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Bankruptcy Law Blog

Thursday, December 24, 2015

Dealing with Too Much Credit Card Debt

When credit cards first came into use, for many they seemed like a lifeline, enabling the purchase of necessary items before the money was in the bank. All too quickly, due to a combination of consumer overuse and the increasingly exorbitant interest rates charged by credit card companies, that lifeline put many in a stranglehold.

If you find yourself overwhelmed by credit card debt to the point that your financial (and perhaps even emotional) life has become unmanageable, now is the time to take some serious steps toward economic stability. It may help you to know that you are far from alone. According to debt statistics released this year, the average U.S. household now carries just over $16,000 work of credit card debt, a number that, unfortunately, continues to climb.


Measures to Help You Regain Control

The first step is usually the hardest one:


Stop Adding to Your Accumulated Debt


While it may be difficult to resist temptation, it is imperative to stop adding to your mountain of debt as you try to get out from under it. Cut expenses wherever you can. Stop using credit cards entirely. If you have been going through a rough patch during which you have needed to pay for essentials, like utility bills, with credit cards, try negotiating a payment plan with the company in question. Another possible solution is downsizing your home, car, or other expenses, or refinancing your home.


Negotiate a Lower Credit Card Interest Rate


Credit card companies don't want you to default, so they are often willing to negotiate a lower interest rate so that you can comply with their demands. Not all credit card companies will negotiate such a reduction in interest, but it may be possible to shift your current balance to a card with a lower (even a 0%) interest rate.
Work Out a Payment Plan

If you are unable to pay the minimum amount of your credit card balance even at a lower interest rate, see if you can't get a deferment on your payments for some period of time, or negotiate a new payment plan. Most companies would prefer having you pay some regular amount, even a small one, rather than defaulting altogether.

Going on a Spending Diet


As with changing any bad habit, one dramatic alteration can sometimes kick-start the process. Some people find going on a "spending diet" for a month or two can be rewarding. Deciding not to purchase anything over a certain amount can also be helpful. Make a firm decision to use the saved money to pay down the existing debt.

Earning More While You Spend Less


It stands to reason that if you find a way to earn more money, you will be able to pay off your debt more quickly. Even a relatively small addition to your income, when applied to your existing debt, can make a significant different over a period of time.

Other methods of relieving overwhelming debt include filing for personal bankruptcy. To obtain help in choosing the best method for handling your credit card debt, you should consult with an experienced bankruptcy attorney for advice and guidance.


Monday, December 21, 2015

Obtaining a Small Business Loan After Personal Bankruptcy

Will my personal bankruptcy affect my ability to get a small business loan?

 

You have become overwhelmed by personal debt and are considering filing for Chapter 7 or Chapter 13 bankruptcy, but, you are concerned about whether personal bankruptcy will prevent you from obtaining a small business loan in the future. This is a legitimate concern, but it is important to remember that while bankruptcy might make things more difficult, it will not make securing a loan impossible. 

 There are a few things that will make it easier for you to get the financing you need for your small business. The first of these is a thorough business plan, as detailed as possible, outlining how the business will operate and including predictions of how much it will cost to open. The plan should also include information on how much it will cost to run the business and how much profit the business is expected to make. Such data makes the lender feel more secure that the loan will be repaid.

If you already have a relationship with a financial institution to which you have fulfilled your repayment obligations, it is best to initially approach that institution. This institution already knows you as a businessperson and has confidence in you, since you already have an established a track record.

 Depending upon when you need the loan, it is usually best to wait until after your personal bankruptcy has been discharged before you apply. It is also important to note that there are nontraditional means of financing available. Asset-based financing, for example, is secured by your business property, such as real property and equipment.

 Most importantly, be persistent. Do not be discouraged if things don’t work out initially. It might take some time, but don’t give up. Your small business financing is out there, even in the wake of a personal bankruptcy.

 

If you are concerned about small business financing or any other matter related to personal bankruptcy, contact the Mobile and Baldwin, Alabama attorneys at Padgett & Robertson, by calling (251) 342-0264 for a consultation today.

 

 


Sunday, November 29, 2015

Student Loans and Personal Bankruptcy

Are student loans dischargeable in personal bankruptcy?

Today,   many people are struggling to pay back student loans while also struggling with other types of debt, such as credit card payments or medical bills.  This overwhelming financial burden can cause a person to seek out bankruptcy as a means of relief only to be told that they cannot discharge his or her student loan debt. 

Generally, the bankruptcy cannot free you of student loan debt, but there are limited circumstances where student loan debt can be discharged.  Under the federal Bankruptcy Code, student loans can be discharged if continuing payment would cause the debtor undue hardship.  Unfortunately, undue hardship was not defined in the statute, leaving it up the bankruptcy courts to explain the concept.  The courts have decided that undue hardship exists when a person has attempted to pay back his or her student loans, but, due to his or her current financial situation, continuing payments would cause this person to be unable to maintain a “minimum standard of living”.  It must also be found that the person’s poor financial situation will continue into the future.

If undue hardship is not the issue, there are other avenues to discharge student loan debt.  One involves the bankruptcy code’s definition of education loans.  The code defines education loans as those taken to attend a school that participates in federal student aid programs.  If you had to take private loans because your school did not participate in the federal programs, those debts might be dischargeable. Also, loans taken for things other than the “cost of attendance” (tuition and fees) may also be dischargeable.

In order to discharge student loans, an adversary proceeding must be filed in an existing bankruptcy case.  If you are trying to discharge your student loan debt, it is in your best interest to retain an attorney with experience in this area.       


Monday, November 23, 2015

What Happens When a Co-Signer Files for Bankruptcy?

I recently co-signed on the loan for my son’s vehicle, and he recently filed for bankruptcy. Should I be worried?

Co-signing a promissory note can be a helpful and productive way to assist a friend or family member in obtaining a much-needed vehicle or personal loan – however, this benevolent decision can ultimately lead to possible financial woes for both parties in the event a bankruptcy occurs. Under the terms of the promissory note, a co-signor is responsible for repayment of the debt if the primarily borrower is unable or unwilling to continue paying –often the case when a debtor declares bankruptcy.

Co-signor liability in the event of a bankruptcy is determined based on the type of bankruptcy filed by the original debtor, which is limited to Chapter 7 or Chapter 13. In a Chapter 7 proceeding, an automatic stay is issued to halt any collection efforts by creditors. However, creditors may still pursue a co-signor, notwithstanding a discharge against the original borrower. To insulate a co-signor against liability in this instance, a borrower could reaffirm the debt or pay it off completely.

On the other hand, Chapter 13 proceedings offer greater protection to the co-signor. The court will initiate a “co-debtor stay” to insulate co-borrowers from liability and collection efforts during the proceedings. However, the court may eventually lift the co-debtor stay in the event the borrower fails to repay the debt under the repayment plan, or the creditor can show it will face “irreparable harm” if the stay remains in place.

In any event, there are options available to help co-signors avoid the fallout of a bankruptcy proceeding by the original borrower, and a bankruptcy attorney can help explain the available options for borrowers in this predicament.


Saturday, October 31, 2015

Avoiding Post-Bankruptcy Lending Scams

I just went through consumer bankruptcy, and seem to receive solicitations for loans and credit cards almost daily. Is this a scam?

It is no secret that the bankruptcy process will temporary impact the petitioner’s credit rating and eligibility for new financing. In the long-run, however, bankruptcy can significantly reduce outstanding debts and liens, leading to an overall brighter financial future. Recent filers should be warned, however, that unscrupulous lenders will take very opportunity to exploit bankruptcy petitioners, primarily due to the presumption that these individuals are “desperate” for credit and will accept virtually any interest rate offered. As experienced bankruptcy practitioners, we encourage you to maintain your newfound freedom from the grips of debt, and to hone your skills in spotting a lending scam before it can ever hit home.

Signs of a Scam

Scammers in any industry rely on the psychological vulnerabilities of their targets. Scams against the elderly, for example, often rely on the notion that elderly individuals live alone, need someone to talk to, and can be easily persuaded into anything with a casual, friendly conversation.

Unfortunately, the same is true with post-bankruptcy lending scams. In the weeks and months following the bankruptcy process, some debtors may feel hopeless and out of control of their financial futures. Using this to their advantage, scammers will entice borrowers to restart the debt cycle by entering into wildly unfavorable – and sometimes illegal – credit agreements, often with unthinkable interest rates and skewed repayment terms.

Other signs of trouble include unsolicited, relentless offers over the telephone or through the mail. In addition, loans and credit products promising to improve one’s credit score are generally correlated to unfavorable repayment terms targeting those in “desperate need” of financing – again, relying on the psychology of vulnerability.

The best bet? Stay on the straight and narrow, avoid pursuing new debts, and if an offer seems too good to be true, it almost always is.

If you are considering personal bankruptcy or have questions about how the process will impact your credit rating, please contact Padgett & Robertson today: 251-342-0264.


Friday, October 30, 2015

Basics of Chapter 7 Bankruptcy

What is Chapter 7 Bankruptcy and how does it work?

If you are overwhelmed by debt, you might be considering bankruptcy as a way out.  Chapter 7 bankruptcy can provide you with a fresh start if you are eligible. Our attorneys regularly determine if clients are eligible and assist them in the Chapter 7 bankruptcy process from inception to conclusion.

In order to be eligible for Chapter 7 bankruptcy, you must pass the means test.  This means that your income must be lower than the median monthly income in your state.  There are a number of exceptions to this rule under which you might also be able to qualify. 

If you pass the means test or fall into one of the exceptions, the Chapter 7 process requires that all of your assets be sold and that the proceeds from those assets be used to pay creditors in a specified manner. The process begins by filing a Chapter 7 bankruptcy petition with the bankruptcy court. 

As a debtor, you must disclose all of your financial information, including a detailed list of your assets and liabilities as well as your income and expenses. At this point, the automatic stay kicks in. The automatic stay stops most collection efforts by creditors.  Within 40 days of the submission, the court appointed bankruptcy trustee must hold a meeting of creditors. You must be present at this meeting, where the trustee and any creditors who attend will question you under oath. The trustee has 10 days from this meeting to decide whether to accept the case or find it to be abuse.

If the case is accepted, all of your assets, except exempt property, will be liquidated and used to pay your creditors. After the bankruptcy, all of your debts will be discharged, giving the debtor the fresh start you were looking for.  There are some debts that are non-dischargeable, such as tax debts and child support payments. You will still be responsible for these, even after the bankruptcy process has been completed.

The attorneys at Padgett and Robertson have extensive experience representing individuals in Chapter 7 bankruptcy cases.  If you are in the Mobile area contact us today at (251) 342-0264 for a free consultation. 


Thursday, October 8, 2015

Timing Consumer Bankruptcy

What is the Best Time to File for Consumer Bankruptcy?

In some cases, filing for consumer bankruptcy involves a strategic component, particularly if a debtor is seeking to reduce overall liability or avoid issues with an impending life milestone such as divorce. It is also true, however, that waiting too long to file bankruptcy can end up costing you more in the long run which raises the question: when is the best time to file?

Interestingly, the summer months are the most popular when it comes to the raw data of bankruptcy filings. By contrast, January and February see the lowest number of filings – the reasons for which could be anyone’s guess.

Setting the calendar aside, there can be some real benefits to filing as soon as possible. For instance, if you are facing a foreclosure and feel that you have nowhere to turn in terms of housing, filing for consumer bankruptcy will put a stay on the pending proceedings – therefore buying you additional time to devise a future housing plan.

As well, creditors are continuing to charge interest on your secured and unsecured debts each day. In many cases, a debtor has nothing to gain by waiting – and trying – to pay down debts before filing. Often, the most toxic and costly debts (unsecured credit cards) are forgiven in the process anyway.

When should an individual delay filing? If a divorce is on the horizon, a debtor will likely fair better by co-filing with a spouse as opposed to filing alone. Likewise, if two spouses are responsible for the debts together, co-filing will be virtually necessary in order to ensure the proper outcome.

Lastly, delaying filing may be the best option if you truly believe you will be able to pay down your debts without needing bankruptcy protection. Bankruptcy will create a temporary stain on your credit rating, which could make it difficult to secure a loan for a home or a vehicle. The impact will be just as negative, however, for those who believe they can pay down debt and wind up in default.

If you are concerned about when to file for bankruptcy, please do not hesitate to contact the knowledgeable attorneys at Padgett & Robertson, Attorneys at Law, in Mobile, Alabama at 251-342-0264.


Monday, September 21, 2015

Bankruptcy & Family Law: How filing affects domestic matters

If I file for bankruptcy, can I avoid or reduce some of my alimony arrears?

Getting behind on the bills can be exceptionally stressful, and a consumer bankruptcy action can help alleviate some of the frustration that comes with overwhelming monthly obligations.  There are certain debts, however, that  are not dischargeable through the consumer bankruptcy process, and the Bankruptcy Code makes clear that most domestic matters cannot be avoided even with a total Chapter 7 liquidation.

No matter how difficult the financial landscape, child support arrears cannot be reduced, negotiated or discharged under any circumstances. However, filing for bankruptcy may help a debtor get caught up on the outstanding balance of the overdue support, and may even help reduce some of the other debts owed to unsecured creditors. When a debtor files for Chapter 13 protection, his or her debts will be prioritized – with child support arrears at the top of the list. The monthly child support payment will be amortized over the length of the repayment plan period and will be paid to the trustee, who will ensure the amount is properly distributed to the child(ren) in need of support.

Bankruptcy can also have an impact on divorce proceedings, and debtors are encouraged to seek thorough legal counsel prior to filing for bankruptcy if considering marital dissolution. In some instances, it may make sense to file for bankruptcy prior to divorce, as this can result in significantly reduced filing fees and court costs. Moreover, joint debtors may be able to have some of their debts discharged and forgiven, meaning the debts need not be distributed during the divorce action.

On the other hand, Chapter 13 consumer bankruptcy can take 3 to 5 years to complete, depending on the payment plan – which may not be feasible if a divorce is on the horizon. Likewise, those seeking Chapter 7 protection may have difficulty meeting income eligibility requirements by filing together, making it more beneficial to go through the divorce first.

If you are considering bankruptcy and are not sure how the proceeding will interface with your pending domestic matter, please do not hesitate to contact Padgett & Robertson in Mobile, Alabama today: 251-342-0264.


Friday, August 28, 2015

Moving Past Bankruptcy: How the Process Impacts Eligibility for Future Secured and Unsecured Loans or Credit

I just finished bankruptcy, will I ever be able to take out a loan again?

While bankruptcy will undoubtedly appear on your credit report, and may initially negatively, impact as a former debtor, the long-term effects of a bankruptcy filing are minimal compared with the financial freedom one can experience as a result of discharging toxic debt obligations.

Under changes to federal regulations, creditors are required to report a $0.00 to credit reporting agencies if a debt has been discharged in bankruptcy. Moreover, there are a number of techniques for debtors to consider in order to repair their credit during the months and years immediately following bankruptcy.

While it may seem counter intuitive, applying for new unsecured revolving accounts is one way to boost your credit rating – assuming, of course, that your balances are paid in full at the end of each billing cycle. The reason for this is that creditors like to see a debtor is holding available credit without using it or “maxing it out,” thus demonstrating self-control and a character for creditworthiness.

Bank loans are another way to establish credit, but it may be necessary to apply with a co-signer in the first few years following bankruptcy. For the reasons described above, a loan that is paid on time and according to the terms of the promissory note will help establish a reputation for creditworthiness, resulting in an increased credit score.

Lastly, remember that patience and steadfastness are an important mental component to rebuilding credit. Your credit did not plummet overnight, so it will take a few years to restore it completely. Over time, however, with careful practices and a dutiful financial attitude, you can restore your credit to a rating better than ever before. In additional, bankruptcy will eventually “fall off” your credit report after a period of 7-10 years.

If you are considering consumer bankruptcy protection and would like to discuss your options, we encourage you to contact Padgett & Robertson, Attorneys at Law, representing clients throughout southern Alabama. We are located in Baldwin County, Alabama and can be reached at 251-342-0264.


Friday, August 21, 2015

Bankruptcy and Foreclosure

Can bankruptcy help to avoid or delay foreclosure?

For clients in danger of home foreclosure, filing for bankruptcy can be a lifesaver. In many situations, filing Chapter 7 bankruptcy can put off foreclosure for a number of months and filing Chapter 13 bankruptcy can even enable a person to save his or her home.

The Process of Foreclosure

Foreclosure results when a homeowner falls well behind on mortgage payments. The bank holding the mortgage does not normally begin the process until the homeowner has missed paying the mortgage for a period of at least three or four months. Once the bank begins the process of attempting to foreclose through auctioning off the property in question, the homeowner, presumably having exhausted other avenues such as a short sale or loan forbearance, may benefit by filing for bankruptcy. Contrary to common belief, some homeowners facing foreclosure may actually be able to improve their credit with a bankruptcy filing.

Types of Personal Bankruptcy: Chapter 7 and Chapter 13 

Chapter 7 and Chapter 13 differ in a few significant ways. Chapter 7 bankruptcy discharges most debts within six months, but some debts remain, most commonly student loans, alimony or child support. People who file for Chapter 7 can't file again for eight years. Chapter 13 bankruptcy, on the other hand, consolidates the homeowner's debts and creates a payment plan. Such a plan typically lasts from three to five years and allows the filer to retain certain assets, such as a house or car and some savings, although laws vary from state to state. Homeowners whose income level is over a certain amount must file for Chapter 13 and once they have filed, are not permitted to file again for two years. Both of these types of bankruptcy can be utilized if your home is in foreclosure. 

If you have hit some serious financial obstacles and are in danger of losing your home, you should consider the possible benefits of filing for bankruptcy. Our knowledgeable bankruptcy attorneys at Padgett & Robertson caringly serve clients in Mobile and Baldwin County, Alabama. Please contact us at (251) 342-0264. 


Thursday, August 20, 2015

Bankruptcy Can Stop Wage Garnishments

Can filing for bankruptcy protect you from having your wages garnished?

Undergoing bankruptcy can be beneficial for individuals whose wages are being garnished. Filing for bankruptcy may help stop a creditor from garnishing your wages and may even enable you to retrieve some of the wages that were garnished prior to bankruptcy proceeding. 

The Automatic Stay

Once an individual files for bankruptcy the automatic stay goes into effect. The automatic stay stops creditors from most actions designed to collect past due amounts. This effectively stops wage garnishments for the duration of the bankruptcy. In cases where the creditor has a valid reason, however, it may ask the court to lift the stay. This happens mostly in cases where the debt is considered non-dischargeable.  Situations that involve non-dischargeable debts that may result in the suspension of an automatic stay include:

• Child support and alimony;
• Tax proceedings; and
• Repaying pension loans.

Most commonly, the automatic stay is suspended in cases of domestic support obligations.

Wage Garnishments After Bankruptcy

The automatic stay may end in one of three ways: when you receive a notice of discharge, when your case is dismissed without a discharge or when the court lifts the stay. If a particular creditor, such as a credit card company, is included in the discharge, your wages can no longer be garnished to collect any outstanding debt. If your case is dismissed without a discharge, however, the creditor can continue to have your wages garnished.

Recovering Wages Garnished Prior to Bankruptcy Filing

When particular conditions are satisfied, you may be able to retrieve some wages that were garnished before you filed for bankruptcy. Typically, you can receive back wages garnished within the 90 days prior to bankruptcy filing if they were over $600 and if you have sufficient exemptions to cover them. Exemptions are often made for items such as a motor vehicle or a wedding ring. It is important to have an experienced attorney in order to negotiate possible recovery of garnished wages. Much will depend on whether you have filed for Chapter 7 or Chapter 13 bankruptcy.

Ensuring That Garnishments Stop in a Timely Fashion

Once you have filed for bankruptcy, you must provide a complete list of creditors to be officially notified. In order to protect yourself from continuing to have your wages garnished, it is necessary to directly inform the payroll department of the company that employs you. It is also important to inform the levying official, usually the local sheriff, of your bankruptcy in order to stop the garnishment process as quickly as possible.

If you are considering filing for bankruptcy, particularly if your wages are presently being garnished, and you have questions, please get in touch with one of the skilled, experienced bankruptcy attorneys at Padgett & Robertson.  We are available for a free consultation in Mobile and Baldwin County at (251) 342-0264.


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Padgett and Robertson assist clients with Bankruptcy, Personal Bankruptcy, Consumer Bankruptcy, Chapter 7 Bankruptcy, Chapter 13 Bankruptcy and The New Bankruptcy Law in Mobile, Alabama and throughout southern Alabama. Alabama State Bar Association Regulations require the following: "No representation is made that the quality of the legal services to be performed is greater than the quality of legal services performed by other lawyers." 11 U.S.C. 528 of the U.S. Bankruptcy Code requires the following: "We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.”



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Alabama State Bar Association Regulations require the following: "No representation is made that the quality of the legal services to be performed is greater than the quality of legal services performed by other lawyers." 11 U.S.C. 528 of the U.S. Bankruptcy Code requires the following: "We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.”