How to Afford Chapter 7 Bankruptcy

When you come to the end of your financial rope, bankruptcy is a safety net. Bankruptcy can discharge bills you cannot pay, force secured creditors to accept payments over time, save your home, your car, and even your marriage!

But how can you afford to pay all of the bankruptcy fees if you are broke? Paying attorney fees, court fees, and the required credit counseling fees are often beyond the ability of a family struggling with debt. Desperate clients frequently bemoan the same conundrum, “If I had that much money, I wouldn’t pay you; I’d pay my bills!”

While attorneys often get bad rap, this time it’s not deserved. First, consumer bankruptcy fees are very competitive and are cheap compared to other legal services. Additionally, the rate of Chapter 7 success is extremely high, so the client almost always gets what he/she expects—a discharge of debts and a financial fresh start. Finally, all Chapter 7 attorney fees are paid up–front, as a flat fee. There are no hidden fees or surprises, unlike in a divorce or criminal case.

So how are individuals able to afford a quality bankruptcy attorney?

First, the costs may be spread out over time. While your attorney must be paid before filing your Chapter 7 bankruptcy case, you may make payments before your case is filed. When you first retain a bankruptcy attorney, you receive federal consumer protections from the Fair Debt Collections Practices Act. Under that law, once you retain an attorney, a debt collector may no longer contact you directly. This temporarily stops creditor harassment. Also, because you intend to file bankruptcy in the near future, debt collectors usually delay filing lawsuits or attempting garnishments. This also gives you time to pay your attorney.

Most courts permit the bankruptcy filing fee (currently $306) to be paid in installments. A court may allow a debtor to make up to four payments with the final installment paid no later than 120 days after filing the bankruptcy petition (which may be extended up to 180 days for good cause).

Second, you can let Uncle Sam help you file. Many debtors receive an income tax refund in the spring. You may use tax refund money to pay your attorney or bankruptcy fees without penalty.

Third, you may borrow the money from a friend or family member. You can repay this loan after you file bankruptcy without penalty.

Fourth, in some cases it makes sense to withdraw or cash out a retirement fund in order to restructure your finances. Speak with your attorney on the feasibility of this action.

Finally, you can sell property. Sometimes the best way to protect an expensive item from turnover during bankruptcy is to sell it before you file. You are able to use this money to pay your attorney and your bankruptcy fees, as long the property was sold at fair market value.

Financing a Chapter 7 bankruptcy is often a challenge to debtors, but can be accomplished with a little ingenuity. Your attorney has helped many clients afford bankruptcy fees and has suggestions for your circumstances. For more information or a free consultation, please contact the experienced bankruptcy attorney’s at Fears | Nachawati Law Firm by calling 1.866.705.7584 or send an email to fears@fnlawfirm.com.

Bankruptcy Schedules

The bankruptcy schedules are designed to list all of your assets, debts, income, and expenses. This article will outline the different schedules and the information you should disclose in a common consumer bankruptcy case.

Schedules A and B

Schedules A and B list all of the assets the debtor owns. Specifically, schedule A lists all the real property the debtor owns. This means all land, houses, oil and gas interests, time shares, future interests in real property, and any other real-estate. The debtor will also list the value of such property and the amount of any secured claim on the property. Schedule B lists all personal property—essentially everything else. This list would contain all monies in cash or bank accounts, all security deposits, all household items, art, pictures or prints, jewelry, sporting equipment, clothing, cars, boats and pets. Some commonly missed items include: stocks, bonds, or other investments; life insurance policies (especially those with a cash value); an interest in a business or partnership; an entitlement to an inheritance from a deceased person;  property held for you in trust; or entitlement to sue someone for money damages (car accident, personal loan, etc.).

 

Schedule C

Schedule C lists all your exemptions. Generally exemptions are the particular code that protects your property. In Texas you can use either the Texas exemptions or Federal exemptions. Both exemptions have their advantages and disadvantages and it is important that you speak to attorney about which set you should use. Any non-exempt property can be sold to pay creditors in a chapter 7 case and can cause your plan payment to increase in a chapter 13.

Schedules D, E and F

On schedules D, E and F you list all of your creditors. Specifically, schedule D lists all of your secured creditors. A secured creditor is a creditor who holds an interest in collateral you are purchasing. The most common examples are a mortgage, a car note, and a purchase money agreement (typically for furniture or other household items). In order to keep the collateral the debts must be satisfied (paid). Schedule E lists all of your priority debt. The typical priority debts in a consumer case are income taxes and/or a domestic support obligation (such as child support or alimony). Priority debts are generally non-dischargeable debts that congress has decided are entitled to special treatment. In a chapter 7 case these debts will pass through the bankruptcy and in a chapter 13 case these debts must be paid during the life of the plan. Schedule F lists all of your general unsecured debts. This is essentially all other debts, including: credit cards, medical debt, student loans, pay day loans, deficiencies on surrendered or repossessed collateral, and personal loans. These debts, with the exception of student loan debt, will be discharged or wiped out at the end of the bankruptcy case.

Schedule G

Schedule G lists any leases or executory contracts you are a party to. An executory contract is one where both parties have the ability to breach, or break the contract.  In a typical consumer case you will list any residential leases or car leases on schedule G. These leases are either assumed or rejected—meaning you either keep the lease or you don’t. If you reject the lease then any remaining default is discharged in the bankruptcy.

Schedule H

Schedule H lists any co-debtors. This is where you list any co-signers on any of your debts. If a married couple is filing they do not need to list each other on the petition, but if one spouse is filing individually they need to be listed.

Schedule I and J

On Schedule I you list all the sources of income you have in the household. In Texas, under the 5th circuit opinion, all income—with the exception of social security income—must be listed on the schedule I. In addition to wage income, types of income include: family contributions, unemployment, retirement, child support, disability (non-social security); real-estate or rental income, interest and dividends, pension, and any other sources. On schedule J you list your budget or your expenses. While everyone’s budget is unique the Trustee will compare your budget to the IRS standard expenses for your household size. If your budget item is higher than the IRS standard amount your budget may be under scrutiny and you may need to provide supporting documentation to explain why your budget is higher.

In conclusion, bankruptcy schedules are a highly detailed and important part of your bankruptcy case. They are signed under penalty of perjury and must be filled out accurately. For more information and a free consultation, contact the experienced bankruptcy attorneys at Fears | Nachawati by calling 1.866.705.7584 or by sending an email to fears@fnlawfirm.com

Discussing Bankruptcy With An Older Relative

Just because a relative is older and living on a fixed income does not mean that he or she is also debt-free.  Many older Americans struggle each month to pay unsecured debts from very modest incomes.  The most common forms of unsecured debts are credit cards and medical expenses, and for many of our elderly even a small unsecure debt can be a big financial complication.  Some face the difficult decision to cut back on food, prescription medicine, or home utilities in order to make minimum payments on these debts. 

Many of our elderly try to avoid bankruptcy because they believe that they can pay their obligations with minimum monthly payments.  The unfortunate truth is that it takes many years to pay off even a small high interest debt with minimum monthly payments.  In the meantime a changed interest rate and annual fees can cause that minimum payment to increase.  Additionally, forgotten payments can lead to creditor harassment or lawsuits which can result in a real estate judgment lien and/or an asset seizure. 

Discussing personal bankruptcy with an older loved one can be difficult.  In many cases there is great concern over losing property or income.  The federal bankruptcy laws have changed significantly over the past fifty years and offer great protections for the elderly.  For instance, retirement income and social security are protected from creditor garnishment during bankruptcy.  In most cases all of the bankruptcy debtor’s property is exempt from turnover; however your bankruptcy attorney can discuss any property that may be at risk.  The bankruptcy laws offer many options for retaining property and discharging debts.  After the typical case the unsecured debts are discharged and there is more money available to pay necessary living expenses. 

Another common concern is the embarrassment of bankruptcy.  A personal bankruptcy can is usually a very private legal process.  Friends and family are not contacted and bankruptcy cases are not published in the newspaper. Only creditors and co-debtors receive notice of a personal bankruptcy.  

If an older relative is struggling with debt, discuss the situation with an experienced bankruptcy attorney.  The federal bankruptcy laws contain many protections that shield the assets and incomes of the elderly while discharging burdensome creditors.  Don’t let the stress of credit cards and medical bills tarnish your loved one’s golden years.

Top Ten Things Your Bankruptcy Attorney Hates To Hear

10.  "I know I told you that I only expected a small tax refund, but my
accountant says I'm getting back a large refund! Isn't that great?" No, its not.
Your attorney can protect your property, but unexpected large cash sums are difficult to
protect during a bankruptcy. Generally it is advisable to receive (and spend) your income
tax refund prior to filing your bankruptcy case.
 
9. "Before I came to see you I paid a debt counselor a lot of money." Individuals
can lose thousands in fraudulent debt counseling. While there are legitimate programs
that can obtain positive results, many are just plain scams and end up making matters
much worse for you and your family.
 
8. "I cashed out my retirement account and paid off my credit cards."
Retirement accounts are generally protectable assets in a bankruptcy and beyond the
reach of most creditors, while credit card debt is typically the easiest type to discharge.
 
7. "I paid off my car with my tax refund." Having too much equity in a vehicle
will result in payments to the bankruptcy trustee. In other words you first paid for your
car, and then you must pay the trustee for the non-exempt equity in the car. That means
you pay TWICE for the same car!
 
6. "I repaid a loan to a family member before coming to see you." Payments to a
family member prior to filing bankruptcy is a big mistakes. He or she may be forced to
turn over the payment to pay your creditors. Of course you want to pay your family
member, and you can certainly do so, but let a qualified professional help you do it the
right way.
 
5. "I transferred my house/car/etc. to my mother to protect it." Another
regrettable mistake. By trying to protect an asset without your attorney's help you could
actually strip any protection it might otherwise be entitled to.
 
4. "I took out a payday loan after our consultation to pay for the bankruptcy."
Incurring a debt with no intention to repay is not only non-dischargeable in bankruptcy, it
could land you in criminal trouble!
 
3. "I went on a shopping spree with my credit cards before I came to see you."
This seldom happens because most people have better common sense. As a general rule
the shopper will be paying that money back to the credit card company.
 
2. "I just got my chapter 7 discharge and I found out my grandmother left me a
large inheritance." This news is sad in many ways; not only is the loss of a loved one a
tragic event, but the bankruptcy court may order you to turn over the inheritance.
 
1. "I didn't tell my attorney this, but. . ." The worst news of all! Always answer
your attorney's questions honestly and completely. Hidden assets or transfers can
prevent you from receiving a bankruptcy discharge and may result in federal criminal
charges.

 

What Can You Keep When Filing for Bankruptcy?

This is a quick list of the things you can keep when filing for bankruptcy (Depending on the type of exemptions you qualify for and the amount of equity you have).

1.       Your house

2.       Your Car(s)

3.       Your Bank Account(s) – including Savings Accounts

4.       All Retirement Account(s) – Yes, 401ks, 403bs & IRAs.

5.       Your Personal Belongings

6.       Stocks, Bonds and Mutual Funds

7.       You’re Sanity!

Call the office anytime to find out more by dialing toll free 1-866-705-7584 or e-mailing info@fnlawfirm.com

Americans' net worth sinks 17.9%; spending pullback likely

As our economy corrects itself after years of mismanagement  by our leaders in government we are confronted with some obvious facts.  The Federal Bailout is helping the  banks, investment firms and the most trusted firms on Wall street, but what about our working class. The American working class is feeling the crunch harder than ever.  The Bankruptcy attorneys at the Law Firm of Fears and Nachawati are standing by to assist you during this troubling time.     

By Barbara Hagenbaugh, USA TODAY

Americans' net worth plunged a record 17.9% in 2008 as the value of their homes, stocks and other assets dropped swiftly, the Federal Reserve said Thursday in a report that did not bode well for consumer spending and the overall economy this year.

With net worth dropping so much, consumers are likely to focus on saving, not spending, as they realize they can't rely on their homes and stock portfolios as ever-rising sources of income, says RDQ Economics senior economist Conrad DeQuadros.

Such saving, while good in the long run, will likely prolong the economic slump. Consumer spending drives more than two-thirds of U.S. economic activity.

"This does point to further weakness in consumer spending going forward," DeQuadros says.

Retired engineer Gerald Sullivan, 58, says he isn't eating out as often or going on vacation now that he's seen the value of his 401(k) and his home sink.

"I was confident before that I was doing fairly well," says Sullivan of Venice, Fla. But, "I have no chance at all of recouping the money by the time I need it."

U.S. net worth, a measure of households' assets minus their liabilities, such as debt, was $51.5 trillion in 2008, the lowest since 2003. The record annual drop in net worth, the first since 2002, accelerated as the year progressed. In the fourth quarter, household net worth dropped 9%, the biggest decline since quarterly records began in 1951, the Fed said.

Other details from the report:

•The value of household real estate fell for a second-consecutive year in 2008, declining 10.5%, the biggest drop on record. At $18.3 trillion, the total value of U.S. homes was the lowest in five years.

•Stock market wealth plunged a record 39.9% in 2008 to $5.5 trillion, the lowest since 1996.

•Corporate profits fell 10.8% in the September-December quarter and were down 8.8% for the year as a whole.

Consumers have been cutting back spending. In February, retail sales fell 0.1% after a 1.8% increase in January, the Commerce Department said Thursday.

"March will see a deeper, and broader-based, decline in consumer spending that will be repeated over subsequent months," Mission Residential chief economist Richard Moody says.

If you are receiving calls from creditors or facing foreclosure contact the Bankruptcy Lawyers of the Law Firm of Fears & Nachawati at (214) 890 - 0711 or info@fnlawfirm.com

Don't let YOUR RETIREMENT slip through your hands

These are tough times on the financial front. However, you don't have to watch your retirement hopes slip away from you.  You’ve been planning for your future and saving for retirement. But what do you do when your expenses outgrow your income? Is it wise to make early withdrawals from your retirement to pay for your expenses today? Many retirement plans penalize for early withdrawal. According to IN.gov, taking a lump sum distribution. “gives you the freedom to do whatever you want with the money.  But beware: at the time you cash out, you will owe all applicable taxes. If you're younger than 59-1/2, you'll pay a 10 percent penalty plus state and federal income tax on the full amount of your distribution (including the penalty.) This choice may also affect your ability to receive unemployment compensation . . . Also, if you are vested, you will lose your right to a lifetime pension benefit.” 

If you are overwhelmed by debt and cannot seem to catch up on your bills it is important to know there are alternative solutions to tapping into your retirement. If you are not ready to empty your nest egg solely to survive today and potentially exhaust your funds for tomorrow you may want to consider bankruptcy. For more information on bankruptcy please contact Fears | Nachawati Law Firm, Phone (214) 890-0711, 4925 Greenville Avenue, Suite 715, Dallas, Texas 75206.

401(k) plans if spent today - what's in your future?

 

 

The Dallas News featured a September 3, 2008 Washington Post article that reported how many people are feeling the need to tap into their 401(k) plans just to survive.   The article stated that, “Hard economic times are driving some people to take actions that could jeopardize their futures”. The article noted that there is an increase in people tapping into their 401(k) plans to supplement their financial needs, but that people who do are jeopardizing their long term retirement plans. A person must show severe financial need. Moreover, they would be subject to a 10% penalty tax if younger than 59 ½ and their account would be frozen for six months after the withdrawal wherein neither the employee nor employer may contribute.  People who are feeling the effects of this difficult economy, who are being inundated with bills that have now surpassed their income, should be aware that in most circumstances their 401(k) is protected should they need to file for bankruptcy. There may not be a need to diminish your retirement savings to survive in today’s economy. For more information on bankruptcy – who it’s for and what assets may be protected please contact Fears | Nachawati Law Firm, Phone (214) 890-0711, 4925 Greenville Avenue, Suite 715, Dallas, Texas 75206.