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Bankruptcy

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. 



Read more . . .


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.


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.
Read more . . .


Monday, August 17, 2015

Congress Considering Amendments to College Tuition ‘Clawback’


What is a college tuition ‘clawback’ in bankruptcy? 


Attending college can be one of the most costly expenses a family endures – and, for some, the increasing tuition rates ultimately prove fatal to their personal financial portfolio, resulting in consumer bankruptcy. 

Under current bankruptcy guidelines, debtors engaged in the bankruptcy process are sometimes able to recover money spent in the years immediately prior to filing that could have been spent on paying down debts and avoiding insolvency. In order to qualify for this recovery – known as a ‘clawback’ – the debtor must prove that he or she did not get a “reasonably equivalent value” for the expense. Historically, the clawback principle was applied to personal loans or money spent assisting family members; or to below-market asset transfers occurring immediately prior to the bankruptcy filing. 

However, in recent years, bankruptcy courts have seen a significant influx of debtors seeking to clawback tuition payments made on behalf of their children enrolled in a college or university.
Read more . . .


Friday, August 14, 2015

Five Things to Know About Consumer Bankruptcy Credit Counseling

Is credit counseling mandatory prior to entering bankruptcy proceedings?

In most cases, a debtor considering bankruptcy is required to work through credit counseling courses prior to even beginning the Chapter 7 or Chapter 13 process. If you are considering bankruptcy, the following tips may help you better prepare for this important preliminary step: 

Tip #5: Counseling required for all debts – Under bankruptcy regulations, credit counseling is required whether the debts are primarily business, personal, or an equal mix of both. Moreover, if a married couple is filing jointly, both spouses must go through counseling. 

Tip #4: Qualified counseling – Not just any credit or debt counselor will do. Under the rules, debtors must meet with a non-for-profit budget and credit-counseling agency officially approved by the United States Treasury. A list of qualified professionals is available from the Bankruptcy Court Clerk’s office. 

Tip #3: Multiple formats available – Credit counseling is available in a number of languages to meet the needs of individual debtors. Likewise, the counseling sessions may take place in person, over the phone, or over the Internet. 

Tip #2: Only limited excusals available – Credit counseling is generally required for everybody. However, there are three scenarios that could give rise to an excusal: (1) the debtor's advanced mental disease or incapacity so severe that credit counseling would prove futile (2) the debtor's physical disability that makes participation impossible (3) the debtor's active military duty in a combat zone. 

Tip #1: Counseling may be obtained late – In limited circumstances, the court may allow debtors to obtain counseling after the bankruptcy petition is filed, but only upon a showing of certain unique circumstances. If these stipulated criteria are met, a debtor may have up to 30 days after the filing to complete credit counseling. 
Contact an Alabama bankruptcy attorney today! 

If you are considering consumer bankruptcy, please do not hesitate to contact the Mobile and Baldwin County, Alabama bankruptcy attorneys at Padgett & Robertson today: (251)342-0264. 


Tuesday, July 14, 2015

Former Adams Produce Owner Under Fire, Facing Criminal Charges

Is it possible that criminal charges will result from information obtained in bankruptcy proceedings?

 

In 2010, Adams Produce, a large family-owned company with a long history in Birmingham, was sold to a group of investors. Just two years later, in 2012, the company filed for bankruptcy and closed.  Four hundred employees were left without jobs and the company owed the employees almost three weeks back pay.  The company also owed almost $16 million to vendors, creditors, and produce suppliers.  The company blamed decreasing margins and lawsuits from rival companies in the bankruptcy filing.  Once the company filed, the United States government cancelled a recently signed, four and a half year contract for produce worth $41 million.    

Prior to the sale and bankruptcy, the family-owned business brought in outside managers to lead the business.  The family eventually sold ownership stakes to the outside CEO, CFO, COO, and an investment firm, CIC Partners.  The bankruptcy and closing impacted the original family, specifically Carl Adams III who claimed that he lost $5 million and suffered emotional and physical damage as a result of the company’s failure.  Adams was forced to return to the workforce and forgo retirement while watching his family business shut down.  Adams blamed the company’s former CEO and CFO, for most of the problems associated with the closing and bankruptcy.  

Former CFO John Stephen Alexander had insight into the company’s finances and did not inform CIC of the issues that Adams Produce faced. Adams claimed the CFO had a duty to report the fraud in the government contract and was guilty of duping people into buying into a failing company along with the CEO. Alexander was sentenced on separate fraud charges and served a prison sentence related to those charges.

If you believe that you have done something illegal and are now considering filing for bankruptcy, you should speak to an experienced attorney before making your next move.  The attorneys at Padgett and Robertson have extensive experience helping companies in the Mobile and Baldwin County areas navigate bankruptcy proceedings.  Contact us today at (251) 342-0264 for a free consultation.      


Monday, July 13, 2015

Recent Bankruptcy Law Changes Lead to Increase in Personal Property and Homestead Exemptions


What are the current asset thresholds and exemptions for consumer debtors considering a Chapter 7 liquidation or Chapter 13 restructure?


As a foundational principle, bankruptcy is an appropriate financial step for anyone whose debts and liabilities far exceed assets – and it is no longer feasible to make monthly debt payments without extreme hardship. While bankruptcy debtors are expected to be highly cash-strapped and tapped of most of their assets, the law does not mandate total poverty – and exemptions have been worked into the law to ensure debtors are able to keep some of what they have earned in both real and personal property assets. 

While the Bankruptcy Code is of course a federal statute, bankruptcy courts are often required to follow certain rules and procedures set forth by the state in which the debtors are situated. One such state law, known as the exemption threshold, varies significantly from one state to the next and dictates the amount of property a debtor may own in order to qualify for Chapter 7 or Chapter 13 bankruptcy proceedings. 

Alabama increases exemption thresholds 

Unlike its peninsular next-door-neighbor with one of the highest thresholds in the nation, Alabama’s threshold is one of the lowest in the United States – meaning debtors must be very insolvent before qualifying.
Read more . . .


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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.”