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

Debt Settlement in CharlotteDebt settlement and bankruptcy go hand in hand. As a result, I routinely speak with clients about pursuing both options, depending upon the specific circumstances.  Depending upon the client’s needs, we may choose to pursue debt settlement over bankruptcy. My goal in each of those conversations with a client is to understand what’s at stake for the client, what their objectives are, and how likely we are to be successful in debt settlement or bankruptcy.

Is Debt Settlement An Option?

Debt settlement is always an option. The question is whether the creditor agrees with your valuation of the debt. You’re obviously asking them to settle the debt for less than “full value.” Depending upon the creditor, the amount, and their tendency to settle, you’ll get different answers from different creditors.

One impediment to settling a debt is your ability to send the creditor a lump sum payment. We are able to generate a best offer from the creditor when we can guarantee them they will have their funds quickly after settlement. While some creditors will agree to a reduced amount to be paid over time, most creditors involved in a debt settlement negotiation require a lump sum payment in full. One exception to this is where a creditor will accept a portion of the reduced amount quickly on the heels of the settlement, with the remainder to be paid over  time in installments.

Do I Need To Qualify For a Chapter 7 Bankruptcy?

No. While a Chapter 7 bankruptcy is a complete liquidation of debt, even a Chapter 13 bankruptcy—which is available to almost everyone—gives the creditor a result where they are only getting paid a small percentage of the debt over time. As compared to having their debt put into a Chapter 13 bankruptcy, most creditors will offer a reasonable reduction in the amount of the debt.

What If We Can’t Settle The Debt?

The firm typically simultaneously negotiates with creditors while preparing bankruptcy documentation for you. If we are unable to successfully negotiate a debt settlement, we can proceed with a bankruptcy filing provided it meets your objectives.

Are There Tax Consequences To Debt Settlement?

While the standard answer is “You should talk to your CPA,” generally speaking, when a lender cancels or forgives debt, there is a possibility that forgiveness of debt will generate taxable income due to the IRS. Generally, clients find that the benefit of the reduction in the principal amount of the debt, combined with settling the debt once and for all with the creditor outweighs any potential for taxable income resulting from the debt settlement.

If you have a question about debt settlement, give us a call at 704.749.7747. We’re here to help.

Chapter 7 — Qualifying For Bankruptcy in CharlotteOne of the myths around qualifying for bankruptcy is that if you make more than a certain amount of income you cannot file. The truth is whether you qualify for bankruptcy is typically determined by examining both your income and your debts and expenses, as a whole.

If you make less than the median income in your state, you will automatically qualify for bankruptcy. The median income is determined by state, and one relevant factor is the size of your household—a word which has a unique definition in bankruptcy. Your bankruptcy attorney can tell you what the median income is in your state, specifically for your household size.

Even if your income exceeds the median income for your household size, you may still pass the Means Test. The Means Test recognizes that just because you have income doesn’t mean you can afford to pay your bills. It essentially compares your income to your expenses and allows deductions for some standard expenses like the operation of a vehicle, or health insurance. Additionally, it allows you to deduct some expenses specific to your situation. Those may be expenses related to caring for an elderly relative, or for your own special needs or circumstances. In this sense, qualifying for bankruptcy becomes an analysis of your own unique situation.

Even if you make more than the median income and fail the Means Test, you may still choose to file a Chapter 13 bankruptcy. The Chapter 13 bankruptcy in this instance recognizes you may have some ability to pay back your bills but not the ability to pay what creditors are asking. It operates to force creditors to accept a reasonable schedule for repayment of your debt and in most cases you pay less than 10% of your total unsecured (credit cards, medical, etc) debt, in exchange for a discharge of the remainder of that debt.

If you have questions about qualifying for Chapter 7, the Means Test, or any other bankruptcy related questions, please call 704.749.7747 to get your questions answered. We’re here to help.

Filing an Elderly Bankruptcy in CharlotteWhile there is not a bankruptcy filing specific to elderly individuals, filing an “elderly bankruptcy” is something to consider if you’re entering into your golden years with considerable debt. Most elderly individuals are living on a fixed income without a significant ability to repay creditors. While younger individuals can look forward to increasing their income as a way to manage debt, the elderly do not have that option.

Future Credit

Most elderly individuals are not anticipating taking on large credit obligations in their later years. This means a new car, new home, or even credit cards, are not in the foreseeable future. As a result, an elderly bankruptcy will not serve to disrupt an  individual’s lifestyle or future financial needs. In fact, it will serve to immediately increase their monthly disposable income, because that income will not be going toward the repayment of debt.

Financial Stress

The ability to handle the stress caused by debt diminishes as you grow older. Losing sleep over credit card balances or medical bills can take a toll on an older individual in ways which may even manifest in their physical health. It’s simply not worth it.

Nursing Home and Senior Living Concerns

Having a bankruptcy on their credit report will typically not affect an elderly person. So long as they can demonstrate the ability to pay, most senior living facilities are not concerned with an elderly individual’s credit report.

Call An Attorney

If you have questions about filing an elderly bankruptcy, or whether bankruptcy might be right for one of your parents or grandparents, please call 704.749.7747 to get your questions answered.

Credit Cards After Filing Bankruptcy in CharlotteIt makes sense to me that clients ask questions about obtaining credit cards after filing bankruptcy. After all, a credit card is a great resource for emergency situations, and the reality of life is we don’t always have money on hand that we need for purchases today. And yes, obtaining credit cards after filing bankruptcy is an option.

Credit Card Offers After Bankruptcy

Immediately after filing bankruptcy, you’ll start to receive offers for unsecured credit cards. This comes as a surprise to most clients, but keep in mind that after you filing bankruptcy you have very little debt. You actually look like an attractive candidate from a bank’s perspective. The bank also knows you can’t file bankruptcy again for another eight years, typically, so they feel confident you’ll pay back any debt you incur with a new card.

The downside to the offers you’ll receive on credit cards after filing bankruptcy is high percentage rates and high annual fees. This will lessen as you re-build your credit score in the months and years after filing bankruptcy.

Secured Credit Cards

One option for getting back in the credit game early and re-building your credit score, is a secured credit card. Credit unions offer these options and I recommend them for clients on the heels of filing bankruptcy. The arrangement is you give the credit union an amount of money (say $500), and they give you a secured credit card where you can charge a balance of up to $500.00. While you are technically using your own money, the upside is that each month you make a payment the credit union will report positively to the credit bureaus and your credit score will rise much faster than if you are just waiting for time to pass after filing bankruptcy. With several on time payments, the credit union typically will increase the limit on your secured card without requiring more money from you.

Your Credit Score And Bankruptcy

Typically, if you’re considering filing bankruptcy, your credit score has already taken a few dings. The filing of the bankruptcy will be the final ding on your credit but most clients find their credit score one year after filing bankruptcy is as good as or better than it was after filing. And the freedom from the pre-bankruptcy debt is priceless.

Call An Attorney

If you would like to speak with an attorney about credit cards after filing bankruptcy, or any other topics surrounding bankruptcy options, please call us at 704.749.7747. We’re here to help and we hope you choose to recover with us.

Bankruptcy Requirements In North CarolinaOne of the things I enjoy most about practicing bankruptcy law is that most clients have no problem meeting the requirements for filing bankruptcy. When clients realize this, the relief I see on their faces, or hear on the other end of the phone means they are one step closer to leaving financial stresses behind.

Chapter 7

Income—While there are a few exceptions, generally clients qualify for a Chapter 7 if they meet the income and assets guidelines set by the federal bankruptcy laws. If you make less than the median income in North Carolina, you automatically qualify. However, most who make more than the median income still qualify by passing what is called the Means Test (something your bankruptcy attorney determines for you).

Assets—Even if you meet the requirements to file bankruptcy, you’ll still need to use the bankruptcy exemptions to protect your assets in bankruptcy. For most clients this is not a problem, as the exemptions are generous and your attorney will work with you to apply them to all of the property you own.

Chapter 13

Income—If you have too much income for a Chapter 7, a Chapter 13 is available to you. In a Chapter 13, you pay back a small percentage to your creditors over time in bankruptcy—typically less than 10 percent—but nowhere near what you owe today.

Assets—A Chapter 13 also treats assets differently than a Chapter 7. If you run out of bankruptcy exemptions, you can still use a Chapter 13 to successfully file. Your Chapter 13 payment will reflect the value of any assets you could not protect with the bankruptcy exemptions.

Prior Bankruptcies

There are bankruptcy requirements related to prior filings. If you’ve filed a bankruptcy in the last eight years, you’ll want to let your attorney know the type of bankruptcy you filed, when it was filed, and whether you received a discharge. In many instances, you’re allowed to file more than one chapter of bankruptcy (Chapter 7 or 13) within the eight year timeframe.

Call An Attorney

The easiest way to get your questions answered is to pick up the phone and call us. We can usually answer your questions in one phone call and you’ll save time and energy searching the internet for answers. You can reach us at 704.749.7747. We’re here to help.

Many of my conversations with bankruptcy clients begin as discussions about potential debt settlement. Clients have a desire not only to avoid bankruptcy if possible, but also to repay whatever amount of their debt they are able, through debt settlement. Unfortunately, this option is rarely successful.

Settling A Debt

Essentially, the debt that exists between an individual and a creditor is based on a contract. Both parties can agree at any time to alter that contract—and the amount owed—and that’s what happens in debt settlement. The creditor agrees to take less than the owed amount, in exchange for forgiving the remainder of the debt.

Three Incentives To Settle

  1. Get creditors off your back—with a debt settlement agreement reached, the client no longer has the stress of being hounded by the creditor.
  2. Avoid bankruptcy—clients are scared their credit score will never bounce back from a bankruptcy and so debt settlement looks to be a better solution.
  3. Feel good in the end—with debt settlement, a client can feel good because the creditor agreed to the negotiated amount. It was a ‘fair’ deal for all.

Filing Bankruptcy Instead

When a client files bankruptcy, the same general unsecured debts referenced above, are discharged in their entirety. The cost to bankruptcy of course includes attorney fees and the hard work required to rebuild your credit after. So often, after a conversation comparing the two options—both of which I’m happy to represent clients for—the client decides on filing a bankruptcy. It just makes sense considering the overall relief bankruptcy provides over debt settlement.

Three Incentives to File Bankruptcy Instead

  1. No Tax Consequences—with debt settlement, the client will receive a 1099-C for forgiveness of income for whatever amount the creditor agreed to ‘let go’ as part of the settlement. This gives rise to a tax obligation which needs to be treated as part of the expense of debt settlement.
  2. The Broad Reach of Bankruptcy—when a client files bankruptcy, not only is one debt discharged in full, but all other debt (with few exceptions) is also discharged. The client truly gets a fresh start. For less money required to settle the typical unsecured debt, you get ALL of your unsecured debt discharged in bankruptcy.
  3. Protection From The Court—the bankruptcy court offers strong relief for qualified debtors, and in exchange for your honesty in the papers you file with the court, you get protection against creditors which can be exercised in the federal court should a creditor refuse to abide by the rules of bankruptcy.

Call An Attorney

Let us simplify bankruptcy for you. Call 704.749.7747 to discuss your options with a bankruptcy attorney. You deserve to understand your options and we’re here to help.

Generally speaking, your bankruptcy will not affect your spouse. In some instances, on joint debt, your spouse may benefit from the automatic stay in bankruptcy, but otherwise, your spouse will not be affected.

Credit Score

Filing bankruptcy will affect your credit score. If your spouse doesn’t file bankruptcy, his or her credit score will not be affected by your filing. When your spouse’s credit report is pulled, your bankruptcy will not show on their report.

Debt

For debt in your name only, your bankruptcy should serve to discharge your obligations under that debt. For joint debt you may have in both your name and your spouse’s name, while your obligation under that debt may be discharged by the bankruptcy, your spouse will still be responsible for that debt. Typically, you are both liable for 100% of the debt. So after bankruptcy, your spouse is still liable for 100% or the full amount, of the debt.

The Bankruptcy Process

While your spouse’s income may be required for the purpose of determining whether you qualify for a Chapter 7 bankruptcy, or in determining your Chapter 13 payment, your spouse’s assets and other personal information are not needed nor disclosed in the bankruptcy filing. Additionally, your spouse will not need to attend the 341 meeting of the creditors.

Call An Attorney

If you have questions about filing bankruptcy, whether they relate to a non-filing spouse, or any other aspect of bankruptcy, please call 704.749.7747 to speak with an attorney. The call is free and we’re here to help.

Any good bankruptcy attorney should make sure to have a conversation with you about bankruptcy costs. As a bankruptcy attorney in Charlotte, I spend a good bit of time each day speaking with individuals trying to decide whether to file bankruptcy. We discuss both the financial costs of bankruptcy, as well as any intangible costs associated with bankruptcy. Here are my thoughts:

Fees To File—Typically, your fees to file bankruptcy are your attorney fees, court filing fees, and perhaps a few administrative fees. In consumer bankruptcy, these are predictable and your attorney should be willing to give you a quote on total fees. One exception is in a Chapter 13 where the attorney may have to perform additional duties during the years the Chapter 13 is active (responding to a trustee’s Motion To Dismiss, defending a Motion For Relief From Stay, etc). Even most of those actions, however, have fees set by the court.

Conclusion—Ask the bankruptcy attorney for a quote sheet. Specifically, ask your attorney if their quoted fees include all filing fees and administrative fees. The court filing fee for a Chapter 7 is roughly $338 so it makes a difference when comparing attorneys’ fees.

Credit Scores—I have written previous articles about credit scores and how they are generally affected, when filing bankruptcy. This is a great question and it shows you’re thinking about the future. That being said, your score will typically bounce back within a year of filing, and without filing, the score would continue to drop if you were late on or missed payments to creditors.

Conclusion—The powerful relief provided by bankruptcy, combined with the ability to quickly recover your credit score to its pre-bankruptcy level and build from there, make it worth focusing on restoring your financial stability in the short-term, and focusing on rebuilding the credit score after filing bankruptcy.

Public Perception—Generally, I’ve found the stigma associated with bankruptcy is from a bygone era. One in which our parents and grandparents lived. People today—and in today’s slowly recovering economy—understand bankruptcy is a choice made by individuals who have already tried every other option. Not only will nobody know about your bankruptcy, but you might be surprised how many people just like you have filed.

Conclusion—This is not the time to let fear of how you will be perceived get in the way of restoring financial health to you and your family. Besides, while a bankruptcy is technically public information, with some exceptions, friends, employers, and relatives won’t find out unless you tell them.

Emotional Stress—This is an intangible I’ve become very comfortable discussing with my clients. I’m amazed at how mentally prepared most clients are for bankruptcy by the time they call my office. I’m always proud that they have decided to choose a peaceful financial life over the impossible task of managing creditors who refuse to be reasonable.

Conclusion—The emotional stress you’ve been through already with finances will give you the strength you need to focus on the goal: life after bankruptcy truly is a fresh start. I should know, I talk to my past clients all the time and I’m always excited to hear about what an amazing change it was for them.

If you would like to speak with an attorney about bankruptcy, please call me at 704.749.7747. I’m here to help you sort through the cost of bankruptcy, and I hope you choose to Recover With Us.

Prior to filing a bankruptcy, you have to disclose any payments you’ve made to creditors over the last 90 days, totaling over $600.00. The reason for this requirement is that the bankruptcy court wants to be sure one creditor hasn’t received more than its fair share over another creditor, as bankruptcy was approaching. Clients often forget that payments to family and friends, or “insiders” count, when answering this question.

The Importance of Payments To Creditors

Generally, the worst case scenario if a payment is determined by the bankruptcy trustee to be a preference, is that the trustee demands the money back from the creditor, and re-distributes it to all creditors equally, based on their debts with the person who filed bankruptcy. If you’re the individual who filed, you typically don’t care if this occurs. Unless it’s a family member or friend.

Payments To Insiders

Family members and friends are considered by the court to be “Insiders”, and therefore payments to these individuals have a longer look-back period. If you make a large payment to these individuals within the look-back period, these are known as preferences in bankruptcy. Furthermore, if the trustee seeks return of a payment to your mom or your best friend, you may have just upset an important relationship in your life. The previously mentioned timeframe of 90 days increases to one year if the creditor is a family member or friend.

Options For Preferences

One option is to have the creditor (mom, friend, etc) return the payment prior to filing the bankruptcy. This puts the money back into the debtor’s estate, and eliminates the argument that one creditor was paid more than another. The next step would be for the bankruptcy attorney to exempt that money now that it’s back in the estate. This is typically done by using the wild card exemption.

Another option is to wait out the applicable look-back period. Again, for family members and friends, this is typically one year; however, a trustee may make the argument that the transfer was fraudulent, which could dramatically extend the look-back period.

Call An Attorney

There is nothing wrong with making a preferential payment. If you have questions about how to manage payments to family and friends, or about the timing of filing bankruptcy, call 704.749.7747 today to speak to an attorney. We’re here to help you recover financially.

First, it’s important to know that intentionally defrauding your creditors by transferring property can result in the bankruptcy court denying your discharge. That being said, there are many valid reasons and conditions for transferring property—if you can show the bankruptcy trustee that you received fair market value for your property transfer, or that the transfer falls outside the ‘look back’ period, then your property transfer will not adversely affect your bankruptcy filing.

Worst Case Scenario

A common worst case scenario in bankruptcy is that the trustee avoids the transfer and gets the property back for the purpose of liquidating it and distributing all or some of the money to your creditors. This is easily avoided by asking the right questions BEFORE filing your bankruptcy.

How Long Ago Is Long Enough?

Assuming you did not fraudulently transfer the property, you need to disclose transfers to insiders (family members, friends, etc) that occurred within the last four years. If the transfer was to a stranger (someone on Craigslist, for example) then the look back period is generally two years, for disclosing the transfer.

What Is The Trustee Looking For?

Essentially the trustee is looking to trace the value of the asset. If you had a vehicle (Keeping Your Car In Bankruptcy) worth $10,000 and you sold it for $10,000, you would be able to show the trustee that you got fair market value for it.

Next, the trustee may ask you what you did with the money. There are numerous appropriate answers, including spending it on household/living expenses, buying another car, or paying off debt, to name a few. The important thing is to discuss it with your attorney and make sure that the asset’s value can be traced and ‘exempted’ in the bankruptcy filing. If you sold a $10,000 car for $10,00 and still had $7,000 in a bank account, the trustee would want to see the bank account listed on the bankruptcy filing and showing the money in that account. Likewise, if you purchased a riding lawn mower with it, he would want to see that listed as an asset on your Schedule B for personal property.

What’s At Stake?

If you can exempt the asset, despite its value, you’re fine. If you liquidate the asset and can exempt the cash you received and/or the items you purchased with it, you’re also fine.

In Conclusion

It’s OK to transfer assets prior to bankruptcy. Discuss honestly with your attorney your intent in doing so, and where the money went. Your attorney can then help determine whether now is a good time to file bankruptcy or whether you may want to wait out the look back period on transfers prior to filing.

Call 704.749.7747 today to speak with a Charlotte bankruptcy attorney about asset transfers or any other questions you may have related to bankruptcy.