Recent Posts in Creditors Category

When you stop paying your credit card bill the bank will want to find a way to get you to start paying again. The first step will likely be making phone calls and sending letters. If that does not work the bank may hire a debt collector to turn up the heat on you.

The collection agency will call, a lot. And send many letters. If still you are not paying your bank will likely hire a local debt collection law firm to attempt to collect.

The law firm will likely again send more letters and make more phone calls. If still not payment is made then they are likely to bring a lawsuit against you.

In order to start a law suit the bank will have to file a complaint and serve a summons on you.  

In my experience it typically takes 10 - 12 months from the time of the first missed payment and the time of the law suite.

Filing for bankruptcy will likely stop all collection calls, letters, and law suits the moment the case is filed.

I came across an article this morning about Debt Settlement on Yahoo. It has a good explanation of what to REALLY expect from the Debt Settlement companies.

http://finance.yahoo.com/banking-budgeting/article/108975/can-you-settle-credit-card-debt-for-pennies?mod=bb-creditcards

Yes settling a debt for less than you owe will save you money but it is not going to save you as much as you think.

When you settle a debt with your credit card or other creditors for less than you owe the amount forgiven is taxable income.

For example if you owe Bank of America $20,000 and they forgive $10,000 the forgiven $10,000 is treated as income to you which you will pay taxes on at year’s end.  The creditor will issue you a 1099.

Also debt settlement for less is reported on your credit report and can negatively impact your credit score.

In bankruptcy debts are discharged through a court order. Discharged debt in bankruptcy will not be taxed or reported as income.

As soon as your bankruptcy case is filed with the Court the “automatic stay” comes into effect. The “automatic stay” is much what it sounds like, it happens automatically upon filing of your case and it stays certain actions against you.

This means as soon as you file bankruptcy your creditors are legally prohibited from, foreclosing on your home, repossessing your car, sending bills, or making collection phone calls.

Of course, your creditors do not know you filed bankruptcy the very instant you file. The Court will send a letter to all the creditors listed in your Creditor Matrix informing them of your filing. This will likely take about two weeks.

If there is an urgent matter, such as a home foreclosure tomorrow, I will call and fax the law office handling the foreclosure to ensure they are aware of your bankruptcy filing and it does not take place.

Bankruptcy can help. As soon as your bankruptcy case is filed the “automatic stay comes into effect. (See 11 U.S.C. §362)

The automatic stay is much like the name implies, it happens automatically by the filing of your case, and it stays actions against you.

Simply put, as soon as you file bankruptcy your creditors are legally prohibited from calling any more.

Leave it there.

An individual filing a chapter 7 bankruptcy case you may be able to exempt up to $11,200 ($22,400 for a married couple) of cash and bank deposits.

If the money is exempt it will not be touched by the bankruptcy court, trustee, or your creditors. Simply put you can keep.

If you are filing a chapter 13 case there is no liquidation of your assets, unless you want there to be, so here again you can keep the money in your bank.

If you have cash and bank deposits that exceed the exemptions, fear not, you may be able to protect some of the non-exempt money by placing it into an IRA or putting a new roof on your home. I strongly encourage you to meet with a lawyer prior to planning any exemption.

Filing bankruptcy does not prevent you from buying any property, including a new home or cars. However, the better question is; when will a bank give me a mortgage for a new home?

Chapter 7 bankruptcy will be listed on your credit report for ten years after you file bankruptcy. The listing of the bankruptcy on your credit report is not a legal bar to obtaining credit; however, it is a factor that a bank will use in determining whether or not to extend you credit.

Smaller loans, such as credit cards, will be available to most debtors shortly after filing. Most debtors start getting solicitations for post-petition credit cards within a month or two of filing.

Car loans may also be available right after the case is filed but you should expect a very high interest rate.

As for home mortgage, it will likely take 2 – 3 years until you can expect to be approved. However, some individuals get a new home mortgage in as little as 1 – 2 years or sooner.

The bank’s decision to extend credit is unique based on your situation, the bank will look at factors such as, credit reports and score and income to debt ratio to determine to extend credit to you.

The goal for most individuals in bankruptcy is to receive a discharge of their debts. A discharge is a release of your legal obligation to repay your debt. With limited exception the discharge will discharge all your debt including your car loan.

However, in order to keep the car post bankruptcy you MUST continue to make the payments to avoid repossession.

Reaffirmation is a process in which an agreement is filed with the Court which says that the debtor is again personally liable on the debt.

In Massachusetts this agreement is unnecessary. Under Massachusetts State Law a bank cannot repossess a car unless there is a default which must includes one or more missed payments (see MGL Chapter 255 §20A).

Therefore, as long as you remain current on your car loan, in Massachusetts, you are able to keep the car without threat of repossession.

Banks will often point to federal law to scare people in to reaffirming. The federal law states that if there is no reaffirmation agreement then the bank can repossess even if you are current on the payments. However, your bank is bound to repossess under state law. So do not fall for this scare tactic.

If you have any questions about reaffirmation please feel free to give me call.

The goal for most individuals in bankruptcy is to receive a discharge of their debts. A discharge is a release of your legal obligation to repay your debt. With limited exception the discharge will discharge all your debt including credit card bills, medical bills, auto loans, home mortgages, and some tax obligations.

Some debts do not typically get discharged in bankruptcy including student loans, some tax obligations, child support, alimony and government or court fines (such as a speeding tickets).

The discharge does not typically affect a lien held on property. Therefore in order to for the debtor to keep property that has been used as collateral to secure a loan, the debtor must continue to make payments.

Some liens can be removed in bankruptcy. Liens held by the second mortgage can be removed, in this case the debtor will be able to keep their home and never again have to pay the second mortgage.

Judicial liens can also be removed. These are liens that have come out of a court action. Typically these occur after a credit card company has sued you over a debt and then they put a lien on your home.  

It is often difficult to keep track of all your creditors. Making matters worse, often times debt collections agents and/or debt buyers make it confusing to understand who you owe.

If, for some reason, a creditor is not included in the initial bankruptcy filing and your bankruptcy case is still open, then worry not the creditor can still be added to your bankruptcy filing. The debt owed to the added creditor must have been incurred prior to filing of your initial documents.

A Motion to Amend your Bankruptcy filing will need to be filed with the Court. Currently the Court will charge a $26 Court filing fee to Amend Schedule D, E, or F.  Here at the Law Office of Robert W. Kovacs, Jr., we will, in most cases, file one Amendment to Schedule D, E, or F without charging additional legal fees.

If you can no longer meet your financial obligations bankruptcy may be able to relieve the stress related with too much debt.

There are two concerns if you have recently charged a lot on your credit cards prior to filing bankruptcy.

First, luxury goods charged on your credit cards that exceed about $450 within 90 days of filing bankruptcy are not dischargeable in bankruptcy. Luxury items are not defined in the bankruptcy code, however, the law tells us that luxury items do not includes charges for things that are reasonably necessary for the support of you and your dependents. Therefore, food, gas, and clothing for you and your family are not likely viewed as luxury items.

If you have recently charged luxury items on your cards then you may need to wait up to 90 days until you should file bankruptcy.

Second, anything charged to your credit cards without a present intent to repay is non-dischargeable in bankruptcy. This is a more difficult issue. This means that at the time you made the charge to your card you thought to yourself that you would never repay the debt. This is very difficult to prove for creditors.

If you are considering bankruptcy I would be happy to sit down with you to discuss all your opinions.

With the snow that fell this weekend I cannot help but think now may be a good time to mention what happens if a debtor cannot make their assigned time and date for their §341 meeting.

The §341 meeting is often the only meeting a debtor has to attend; they are not a formal Court process and are not held before a judge or even at the Court House. The §341 meeting gives the Case Trustee and others a chance to ask questions about the debtor’s financial affairs.

It is uncommon for anyone other than case trustee and the debtor’s lawyer to be present during the §341 meeting in consumer cases. The meetings are typically short lasting only 5 – 10 minutes for chapter 7 cases and about 15 minutes for chapter 13 cases.

When your bankruptcy case is filed, the Court will automatically assign your case a Case Trustee (who represents the creditors) and a time for the meeting.

If for some reason you are unable to make the scheduled meeting time then you can request that your case trustee reschedule the meeting. The case trustee will give you a new time and date. The debtor, typically through her lawyer, will have to send notice (a letter) to all the creditors stating the new time and date of the meeting. Of course the more notice you can give the case trustee about your need to reschedule the better, however, in the case of an emergency or inclement weather you may not be able to give the case trustee much notice at all.

Warm wishes.

Robert

Around this time of the year many struggling families look to their income tax return to provide some relief. These same struggling families often consider filing for bankruptcy.

A common question becomes: Can I file bankruptcy and keep my tax returns?

Typically, yes an individual can keep his or her tax return.

Although everyone’s bankruptcy case is different and an individual assessment of your case will be required, most debtors are able to completely exempt their tax return, thus protecting from the case trustee and your creditors.

If, you are in the small minority of debtors that are unable to fully exempt your tax return, you may be able to plan your exemptions and spend down some of the tax return prior to filing for bankruptcy. Thus, you will keep the entire tax return.

Please feel free to give me a call to discuss your particular case and determine the best way to protect your tax return and all your assets from your creditors and the bankruptcy trustee.

Many times when facing insolvency issues a debtor, either a business or individual, will look to pay one creditor over another, this is called a preference. If the payment was not in the ordinary course of business and the transaction occurred within the 90 days prior to the date of filing the bankruptcy case, then the preference is likely avoidable.

For businesses this may be paying a large sum to creditor, such as a supplier whom you want to repay in full before filing. For individuals this may be a large payment to a family member.

If this has occurred the case trustee or another party in interest may be able to force the creditor to return the payment to your bankruptcy estate. Then the case trustee will distribute the non-exempt funds to your creditors’ pro-rata.

If you have made a large payment to a creditor prior to filing bankruptcy you should discuss this situation with your attorney.