A bankruptcy blog containing useful information for anyone considering a Charlotte bankruptcy attorney.

Clients who surrender their home or condominium in bankruptcy are often approached by the mortgage lender or a realtor, about doing a short sale. For most, this is confusing. The property was given back to the mortgage lender in bankruptcy, so why is the homeowner being asked to participate in a short sale?

Post-Bankruptcy Obligations

After you receive your discharge in a Chapter 7 where you surrendered the home, you are not liable for the mortgage. Fortunately, for most clients this means they get to live ‘rent free’ at the property until the bank decides to move forward with foreclosure– and sends you a notice to vacate. You should feel comfortable signing off on a deed to the bank or to the new buyer, if requested, but consulting a lawyer is always a good idea.

Will My Credit Be Affected By A Foreclosure?

Your bankruptcy discharged the debt owed to the mortgage lender. If there is a subsequent foreclosure, there is no further credit damage– the debt has already been discharged.

What About A Short Sale?

If you are approached by the bank or a realtor about doing a short sale, essentially what is being proposed is that your payoff to the bank be lowered to accommodate a low sale price. At this point you should be asking yourself: What payoff? I thought I surrendered this property and am not responsible for the mortgage? And you’re right. You have no obligation. But a short sale benefits the bank and the new buyer and realtor, so that’s why you’re being approached.

I Want To Help. What Should I Be Concerned About?

It’s common after bankruptcy to sign over your legal interest in property either to the bank or to a 3rd party buyer in foreclosure; however, if are the selling party on a short sale transaction, a few red flags are raised:

1. As seller on a contract for land, you are taking on responsibilities to deliver the property in a certain condition, and free of liens or encumbrances, including HOA dues and taxes. Those were discharged by your bankruptcy and to the extent any HOA dues have accrued since you sold, they are typically taken care of by the bank or buyer in foreclosure.

2. In a short sale, the bank is lowering the amount due to them on your mortgage. After your discharge you owe them nothing. If they ask you to ‘reaffirm’ the debt as part of the short sale, you’ve just re-committed yourself to the loan amount. Then, when the bank sells to the buyer and lowers their payoff to do so, you receive a 1099 form for “forgiveness of debt.” This means you will be responsible for the amount forgiven, from a tax perspective. If the bank forgives $20,000 in debt to make the sale work, you’ll owe the taxes due on $20,000 of income.

3. The bank is looking to save the cost and time associated with the judicial foreclosure process. This is one reason the short sale is attractive to them. They save money and time, and give you nothing in return except the uncertainty as to your new obligations once you start signing papers with them.

Talk to an attorney before assisting the bank with a transaction related to your property. Your bankruptcy attorney should be more than willing to review documents for you. If he or she isn’t, feel free to call me. I’m happy to help make sure you don’t accidentally undo the benefits of bankruptcy. 704.749.7747.

Yes. In fact, it’s the best way to rebuild your credit after filing bankruptcy. Because your income to debt ratio will be healthy after filing bankruptcy, you’ll find you receive offers for credit cards a month or two after filing.

While you will eventually be able to get a traditional credit card at a normal rate, the first type of card you will most likely be approved for is called a secured credit card. This article explains a few types of cards to look for after filing.

Step Carefully Back Into The Credit Game

I advise my post-bankruptcy clients to focus on rebuilding credit. I also encourage them to be careful not to jeopardize their new financial stability. While it is smart to build good credit for the purchase of a home or reliable vehicle, it’s important to avoid over-extending ourselves.

Once A Client, Always A Client

I have realized that the lawyer-client relationship is nowhere near over just because the client receives a discharge in bankruptcy. My clients consider me to be their lawyer going forward. I’m proud of that. I have conversations regularly with old clients who need my help with a question about a new car or a communication from a mortgage company. I don’t charge for that time—it’s nice to reconnect and I’m happy to be able to help.

If you’d like to speak with a charlotte bankruptcy lawyer today, please call me. I’d be happy to answer any questions you may have about bankruptcy or your finances, no matter the situation. 704.749.7747.

I understand my clients’ concerns about their credit score when considering filing bankruptcy. It’s hard to predict exactly what your credit score will be after filing bankruptcy but here are some guidelines and a few things to think about.

Your Current Credit Score

If your current credit score is in the low 600’s, you can expect about a 50-75 point drop. One year after filing, however, you can expect that your credit score will be higher than it was prior to filing. The reason is after you receive your discharge in bankruptcy, your income to credit ratio is much ‘healthier,’ which raises your score.

If your current credit score is below 600, bankruptcy will lower your score but it shouldn’t be your primary concern. Your credit is already damaged. The benefit of filing—freeing up monthly disposable income and eliminating the balances on credit cards, medical bills and sometimes taxes—will serve you far better than trying to preserve a credit score.

If your credit score is 750, you will most likely see about a 150 point drop. This is perhaps the most dramatic shift, as you are going from perfect credit to bad credit. But keep in mind, you’re considering filing bankruptcy because you can’t pay your monthly bills. If that continues, you’ll start missing payments and your credit score will drop accordingly. At least with bankruptcy you achieve a goal.

There Are Many Factors To Consider

My job is to understand my clients’ objectives, and to help them make a decision based on the options. My personal preference is for a healthy and balanced financial and personal life and in most cases, when unsecured debt has mounted, Chapter 7 and Chapter 13 bankruptcy becomes a powerful option with immediate and lasting changes.

Call Our Questions Line

We’re here to answer questions all day and some evenings. Call any time. There is no charge. You’ll speak with an attorney and come away from the call better educated about your options. 704.749.7747.

When considering filing a personal bankruptcy, some clients are concerned about whether they will be able to get a job in finance, post-bankruptcy. Additionally, some jobs require bonding, which protects the employer against acts of the employee.

You Can’t Be Fired For Filing Bankruptcy

Here’s good news. Your employer is not permitted to fire you simply because you filed for bankruptcy. It’s an illegal act for the employer to do so, and as such, it’s not a concern. In fact, most current employers are not aware you’ve filed bankruptcy unless there was a specific reason to involve them in the filing, which is rare.

Private Employers

Private employers often run credit checks on potential employees. Your experience thus far in your field should tell you whether that is a function of obtaining a job. Individuals who have filed bankruptcy have reported that even in those instances where a credit report was run, the employer sometimes did not ask, and when the employer did ask about the bankruptcy, they were simply looking for an honest answer. If medical bills or credit cards due to loss of income are your reason for filing, you are not along. Employers are typically trying to insure they have an honest candidate.

Bonding Issues

Some jobs require bonding, so that the employer will be insured against an employee’s negligence or intentional acts. While bankruptcy may prevent you from being bonded in some situations, the federal government offers a bonding program that is available to individuals who have filed bankruptcy. After six months of successful bonding in this program, the employee once again becomes ‘bondable’ in the private sector.

Thinking Ahead

Thinking ahead allows for strategy. Whether it’s a question about paying back family loans, filing a Chapter 7 vs. a Chapter 13, or wondering who will find out about your bankruptcy, I’m here to answer questions. Call me at 704.749.7747 if you need help or guidance.

 

Yes. Even if your vehicle was repossessed prior to you filing bankruptcy.

Federal law allows an individual who has filed bankruptcy to to compel the creditor (or collection agency) to return possession of the property. The reason is two-fold. First, the bankruptcy estate of the individual filing has been determined to include items the individual has an ownership interest in, whether he is in possession of them or not. Second, the automatic stay in bankruptcy prevents creditors from pursuing collections attempts until the stay is lifted.

Protecting Your Interests

The practical result of all of this is that provided your car has not been auctioned off, with the help of your Charlotte bankruptcy attorney, you can demand the return of the vehicle. Your attorney can help you decide if bankruptcy will protect the car, or if you will have to contribute financially in some manner in order to keep the car. This is a function of your exemptions in bankruptcy, which often protect 100% of your ownership interest in your vehicle.

You Have Options

Depending upon your equity in the car, and whether you file a Chapter 7 or a Chapter 13 bankruptcy, you may need to get caught up on payments prior to your 341 meeting, which takes place about 30 days after filing.

Plan For The Future

This is a great time to have a conversation with your attorney about the value of the vehicle, as well as other vehicle options you may have. Prior to filing bankruptcy is a great time to refinance a car or get into a different vehicle that you will keep through bankruptcy. Strategizing with your lawyer can yield wonderful results, while relieving you of other financial burdens like credit cards and medical bills.

Call me today to find out what your options are. I’m eager to help. 704.749.7747. Or, if it’s easier, contact us via email HERE and we’ll be in touch shortly to help.

When you don’t have enough money to pay creditors, it’s difficult to imagine being able to pay an attorney to make those same creditors go away. I encourage clients who are stressed by financial problems to focus on the long-term. And if bankruptcy is going to provide a long-term solution for helping you regain a peaceful and financially stable life, here are a few way to pay for it:

Borrow It

This isn’t an option for everyone. Some clients have borrowed from friends and family over the years just to keep their heads above water. Going back to them for ‘one last favor’ may not feel good. However, this is different. If you’re considering asking a friend or family member for a loan to file bankruptcy, you can insure them of your ability to re-pay it because all of your other monthly debt will be gone. And, the bankruptcy court allows you to re-pay this loan, after your bankruptcy is complete.

Stop Paying Creditors

Once you’ve spoken with a bankruptcy attorney, you can determine which monthly debts will go away with bankruptcy. Take the money you’ve been sending those creditors each month and start putting it toward the bankruptcy fee. It may take a few months, but once you’ve decided to file, you don’t need to worry any longer about the consequences of not paying credit card companies and medical providers.

Stop Paying Your Mortgage

In many cases, clients who are turning over their homes in bankruptcy are able to stay in the home for months without paying the mortgage before leaving the home. This aids tremendously in getting back on your feet financially. In fact, when you file bankruptcy all foreclosure proceedings are ‘frozen’ by the Automatic Stay in bankruptcy. This means your living situation is not disrupted or threatened until your bankruptcy case is dismissed or you receive a discharge.

Use Your Tax Return

If you have been using your tax return to catch up on bills, consider filing bankruptcy instead. The strategy isn’t working for you, but bankruptcy will. When next year’s tax return comes you can invest it, spend it on home repairs, or treat yourself in some way—but you won’t be paying creditors with it.

Use Retirement Funds

I hesitate to recommend that clients use retirement funds to pay for bankruptcy, because those funds are typically protected from creditors. However, if we decide that the short-term expense of using 401k funds or other protected funds to pay for the bankruptcy is outweighed by the positives, then it’s a consideration and it’s allowable.

Can I Use Credit Cards To Pay?

No. The bankruptcy court does not allow you to use credit cards to pay for your bankruptcy. All cash advances and major purchases during the time leading up to bankruptcy are heavily scrutinized by the court, and the creditor can claim you abused the line of credit if you use it to pay a bankruptcy attorney. An attorney can help you strategize around the use of your credit cards prior to bankruptcy though, so make that part of your conversation when you call for advice.

Talk To An Attorney

The most important thing you can do is find out what your options are. Call me today for a complimentary and stress-free conversation about your options in bankruptcy. You’ll know more, and you’ll feel better. 704.749.7747.

Creditors are relentless in their pursuit of money. I talk to clients every day who are doing everything they can to pay creditors each month, and yet the creditors refuse to be reasonable. Bankruptcy is a vehicle available to most of those clients, and one way to view bankruptcy is that it forces creditors to be reasonable. And as soon as you file, the calls and harassment stop for good.

Your Financial Picture

When a client files bankruptcy, the bankruptcy trustee is essentially determining the client’s ability to pay the creditors. While there are income thresholds (State Median Income) which may automatically qualify you for bankruptcy, more often your attorney uses the Means Test, which is an analysis of your overall financial picture: income, debts, and assets.

What To Expect

In many cases, your creditors will receive nothing in bankruptcy and you will receive a full discharge of the debt. You are only entitled to this relief every eight years so while the relief is powerful, it is also fair to creditors. Additionally, in cases where creditors receive nothing in bankruptcy it’s because you’re simply unable to pay them anything meaningful while maintaining an acceptable standard of living.

Paying Back A Percentage Of Debt

When creditors do receive something in bankruptcy—typically in a Chapter 13 bankruptcy—the payments you make to them are a percentage of the entire debt owed to them. If you demonstrate over the course of the Chapter 13 plan that you can consistently make these (much smaller) percentage payments, then at the end of the plan you will receive a discharge of the remaining debt.

You Are Entitled To Help

The bankruptcy rules are here to protect you and to assist you in getting the relief you need, while also protecting creditors against individuals who are capable of paying but just unwilling to pay. Your bankruptcy attorney can help you determine whether you qualify for bankruptcy relief, and make you feel comfortable about the choice to file. It’s never a bad idea to protect your family, and you deserve a fresh start.

Call An Attorney Today

Call today to find out more about your options. My job is not to convince you to file bankruptcy. Instead, I want to make sure you understand the situation you are facing and help you achieve the best result for you and your family.

I’m available at 704.749.7747 or by email HERE. Take control. Make the call today.

When a creditor or lender accepts less than they are owed, the debtor often receives a Form 1099-C. This form is essentially requiring the individual to pay taxes on the amount of debt ‘forgiven’ by the lender. For example, if you have a credit card debt of $50,000 and settle with the credit card company for $35,000, you may expect a Form 1099-C for the $15,000 of ‘forgiven’ debt. It is treated as income to you for tax purposes.

Forgiveness Of Debt

The most common types of forgiveness of debt result from foreclosure, short sale and credit card settlement. The income due on forgiven debt can be substantial and weakens your position in a settlement because it is a fee you ultimately end up paying. Even worse, it’s due to the federal government so they have the power to garnish your wages if you fail to pay it.

The Difference A Bankruptcy Makes

When you file a bankruptcy, tax issues from forgiveness of debt are a non-issue. Any and all debt discharged through the bankruptcy is addressed fully as part of the discharge. You will not have any tax consequences as a result. If you receive a Form 1099-C from a lender or creditor and that debt was discharged through bankruptcy, you should call your bankruptcy attorney so they can assist in making sure it is addressed. Often lenders and creditors use automated systems and a phone call from the attorney can fix the situation.

A Phone Call Is Free

If you have any questions about income from forgiveness of debt, or if you are trying to decide between short sale, foreclosure or bankruptcy, please call me. I’m here to help you understand your options and make a decision. The call is free. 704.749.7747.

Misconceptions

One misconception around bankruptcy involves the Means Test. Yes, such a test exists. It is designed to compare your Current Monthly Income to the Median Income that applies to your geographic area. If your CMI is lower than the Median Income, then the presumption is that you qualify for a bankruptcy filing. However, your Charlotte bankruptcy attorney will rightfully tell you this is not where the analysis ends.

Beyond Median Income

Even if your CMI exceeds the Median Income, it doesn’t necessarily mean you won’t be able to achieve a bankruptcy filing and discharge of debts. If your CMI exceeds the Median Income, the next step is to subtract your monthly expenses to determine your monthly disposable income. You are allowed some disposable income each month per the bankruptcy rules, without being disqualified for filing.

More On Disposable Income

If you exceed the allowable disposable income per month for qualifying automatically for a bankruptcy, the next option is for your attorney to determine what percentage of your general unsecured debt can be paid with your disposable income. Generally speaking, if your disposable income each month would pay less than 25% of your monthly debt to general unsecured creditors (Credit Cards, Medical Debts, etc), then you should still qualify for a Chapter 7.

Get Educated

There are many options in bankruptcy, including a Chapter 13 for individuals who are behind on mortgage payments but want to keep the home in bankruptcy. Call today to speak to an attorney about your options in bankruptcy. Getting educated is empowering and that’s part of the bankruptcy attorney’s job—take advantage of it! 704.749.7747.

Yes, married couples are permitted to file individually or jointly. To maximize the results of the bankruptcy, it sometimes makes sense to file individual bankruptcies simultaneously for both spouses. Your Charlotte bankruptcy attorney can assist with this calculation.

But Will It Stop A Foreclosure If We’re Both On The Note?

Yes, when one spouse files a Chapter 13 and proposes to keep the mortgage current while making up missed payments over time, the lender is prevented from pursuing a foreclosure again both the spouse that filed and the non-filing co-debtor spouse. Once you’ve completed your plan, you will be current on your mortgage.

What Happens To Jointly Owned Credit Cards?

When one spouse files bankruptcy and the other does not, the filing spouse receives a discharge of the debt. The non-filing spouse will still be responsible for the entirety of the debt (on joint debt); however, while the bankruptcy is ‘active’ the creditors are prevented from attempts to collect or take legal action against both spouses. In a Chapter 13, this provides essential time for the family to execute a financial plan prior to the bankruptcy ending.

Why Would One Spouse File And The Other Not?

Preservation of the non-filing spouse’s credit is a great reason to consider a single filing. Provided that the relief granted by the single filing will be impactful enough, upon discharge, the debt (of the filing spouse) is discharged and the non-filing spouse still has good credit standing which can be used to purchase a home or car.

While the bankruptcy rules are generous to those preparing to file, there are some instances where one spouse may have inheritance or significant assets which prevent them from filing. In that case, the spouse with fewer assets can still file and will receive the relief from debt as a result.

Lastly, sometimes one spouse has engaged in transfers of property within the last year which would prevent or frustrate a bankruptcy filing. Again, in that case, the other spouse can file and the court is not interested in the transfers of the non-filing spouse.

Talk To An Attorney

Don’t delay on finding out more about your options. I spend much of my time each day advising individuals over the phone about the possible relief they can achieve through bankruptcy. Call me today for a conversation which will provide clarity and help you decide. 704.749.7747.