. You can ask Steve your debt related question through GetOutOfDebt.org and he’ll help you for free.

When everything has been cut to the bone and there is no other expense to cut, that’s when you should start looking at benefits you may be entitled to. Government benefits like food stamps (now called SNAP), food allowances for women, infants and children (WIC) and health benefits like Medicaid should be there in your time of need. You can see this previous answer for more information on these benefits and others.

Maybe you’re feeling like you are too proud to hunt down those benefits. But you’ve paid into those programs through your tax dollars all this time. If you are in need, don’t let pride stand in your way of feeding the kids.

You should really take a good look at bankruptcy and see what debts you can get rid of in bankruptcy. Since the land won’t sell you can either reduce the price way, way down to move it, let the land go back to the finance company and include any residual debt owed on the land in your bankruptcy, or let your bankruptcy lawyer try to negotiate down what you owe on it so you can include it in the bankruptcy but keep it.

I’m really concerned about the borrowing from family to help make it. You’ve noticed that’s not working so in reality all you are doing is just going further into debt but to a different person. It is not solving the problem.

Getting out of debt is hard, difficult and sometimes damn near impossible, but it is not rocket science. If you can get your basic expenses to fit within your income, with a buffer to save a little in a savings account and get by, that’s what a basic budget should look like. If you are trying to pay down debt on a new spending plan or budget then you’ve got to trim down your expenses so far to include your basic expenses, debt repayment, and savings.

The pressure is intense and debilitating but it is not going to ease until you start to put a plan in place to resolve this situation. The pressure you are feeling is the force that builds up between the wall of reality and the wall of demands as they move closer and closer to each other. Once you alter your financial existence or eliminate your debt through bankruptcy, then the relief valve will open and the pressure will decrease.

You will find that your best solution will probably lie in a combination of these actions. That might be, cutting back, bankruptcy, benefits and then focusing on building a new financial life and putting money into a savings account.

J. Money – You’ll enjoy the blog Budgets Are Sexy for a look inside the life of one blogger and how money impacts it.

Oooh, tough one :( First off, i’m sorry to hear that you’re in this situation, that’s def. not fun – especially when it involves a family. I do, however, give you mad credit for reaching out and looking for solutions! Now, do i have a solution? Yes, actually i have a few, but without any specific details it’s pretty broad. And I’m afraid none of it’s all that new or exciting:

1) Track all your $ – Find out where every single dollar is going! (not where you *think* it’s going, but where it *is* going)
2) Make more cuts – Go down this list of expenditures and decide which are necessities, and which are “likes”. Cut out the “likes” for now, and focus on the needs. You can always go back once this passes.
3) Create a budget – After you’ve made some cuts, or before even, come up with a REALISTIC budget. This is important for a number of ways, but mainly to help you track your progress each month.
4) Have c/c debt? – Try consolidating and/or asking for a lower interest rate. It won’t pay it off, but it sure would lower the amounts you owe each month!
5) Bring in more money – A bit obvious here, but it’s imperative at the rate you’re going. If you haven’t already, try asking for a raise at work – you may get shot down, but it’s worth a try. If that doesn’t work, consider looking around for the next step up, or in the meantime even looking for a 2nd job that one of you can take. It’s not ideal, but it may be necessary.

Again, it’s sorta hard coming up with specifics w/out more details, BUT i can promise you that if you give all 5 of these a shot, you’ll have a much better chance coming out of all this much sooner :)

Navy Tells Jonathan to Contact Me For Advice

Steve Rhode — Thu, 09 Oct 2008 01:53:22 +0000

From How to Get Out of Debt

“Dear Steve,

I’m a 30 year old married man, 2 children. My wife lost her six figure a year job in real estate, since then, we have lost two homes to foreclosure, 1 vehicle repossessed, and 15 major credit cards maxed out and not paid for 2 yrs+. Everything is in collection.

We have about $1.2 million in un-paid debt. I want to file chapter 7 bankruptcy and keep what little good debt I have active. Navy/military attorneys told me to start here before seeing a bankruptcy lawyer. Current budget leaves me with nothing extra month to month after paying the debt I can afford.

What is the next step in persuing bankruptcy?

Jonathan”

The Answer:

Dear Jonathan,

In a way your story is very similar to one I heard on the radio the other day about Amy Crooks who lost her mortgage broker job and is now in terrible financial shape.

Listen Here

Based on my years of experience in helping others and after living through financial problems myself I can offer you this totally honest and unvarnished assessment of your situation; the bad news is, you’re screwed.

There is no reasonable expectation that you’ll be able to crawl out of this deep and dark hole. Putting your past financial life and the wreckage it has left behind to rest is the best thing you can do at the moment.

The good news is that since the car has been repoed, the homes foreclosed on and all the bills past due, bankruptcy should be the final chapter in that part of your life.

So let me give you some good basic advice about what to do next. While your situation feels like a real mess, from a bankruptcy attorney point of view it seems fairly straightforward. This should be a case any bankruptcy attorney can handle.

If your want to use this form for a free bankruptcy review, go ahead or use this link to find a bankruptcy attorney, feel free. But the key for you to select a bankruptcy lawyer should be communication.

You want to make sure you are working with a bankruptcy attorney and their office that you feel comfortable communicating with, you feel like they take the time to answer your questions, and you are not treated like a number.

The paperwork for your bankruptcy will be what it is, just data gathering and court forms. The actual process of going bankrupt will be fairly easy and clear and before you know it you can close that chapter of your life.

At this point the most responsible thing you can do is to go bankrupt as quickly as possible so you can begin to rebuild your new financial life. And rebuilding your financial life will be important, otherwise your credit reports will end with a string of bad debts followed by a bankruptcy. To rebuild your credit report and credit score you’ll have to get back into the credit game.

I know it sounds silly to talk about such things even now but you will find that you will start getting new offers for credit in your mailbox even before the final discharge of your bankruptcy.

However, you can rebuild your credit report and credit score by looking in this credit card link for secured cards that report to the major credit bureaus. With a secured credit card you get a credit line that is equal to the deposit you place in a savings account with the bank. In case something happens, the deposit will pay off the account so you can rest easy knowing that you can’t get into debt with that card.

As you use the card your credit report will start to show responsible use of credit again and time will pass from your bankruptcy. Those factors will help to bring your credit score back up and in a couple of years your credit score will probably be as good as it ever was.

A good credit score is important as you look into the future and think about maybe a new mortgage in the future, a car loan or maybe even student loans.

I’m certainly sorry that you’ve had to live through these dark issues and the pain that goes with all of this financial uncertainty but if you look at the bankruptcy as the final stage in your misfortune and immediately start to rebuild you will be able to get a better life back for you and your family.

Big Hug!

@GetOutOfDebtGuy

P.S. When I went bankrupt in 1990 it created some of my worst days in my life. Don’t feel like that. You have a bright future to look forward to. Use what you have learned from this experience and maybe, just maybe, you’ll do what I did, take that experience and help others. Pay it forward my friend.

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