Filing for Bankruptcy – When, How, & Why
Determining if you Qualify for Bankruptcy
Individuals file personal bankruptcy because there is financial relief needed and they seek a second start. If you feel there is no way out of your debt troubles and these debt troubles are regular occurrences, filing bankruptcy maybe your best option.
- Debt troubles a regular occurrence
- You fear losing your home/facing home foreclosure
- Wage garnishment has been assigned to paychecks
- Laid off/ job problems
- Medical crisis to your family
- Creditor harassment
- Recent divorce
- Lawsuit pending
To Qualify for Bankruptcy there are steps you must take.
1) Attend a court-approved financial counseling course
2) Figure out if your monthly income is more or less than the median income in your state.
One way to Qualifying for the bankruptcy means test:
Current monthly income minus expenses
Times that by 60 to get your result
If your result is more than 25% = $10,000
Less than 25%=$6,000 or less
1400* 60 = 84000*.25 = 21000 (File for chapter 13)
400*60=24000*.25 = 6000 (File for chapter 7)
3a) If Income is more than median income then you can file a 5 year chapter 13 bankruptcy
3b) If Income is less than median income then you can file a chapter 7 bankruptcy
4) Get a discharge from your bankruptcy through an approved Credit Counseling Course.
A Chapter 7 bankruptcy or a Chapter 13 Bankruptcy can help you overcome problems. Learn more about what filing a Bankruptcy can do to help you in Bankruptcy 101
If you are at risk of losing your home due to foreclosure, mortgage mediation and modification might be your best solution. Contact us anytime to learn more information about Western Washington mortgage mediation, the fairness act, and how to avoid foreclosure.
We are in some unusual and unprecedented times right now but that doesn’t’ mean you can’t prepare and still have some time to plan.
People use the phrase “Practice good money management.” However, what does this really mean? Terms like impulse spending, realistic budgeting, and no high-risk investment are not part of the “good practice.” Understanding what is good money management practices can help you in preventing bankruptcies. Bankruptcy might be your only option but there are ways to prevent it.
How do you avoid impulse spending?
- Impulse spending is spending money on anything that is not a NEED. Steps you can take to avoid impulse spending:
- Cut up credit cards so you cannot use your credit.
- Take your credit cards out of your wallet so you have time to think about a purchase you are going to make.
- Ask yourself do I need this item or just want it.
- Can I get this item somewhere else for less money? Is an item available on Craigslist, E-bay, or a thrift store?
- Discipline yourself to use credit only when you know you have money in the bank to pay off the total at the end of the month.
- Tear up credit card offers.
- Tear up credit card checks that your credit company sends in the mail.
- If you have to use credit cards and you are not in a position to pay the total off at the end of the month pay more than the minimums. If you can pay more than you put on the card that month.
- Say you have$ 5000 in debt on a credit card and you bought $500 in stuff this month. Pay $500 plus more when the bill comes. This way you didn’t add anything to the card and if you did pay more then you are on your way to reducing the outstanding debt on the card.
What is Realistic Budgeting?
- Write down what you pay each month for bills: House payments, electricity, garbage, water, natural gas, home insurance, life insurance, medical insurance, car payment, cable, phone, internet, and whatever else is a reoccurring monthly expense.
- Some expenses are every other month like garbage and natural gas. Set aside an amount so that the total bill can be paid when it is due. (If your natural gas bill is around 200 every other month set aside 100 on the month it is not due that will be used in the next month)
- Budget for food, entertainment, gas, and misc. expenses
- Know what your average spending is for food, entertainment, gas, and misc expenses.
- Create a set amount (budget) for each category and stick to it.
- This might take some collecting of receipts or writing down each purchase.
- Some people have taken out money from their paycheck, put it in an envelope, and that is the money for food for the month.
- Whatever will work for you, to stick to a set amount, and do it!
What are high- risk investments and how can I avoid them?
- Don’t incur debt with others who have questionable financial habits.
- If they walk out on a debt your credit rating will be effected
- Co-signing on loan is a high-risk investment – it might be helping a family or friend out but if anything happens to them, you are left holding the loan!
- Interest-only loan payments are high-risk investments. If you can only afford to make an interest-only home payment, then the house is out of your price range.
You may be looking at how to get out of debt and bankruptcy seems like the only way just remember these ideas so you will not have to file for bankruptcy again. Contact advantagelegalgroup.com for more help.
Additional Financial Resources:
- Better options than a huge down payment
- How long will a bankruptcy keep me from buying a home?
- 8 Smart Money Moves to Make Now
- Are All Debts forgiven in bankruptcy?
- How do I Start a Bankruptcy?
- Is Bankruptcy Embarrassing?
Will Bankruptcy Mean I Have to Give up My House? – A common question weighing on the minds of those who are still making mortgage payments on their home and facing bankruptcy is “will I have to give up my home?” The answer to this lies in understanding the options available to your unique situation. It is possible to keep your home when filing bankruptcy if you meet necessary requirements.
To protect your home during bankruptcy, be aware of how much equity you have in your home and how you can protect that equity. If you’re making mortgage payments, you may have a certain amount of equity that’s exempt. This means a creditor can’t NOT touch this amount to satisfy debts you owe. Every state has a specific level or amount of “homestead exemption” which allows homeowners protection against debtors.
This homestead exemption is protection at the state level. However, there may also be help available at the federal level. Sometimes, if your state allows it AND you qualify, you may be able to use both kinds of exemptions( the state and the federal). A good example would be that if your state exemption protects you up to a certain level, then the federal exemption, often referred to as a wild card exemption, can protect your remaining equity. You may also be pleasantly surprised to learn that there are other exemptions available for items such as household goods, jewelry, vehicles, retirement accounts, and other personal assets.
Take heart. In most cases, you will not lose your home or even your car for that matter as long as your equity is fully exempt. Even if your property is not fully exempt you may be able to keep it if you pay its non-exempt value to the creditors.
However, be aware that if you’ve ever put your home up as collateral for a debt, then that creditor has a “security interest” in your home that does not go away with bankruptcy. If you’re unable to pay that interest, this creditor can repossess your home during or after bankruptcy.
Filing for bankruptcy is never an easy decision. If you are considering bankruptcy or if you have been through it, there is probably just one question on your mind: “How quickly can I recover from bankruptcy?”
There are many factors that contribute to the time you will spend mending your credit. The first step you should take is to carefully examine what you have coming in each month from any source. Tally up what you are obligated to spend for basic living. Then, get some help if you need it and create a workable cash flow budget that ensures that you can begin living within your means. Keep all of your receipts, especially those that show on-time payments.
Spend some time looking at all three of your scores from the major credit rating services. Look for any mistakes in balances owed or payment records. Correct any errors by challenging the incorrect reports and once you have set the record straight, continue to monitor these reports on a regular basis.
It may be helpful to reestablish credit when possible, but be very careful with big-ticket purchases that have little or no resale value. In other words, buying a good used car on a monthly plan is preferred by lenders over consumers buying plasma TVs. The car has a greater resale value and can be easily sold if you hit a hard spot. A plasma TV might be entertaining, but loses a large percentage of its value the moment you walk out of the store.
In general, use the old adage: “If the blanket isn’t long enough, don’t stretch it out so far.” Use layaway plans instead of paying high fees and interest rates on sub-standard credit cards. Over time, fewer purchases paid on time is more impressive than a large debt poorly serviced. The sooner you show your ability to make and keep commitments, the sooner your bankruptcy will be behind you.
Read More on Bankruptcy Myths
Overall, most people will face a 3-5 year journey out of bankruptcy. It can be shortened by an individual commitment to making payments on time and keeping an eagle eye on their credit reports. Once out of the bind you found yourself in, pat yourself on the back and commit to never going back to the courts for relief!
Want more help on Bankruptcy in your area? Contact the Advantage Legal Group for all mortgage modification and foreclosure assistance. Advantage Legal Group is your source for helping you file bankruptcy and then recouping and planning for the future. Call us for Mortgage Mediation and all questions regarding foreclosures and bankruptcy.
Are All Debts Forgiven in Bankruptcy?
Bankruptcy is a very useful thing that can help many people and give them a fresh start in their financial lives. Many debts can be discharged in bankruptcy. However, there are sometimes exceptions. Debts that are commonly discharged in bankruptcy include things such as:
- -credit cards or unsecured loans
- -car repos and deficiency balances
- -SOME car accidents
- -material supplier debts
- -medical bills
- -lawsuits and judgments
- -evictions and unpaid rent
- -unpaid utility bills
- -foreclosure balances
There are exceptions, however, to the above standard discharges covered by going bankrupt. The following are four different examples of these exceptions:
Excessive credit card use immediately leading up to the bankruptcy. If you go on a major credit spree just before filing for bankruptcy, you may have troubles. The creditor may challenge your request claiming you never intended to pay for those items. If this happens your entire balance MAY NOT be discharged.
Being under the influence of drugs or alcohol when you cause an accident or maliciously or willfully causing an accident. Debts under these kinds of circumstances cannot be eliminated.
In the case of money owed to suppliers, if you STILL have material that the supplier can recover and resell, you have to return it. You don’t get to keep it, eliminate your debt and then resell the material for your own profit.
Committing fraud when you’re sued may prevent debts from judgments against you from being discharged.
The aforementioned debts are the most common types included in bankruptcy petitions. It should be noted that each case is unique and has its own set of circumstances. Therefore you should always consult an attorney concerning your particular debts as well as do your own personal research.
Where do you start if you are considering bankruptcy?
Reality has changed for millions of people over the last few years. Even though the housing market has recovered nicely, for some, this reality is not in their favor. If you feel overwhelmed by a mountain of debt and can’t see your way out of the situation. It might be time to consider filing for bankruptcy.
Filing bankruptcy is a serious matter. You should get financial counseling before you take this step, but if you have no other option, the process can protect you from harassment. It is pretty straight forward. Over time, if you are careful, you will have a chance to rebuild your credit.
Once you have researched your options and concluded that bankruptcy is the best way forward, make sure that you understand the process before you begin filing so that at any point along the way you will know what steps are next.
How Do I Start a Bankruptcy?
The first step in filing bankruptcy is to determine what you owe to each lender. You can do this by obtaining a copy of your free credit report from each of the three major reporting agencies: Equifax, Experian and TransUnion. This will provide you with the most recent records of your debts and will play an important part in ensuring that you properly proceed.
Next, visit the U.S. Courts Bankruptcy website. Here you can find information regarding the type of bankruptcy you will need to file. Generally, you will file under chapter 7 or chapter 13. When you understand the differences you are ready for step 3.
You will probably want to obtain an attorney who specializes in bankruptcy in your area. This is always recommended because his/her expertise can help you make your way through the often confusing process of bankruptcy. They can also advise you on how to get creditors off your back while you are moving ahead.
Locate a bankruptcy attorney in your area. Although an attorney is not required to file for bankruptcy, it is highly encouraged that consumers use a knowledgeable bankruptcy attorney. The bankruptcy process is not clear-cut and it is important to have an experienced professional on your side. The e-bk website maintains a lawyer directory that will help you in your search for an attorney to help you with filing your bankruptcy.
Once you have your records in place, meet the attorney in person. If you are married or have a partner, bring them along and talk about the right process for your bankruptcy. This will also mean taking a Means Test that will determine whether you file for chapter 7 or chapter 13 bankruptcy. Once your path is set, the attorney will file a petition on your behalf. The entire process can be quite lengthy, but once the petition is filed with the court, you are well on your way to a new beginning.
Filing bankruptcy in Western Washington should never be your first step in finding debt relief, but if you have exhausted your other options and still find yourself unable to meet your debt obligations, bankruptcy can help you move forward toward a better future.
Contact Advantage Legal Group for more information on Western Washington bankruptcy.
Is Bankruptcy Embarrassing?
Being an adult is rough. As an adolescent we would hesitate to do things, worried about what our peers would think, and often, being an adult is no different. Being an adult doesn’t mean you no longer have emotions or that you don’t worry about others judging you. However, being an adult DOES mean that you need to go ahead and make the hard decisions that DO come with consequences, BUT do turn out better for you in the long run.
Bankruptcy has a weird stigma and connotation like people think their name will appear on some “website of shame” or something. The truth is, unless you’re a celebrity, you probably won’t hit any tabloids.
Most of bankruptcy is between you and your lawyer. As with any other attorney/client relationship, the attorney/client privilege of confidentiality applies.
When your case is filed with the bankruptcy court, your case will be sent to your creditors for obvious reason. Additionally, any family or friends that you owe money to will be notified as well since you are required to list ALL debts. Therefore, now your lawyer knows and the people you owe money. No one else. It is true that your filing of bankruptcy is public record but no one would ever know unless for some reason they purposely sought it out.
The only time you will be out in public discussing your bankruptcy is at your “Meeting of Creditors”. This meeting is a short meeting between you and your bankruptcy trustee. Creditors are welcome to attend however, they usually don’t. These meetings are generally held in a conference room and last about five minutes or so. So, rest assured that this is a short meeting with STRANGERS that you’ll probably never see again. So, once again unless you’re a celeb and get caught by TMZ, the process is relatively short and painless.
No one will know you filed for bankruptcy unless you tell them. Besides all this, if you’re facing serious financial problems and TRULY WANT to begin to do what RIGHT with your money, you shouldn’t feel any shame in creating a fresh start with a clean slate for yourself. Hold your chin up and begin on the path of financial responsibility. You got this.
Bankruptcy is all about helping an individual(s) resolve debt and learn better financial management. Getting a fresh start is not just about leaving the past behind but it also requires someone to protect the assets they still have. You can maximize the benefits of this by NOT borrowing, selling or getting rid of these assets before you file for bankruptcy.
Before I File for Bankruptcy, Can I Sell Some of My Assets?
All too often, bankruptcy attorneys meet clients who have taken desperate measures in order to stay afloat with mountains of debt. They operate under the belief that they will lose their assets after filing bankruptcy. However, the truth is, that it can be harder to recover from bankruptcy if you don’t have the basics, such as a home, car, retirement accounts, unemployment benefits, tools of your trade and so on.
Bankruptcy Protection and Your Assets
A lot of times bankruptcy will provide protection for your assets. Straight bankruptcy (Chapter 7 filing) will protect “exempt” assets which means people filing for this type of bankruptcy will be able to keep much of what they own. Assets that have a higher value than what is exempt by law can be kept by “an adjustment of debts” under Chapter 13 bankruptcy for items that are nonexempt. To develop a plan to protect these assets, obtain an experienced attorney.
Bankruptcy Can’t Bring Back What Has Already Been Lost
Although bankruptcy can provide protection for what you currently own, it cannot bring back what you may have already lost before you filed for bankruptcy. Things that have been spent, sold or borrowed against to avoid financial disaster could have been saved if bankruptcy was filed beforehand.
Most people facing bankruptcy don’t realize the consequences of borrowing, selling and spending or that their assets may be protected under law. An experienced attorney can help place you in the perfect position for filing bankruptcy.
Ready to schedule a consultation? 425-452-9797 Or Contact Us Here
Who Says Life’s Not Fair? Two Things to Know About the Fairness Act
Okay. Okay. So, life’s not fair. It’s true. However, when things come around like the Washington Foreclosure Fairness Act, life seems to seem a little fairer, a little brighter. This act or law helps bring homeowners back from the brink of foreclosure by forcing lenders to enter into face to face negotiations. There are two things to remember about the Washington Foreclosure Fairness Act:
1) You MUST have representation to advocate for you. You cannot make use of the Washington Foreclosure Fairness Act without good representation. Why? Because you must have someone ( your attorney/representation) make a referral on your behalf so that Washington State commerce stops the foreclosure long enough for you to enter into negotiations with the bank’s lawyers. The reason you can’t do it yourself without an attorney is because they want you to be prepared. This is an adversarial process. The attorneys on the other side are not there to help you, therefore it’s imperative to have someone there who is.
2) It often takes more than just one meeting. The Washington Foreclosure Fairness Act actually only provides for one three hour mediation session, but it usually takes two or three of these sessions. In these sessions your attorney presents a package to your bank’s lawyers and lets them know how much you make for a living and what you can afford. They then negotiate back and forth until an agreement is made.
Ready to schedule a consultation? 425-452-9797 Or Contact Us Here
Taxes and Student Loans in Bankruptcy
There are certain kinds of debt that can be discharged in bankruptcy.
A Chapter 7 bankruptcy is a great way to reduce or eliminate many debts. A Chapter 7 bankruptcy can help discharge credit card debts, medical debts and many other types of unsecured debt. A Chapter 7 bankruptcy may allow you to reduce or eliminate credit card debts or other unsecured debts, thereby enabling you to focus your debt repayment efforts on tax liabilities and student loans.
Taxes and Student Loans – Dealing With Non-dischargeable Debts in Bankruptcy
Some debts are difficult or impossible to discharge through bankruptcy. Debts that are difficult or impossible to discharge include:
- Student loans
- Child support arrears
- Certain types of taxes owed to the government
Not all unsecured debts can be eliminated in bankruptcy. While exceptions to discharge cover debts range from child support to back taxes, rules differ depending on factors like the nature of the debt, the age of the debt, or your ability to present a hardship case.
Non-dischargeable debts come in many forms. Some are by definition non-dischargeable, while others are subject to discharge unless the creditor files a specific objection. Examples of non-dischargeable debts include the following:
- Lawsuit damages related to drunk driving, willful or malicious conduct, or fraud
- Child support or alimony
- Taxes that are less than three years old or for which no return has been filed
- Most student loan obligations
- Certain credit card debts incurred under circumstances indicating an intent to defraud the issuer
Certain types of state and federal taxes, as well as student loans, fall into the category of debts that are generally not dischargeable. However, some types of tax obligations can be discharged. Talking to a lawyer can help you to determine which type you have.
There are also debt relief services available to people suffering from an unmanageable tax debt or student loan debt. For example, a Chapter 13 bankruptcy may allow you to pay back other debts over a longer period of time and therefore increase your ability to handle your current tax or student loan debt load.
Many old tax debts can be discharged in bankruptcy
Many people will tell you that tax obligations are non-dischargeable debts. This is only true of taxes that have been assessed and payable for less than three years.
If you owe taxes for which you’ve filed the returns more than three years ago, or that have been in collection for at least that long, you can discharge them in bankruptcy like other unsecured claims unless enforceable tax liens are in place against property with enough value to meet them.
Student Loan obligations in bankruptcy
It used to be that a hardship argument could convince a bankruptcy court to excuse you from repayment of student loans.
Today, recent amendments to the Bankruptcy Code have made it more difficult to prove hardship as a basis of discharge. In order to prove hardship, it is now necessary to demonstrate that your education has little or no value in helping you generate income for reasons beyond your control. It is also important to note that if you have been excused from your student loans there are many jobs that you will be unable to apply for because you have been excused from repayment of student loans.