480-420-3165We are having a free bankruptcy seminar on Thursday, January 27th at 7-8pm. We have been putting on these seminars for a while and we really get great feedback. If you looking to get a fresh start and eliminate your debt, this is great event for you. If you are in foreclosure and you want clarity on what you should do with your home, register here.
Every now and again we come across the question, “What can I do if I forgot to add a creditor to my bankruptcy filing?” Unfortunately, this question isn’t really all that uncommon in the world of bankruptcy law.
Every bankruptcy filing should include a comprehensive list of all debts, both secured and unsecured. However, most bankruptcies are filed as a response to a financial crisis and occasionally some debts are inadvertently left off the original filing. Should this situation ever arise it may be possible to add an amendment to your bankruptcy filing to include the missing creditor(s).
The United States Code: Title 11, 523,(3), states that a debt not listed on the debtor’s schedule can not be discharged if the creditor has a claim to any of the following:
If none of the above circumstances exist, than discharging the unlisted debt can most likely be accomplished. Of course the debt can not be a “new” debt meaning it had to exist prior to the filing guidelines for your bankruptcy. Any debt incurred during or after the point which you originally filed your bankruptcy paperwork will not be accepted or discharged as the debtor’s schedule is viewed as a final ledger of the debtor’s financial standing.
Adding a debt to the bankruptcy filing after the fact will result in additional penalties and fees to the court.
Of course the best course of action is to carefully prepare for your bankruptcy filing ahead of time. Make sure to divulge all your debts when you meet with your bankruptcy attorney and let your attorney determine which debts can be discharged and which can not. Don’t assume that a debt can not be discharged or conceal or hide any debts or financial activity from your attorney. Pulling a credit report 30 days prior to your bankruptcy filing date is also a good way to ensure you haven’t left any debts off your schedule.
One of the most important things you can do as you prepare to file bankruptcy is to stay well organized and keep exact records of all your financial dealings. These documents and expenses are used by the court to determine your financial capacities and what forms of bankruptcy protection you are eligible for. In simple terms, saving all your receipts is a must when filing for bankruptcy protection. This is because like any other area of law, a bankruptcy hearing requires evidence; evidence in the form of financial documentation.
According to the US Bankruptcy Code Section 727, a bankruptcy discharge can be denied if a debtor has “concealed, destroyed, mutilated, falsified, or failed to keep or preserve any recorded information” that might be used to ascertain the debtor’s financial situation and standing. In other words, the trustee is going to examine all of your assets and expenses. Failing to adequately record and document your financial transactions can create all kinds of problems in a bankruptcy case, ranging from having an expense disallowed in your budget to having your entire bankruptcy case tossed out for failing to adhere to Section 727.
While preserving receipts for all your transactions should go without mention, it happens more often than one might think. Common problems that can arise in bankruptcy filings stem from debtors paying rent with cash, to even handling smaller expenses without receipt such as childcare fees, charitable donations, and even loans. Debtors who pay rent or the nanny with cash (especially to relatives or friends) risk the appearance of “fraudulent transfer” which if suspected can be disastrous on a bankruptcy hearing.
The best practice in any situation, but especially leading up to bankruptcy is to collect receipts for all your expenses, large or small, and let the trustee determine which are meaningful. Always create documentation for loans, even if the loan came from a family member. Otherwise the loan could be included as monthly income and affect your means test score. Keep copies off all your bank statements as well, and be sure to provide all your receipts and financial documents to your bankruptcy attorney prior to the filing date. And of course, if you are unsure about whether or not to include an expense or receipt consult with your attorney beforehand.
In summary: Make sure to put everything in writing before filing for bankruptcy.
It’s almost official. It looks like for the first time since 2005 Arizona will surpass the previous record for bankruptcies.
Phoenix area bankruptcy filings already hit an all time high for 2010. According to an Arizona Republic article and U.S. Bankruptcy Court in Maricopa County there were 28.849 separate bankruptcy filings between January and November 2010. Even with December filings left to be counted, this beat the previous record of 28,277 filings in 2005. The 28,000 plus filings also surpasses the number of bankruptcies conducted in 2009.
Statewide the record looks to be broken as well. Through November the number of bankruptcies state wide sits at 38,522. Once December’s numbers are included all indicators are Arizona will almost certainly pass the 39,204 filings record set in 2005 as well.
It’s not a huge surprise that more people sought bankruptcy protection in 2010 than previous years. A lagging job market combined with record unemployment highs and a slumping housing market made Phoenix a volatile market for the 3rd straight year. While there is no way of knowing for certain, there are no signs of bankruptcy filings significantly slowing down through 2011.
The article on azcentral.com also points out Chapter 7 filings accounted for roughly 4 out of every 5 bankruptcy filings in Phoenix in 2010. Chapter 7 bankruptcy eliminates all consumer debt (minus debts like child support and student loans) and is provides consumers with a fresh start. Additionally, chapter 7 is what most people think of when they think of bankruptcy and is the most common form of bankruptcy for individuals.
Still there are signs that bankruptcies nationwide could have peaked in 2010. Bankruptcy filings have been down 13% since October and filings seem to be curbing in the metro Phoenix area as well. The number of bankruptcies expected in 2011 is anyone’s guess but it’s possible that the number of filings will be close to but not break the records set this year.
If you didn’t have a chance to read the Arizona Republic article you can view it here, http://www.azcentral.com/business/articles/2010/12/19/20101219Valley-bankruptcy-filings-hit-record-1219.html
If you find yourself considering bankruptcy chances are you also find yourself struggling to manage a pile of debt. For many, bankruptcy is the best way to get out from underneath that pile of debt and get started on a path to developing healthy financial habits. However, for some bankruptcy may not be the best method for financial recovery. In these instances debt settlement becomes a viable candidate for developing a secure and healthy financial future.
Debt settlement can be a good alternative to bankruptcy, and judging by the number of debt settlement companies out there many people are choosing to go this route when rectifying their finances. Furthermore these debt settlement companies present the process as simple and painless for the consumer. All their promises make debt settlement seem like the perfect remedy.
But there is a problem with the debt settlement industry; lack of regulation. There is no oversight on debt settlement companies and that makes for problems. Plenty of people have thought they were receiving welcomed financial relief only to be ripped off. Furthermore debt settlement companies cannot offer legal help. When dealing with these companies a suitable adage is “buyer beware.”
In fact, the problems surrounding the debt settlement industry prompted the Federal Trade Commission (FTC) to place a ban on advanced fees for debt settlement companies just earlier this year. In addition to banning companies from charging advanced fees the modified rules also now require companies to estimate the length of time and amount of money required to pay off a consumer’s debts. The FTC also barred these companies from exaggerating success rates and using other devious marketing tactics.
In a statement to the media FTC Chairman Jon Leibowitz stated, “Too many of these companies pick the last dollar out of consumers’ pockets. Far from leaving them better off; (they) push them deeper into debt.” The attention of the FTC and subsequent announcement shows a downright scary trend among debt settlement providers.
Sure there are a few bad apples in every industry and I’m sure if you tried hard enough, you could find an unscrupulous practicing attorney. However, attorneys have something generally preventing them from cheating their clients; disbarment. No attorney I know would be willing to risk years of schooling and practice to make a quick buck off those who have fallen on hard times. The oversight and regulation held upon the legal community keeps most predators at bay and protects legal consumers.
A good way to determine if you should look at debt settlement over bankruptcy is to budget first. Make a table listing all of your expenses and debts. Be realistic in the amounts you can afford to pay. Generally speaking it takes a one time payment of between 40 and 60% of the amount you owe for a creditor to settle the debt. Some debts can be negotiated to as little as 15%. If you can save this kind of money while still maintaining enough income to cover your basic living expenses debt settlement might work for you.
The best way to determine if debt settlement is the best option for you is to speak with a bankruptcy attorney first. By nature bankruptcy attorneys are experts in negotiating with creditors and settling debts. After all, communicating daily with creditors and lenders about outstanding debts is a large part of the business. As a result bankruptcy attorneys know when a settlement makes sense and when it doesn’t. Many times a bankruptcy lawyer can even negotiate with lenders on your behalf.
However if you do choose to work with a debt settlement company, make sure to do your homework. Check with the Better Business Bureau and speak with local non-profit help organizations about the company. Don’t simply trust your money to anyone claiming to reduce your debt by 80 percent. It’s important to protect yourself, and if you need legal advice about your finances always seek the help of an attorney.
Last week I touched on the details of an Order of Relief and Automatic Stay as they related to freezing the foreclosure process during a bankruptcy. This week I’d like to touch on an issue that affects nearly everyone considering filing for bankruptcy protection; creditor harassment.
Perhaps the most uncomfortable aspect of overwhelming debt is the harassing phone calls and threatening letters that accompany late payments and overdue balances. Collection agencies are relentless and it’s highly unlikely they will listen to or care about your unique financial situation. Because these collectors are compensated by commission, meaning they keep a predetermined percentage of the amount collected they have zero incentive to work with the debtor or to ensure that the debt they are attempting to collect is valid. Repetitive calls from aggressive collectors can be extremely stressful and overwhelming during times of severe financial burden. Not to mention many of the activities conducted by some collections agents are downright illegal.
If you are considering filing for bankruptcy you’ve probably already encountered your fair share of unscrupulous debt collectors. The constant harassment and threats may have even contributed to your decision to file bankruptcy. The bad news is, as the old cliché goes, it gets worse before it gets better.
Once collection agents catch wind of your intention to file bankruptcy the harassing calls and letters will intensify. Their goal is to get you to pay some, if not all, of the collection amount before you are able to file your bankruptcy. A person in the process of preparing a bankruptcy can expect collection companies to use just about every trick up their sleeve to get you to pay. Some of their threats and tactics are even illegal but many collections companies persist on the assumption that you, the debtor, won’t have the time or financial resources to challenge their actions in court. However, there are a few things you can do to stop creditor harassment prior to filing.
Know Your Rights
The Fair Debt Collection Practices Act (FDCPA) protects consumers against unfair collections practices. Under the FDCPA you have the right demand collectors stop calling you by writing what’s called a “cease communication” letter. A cease communication letter will tell the creditor you are no longer willing to discuss the debt with them and under the FDCPA they are no longer legally allowed to contact you except to inform you of actions they are taking to collect the debt or to cease collecting the debt. However, they can not contact you daily to threaten or harass you into paying them money. The letter must in written form, must be dated and it is a good idea to mail it certified to ensure confirmation of delivery.
Some unethical or just unconcerned collection agents might still attempt to contact you after receiving a “cease communications” letter. If the collections attempts persist, you have the right to demand the creditor validates the debt. The FDCPA provides that no debt is automatically considered valid, and therefore gives the consumer the right to obtain proof of said debt and dispute the amount, etc. If a debtor disputes a collection attempt and requests validation the creditor has five days after the initial conversation to send a letter to the debtor with the amount of the debt; the name of the creditor; and a statement that provides the consumer 30 days to dispute the debt before it will be considered valid. If the debtor disputes the debt or amount within the 30 day period the collector is then obligated to obtain verification of the debt. If the creditor refuses and persists in collection attempts the consumer has a right to sue and/or the debt could be excused by a court.
Collections Attempts After Filing Bankruptcy
Once you have filed for Chapter 7 or Chapter 13 bankruptcy protection collection activity should stop. The Automatic Stay provides that all collections activity cease while your case is in bankruptcy. This includes phone calls, letters, lawsuits, and wage garnishments. Occasionally a stray collections agent will call attempting to collect on a debt. You simply need to inform them you have filed for bankruptcy protection, provide them with your case number and attorney’s contact information and hang up the phone. You do not need to answer any collection agent’s questions or discuss the debt with any person other than your attorney.
A recent news article in the Arizona Republic paints a grim outlook for those facing foreclosure in the coming months. While the article doesn’t deal directly with bankruptcy law it does deal with some of the major contributing factors considered when determining whether or not bankruptcy is a viable option. The article discusses how foreclosures in the Phoenix area dropped to a new 32 month low in November, but warns homeowners that the relief to the plummeting housing market is only temporary as experts attribute the new lows to foreclosure moratoriums put in place by the valleys biggest lenders led by Bank of America.
Bank of America pushed back over two months worth of foreclosures to revise internal policy and counter claims involving “robo-signing” of thousands of mortgage documents without first reviewing them. The article goes on to point out that starting in early 2011 Bank of America will have 2 months and over 8,000 foreclosures to catch up on in Phoenix alone. The ultimate message if you are sitting on the verge of foreclosure; be prepared for paperwork early next year. If you didn’t have a chance to read it you can catch the article here.
The question poised by many homeowners staring at foreclosure is; which is the better option, foreclosure or bankruptcy? Here are so facts to consider:
Bankruptcy Can Halt the Foreclosure Process
For many homeowners facing foreclosure bankruptcy can help. When your bankruptcy attorney files for bankruptcy, whether it’s Chapter 7 or Chapter 13, the court will automatically issue an Order for Relief including an Automatic Stay. The Automatic Stay provides immediate relief for debtors by requiring creditors to immediately cease all collection activities while the bankruptcy is pending. This includes any attempts to foreclose on a house and evict the tenant.
The Automatic Stay stalls the foreclosure process and typically buys individuals three to four months to catch up on missed payments and reorganize their finances. However, Order of Relief doesn’t permanently put a stop to the foreclosure. Home lenders can ask the court for to lift the stay during the bankruptcy process, especially if the homeowner had been served with foreclosure paperwork prior to the bankruptcy filing date. Your bankruptcy attorney is the best source for information on whether or not your bank is likely to seek a lift on the Automatic Stay.
Bankruptcy Can Keep You in Your Home
Not all forms of bankruptcy can offer complete protection from foreclosure. For example, Chapter 7 protection can delay foreclosure, but inevitably results in the liquidation of most all assets. As a result those filing a Chapter 7 bankruptcy almost always lose their home.
Chapter 13 is more effective at helping borrowers keep their homes. Through Chapter 13 lenders are able to make payment plans to repay the arrearage on their mortgage. There are financial qualifications to ensure you are able to make suitable payments for both your current mortgage as well as the outstanding amounts, but assuming you are able to make all the necessary payments you will avoid foreclosure.
Chapter 13 can also provide relief by potentially eliminating second and third mortgages. Home values have fallen to record lows, and many home owners in the Phoenix area now owe more on their original mortgages than the value of their homes. When the first mortgage is secured by the entire value of a home, there may no longer be equity to secure the later mortgages which may change the status of second or third mortgages to unsecured debt. In Chapter 13 bankruptcy unsecured debt takes last priority and often times does not have to be repaid at all.
Bankruptcy May Lessen the Impact on Your Credit
It’s important to acknowledge that both foreclosure and bankruptcy have adverse impact on your credit standing. However, bankruptcy can be the better option for rebuilding credit. First, bankruptcy discharges most all debt while foreclosure does nothing to reduce credit card, auto loan, or other forms of debt which may have contributed to the overall financial crisis one may be experiencing. By filing bankruptcy you are able to start rebuilding healthy credit quicker. Additionally many banks and mortgage lenders look particularly unenthusiastically upon foreclosures and may be more understanding of a bankruptcy when considering an application for a home loan. Even if you are faced with no alternative to losing your home bankruptcy may be the more effective route.
There are many factors I haven’t presented here which need to be considered when looking at bankruptcy versus foreclosure. Among them are the value and equity of the home, the ability to make timely payments and more. If you are facing possible foreclosure and want to learn if bankruptcy could be a more suitable option for you, the first thing you should do is schedule a consultation with a bankruptcy attorney to review the individual merits of your case. Each bankruptcy is unique and working with an experienced bankruptcy attorney who understands the laws surrounding bankruptcy is pivotal to getting back in control of your financial future.
For many consumers looking to bankruptcy credits cards are more than just a luxury, they are a means of living. Many people in financial turmoil rely on credit cards and cash advances to help keep the electricity on and food on the table. If you are considering filing bankruptcy one question you may have already begun to ask yourself is, “Can I continue to use my credit cards?”
The answer is laid out in U.S. Bankruptcy Code §523(c) which states:
(I) consumer debts owed to a single creditor and aggregating more than $500 for luxury goods or services incurred by an individual debtor on or within 90 days before the order for relief under this title are presumed to be nondischargeable;
§523 goes on to clarify luxury goods as excluding “goods or services reasonably necessary for the support or maintenance of the debtor or a dependent of the debtor.” In simple terms, what the code states is that any debts to one creditor totaling $500 or more, and taking place within 90 of the bankruptcy filing are nondischargeable. Even charges the consumer may see as essential can be deemed nondischargeable if the creditor can prove the debt was incurred with the intent to never pay the amount back. Furthermore the term “luxury goods” has often been argued in bankruptcy court to include a variety of charges including clothing, electronics, travel and entertainment expenses among others. Determining what does or does not qualify as a luxury good is ultimately in the hands of the Court.
In response to §523 a good bankruptcy attorney will generally advise a client to immediately stop using credits cards for any purchases after first consulting with the attorney and to wait a minimum of 3 months (90 days) before filing bankruptcy. Waiting the full 90 days where feasible greatly reduces the chances the trustee or a creditor will file an objection. If you are considering bankruptcy or in the process of filing bankruptcy it is important to keep your attorney educated on any credit card purchases and provide your attorney with a comprehensive list of your purchases and credit card transactions prior to filing.
The timing of the date for filing bankruptcy is important. You have a small exemption of $150 per debtor for money in your bank account on the date that your bankruptcy is filed. There is no exemption for cash on hand. If, on the date your bankruptcy case is filed, you are holding a pay check that was not deposited or any other payment instruments such as cashier’s checks or money orders, the trustee could require that you turn them over to pay something to your creditors. The trustee is entitled to take any sum over $150 in your bank account for the benefit of your creditors. The trustee will require that you provide them with a copy of your bank account which shows the sum in your account on the date your bankruptcy was filed. If possible, you should bring that bank statement with you to the Meeting of Creditors (Sec. 341 hearing) which is usually scheduled approximately 35-45 days after your case is filed. This is only possible if your bank has issued a bank statement prior to your hearing date prior to your hearing date.
Part of the process of preparing for filing bankruptcy includes monitoring your bank account so that the amount in your account ON THE DATE YOUR BANKRUPTCY CASE WAS FILED will not exceed the amount which is exempt under the law ($150 per debtor if you are using Arizona exemptions). The following steps should be taken to help you avoid losing money that could have been used to pay your bills:
There were 1,596,355 bankruptcy filings in the Unites States in fiscal year 2010. Bankruptcy filings have risen almost 14 percent from last October 31st 2009 to September 30th 2010.
Maricopa has an increasing rate also. Seven of every thousand people in Maricopa County filed bankruptcy last year.
