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This blog is updated by San Diego Bankruptcy Law Firm. The blog is designed to educate consumers about their rights under the Bankruptcy Code.

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Tuesday, December 20, 2011

Preparing For Bankruptcy

by Adrian Lapas, Eastern North Carolina Bankruptcy Attorney
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When you are considering a trip, usually, you make substantial preparations in anticipation of that trip. You make travel arrangements; you make sure you have a place to stay; you make reservations for any activities in which you wish to participate. You will often make significant plans and preparations for any “big” event. Bankruptcy is no different. It is a significant life event that demands some thought and preparation before you embark on it.

In talking with potential bankruptcy clients, it seems that a lot of them wait until the last minute before contacting a bankruptcy lawyer to find out how bankruptcy may help them. While visiting a bankruptcy lawyer most likely does not rank high on most people’s “bucket list,” if you are struggling financially, it most likely makes sense to determine if and how bankruptcy can help you sooner rather than later.

So, how can “preparing” for bankruptcy help? First, you will need to have the fees for the lawyer and for the court available. For now, for a chapter 7 filing, just the filing fee is $306.00. Additionally, before you file, you must complete a consumer credit counseling session and get the certification that must be filed with the court. If you “fail to plan” for your bankruptcy filing by finding out what you need ahead of time, when your car is on the verge of getting repo’d, you may not have the time and/or money to retain a bankruptcy lawyer.

Second, you can carefully go over your income and expenses and see where the trouble lies. Certainly a bankruptcy lawyer can help you identify the problem (with appropriate information) but you also need to know how you got into this financial mess. Some problems are easy to identify–temporary loss of income; extraordinary medical bills; overspending for a bit, etc. Bankruptcy can assist in overcoming those past problems but you need to be aware of the problem so that you can avoid it in the future. Bankruptcy is designed to be a “fresh start.” You can greatly assist in obtaining that “fresh start” by breaking or modifying some of the habits that perhaps got you here in the first place.

Third, make sure you know who you owe and how much. Find out if there is any collateral associated with the debts and gather up loan documents. Your lawyer will need this but, more importantly, you need to know your own financial picture. Credit reports are freely available and can be a big help. Also, if lawsuits or foreclosures have been filed against you, make sure you have that paperwork–all of it! It is important!

Finally, change your mindset. In dealing with individuals facing financial problems, it is often much more difficult instead of dealing with distressed businesses. That is because a business looks at assets and liabilities and can make a rational decision as to whether keeping an asset is worth the corresponding liability. Understandably, people are attached to their “things.” But, after all, they are just “things” and you have to consider carefully whether retaining a “thing” is worth the potential stress and headache. As an example, if you suffered a decrease in income and you have two relatively late model cars. No one wants to give up one or two cars but sometimes it is better to surrender a vehicle or two in order to keep your house (if that is important to you). There will be some emotional attachment to some “things” but it is imperative that you do this. Determining what is important to you is important for your bankruptcy lawyer in setting achievable goals for your bankruptcy filing.

Finally, do some research. There is a lot of information about bankruptcy that is freely available. However, you should exercise extreme caution in considering the information. Not that the information is inaccurate (some info may be outdated or simply inapplicable) but it takes an experienced profession to know what is appropriate and what is not. But, by familiarizing yourself with some basic bankruptcy information, you will be in a better position to appreciate and assist your bankruptcy lawyer in setting realistic and achievable goals.

After all, the real goal of a bankruptcy filing is a “fresh start.”

Tuesday, December 13, 2011

Unpaid Bills Land Some Debtors Behind Bars

Unpaid Bills Land Some Debtors Behind Bars

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Although debtors' prisons are illegal across the country, it's becoming increasingly common for people to serve jail time as a result of their debt.

Collection agencies are resorting to some unusually harsh tactics to force people to pay their unpaid debt, some of whom aren't aware that lawsuits have been filed against them by creditors.

Take, for example, what happened to Robin Sanders in Illinois.

She was driving home when an officer pulled her over for having a loud muffler. But instead of sending her off with a warning, the officer arrested Sanders, and she was taken right to jail.

"That's when I found out [that] I had a warrant for failure to appear in Macoupin County. And I didn't know what it was about."

Sanders owed $730 on a medical bill. She says she didn't even know a collection agency had filed a lawsuit against her.

"They say they send out these court notices, and nobody gets them," Sanders says.

She spent four days in jail waiting for her father to raise $500 for her bail. That money was then turned over to the collection agency.

Similar stories have been reported in Indiana, Tennessee and Washington.

Here's how it happens: A company will often sell off its debt to a collection agency, generally called a creditor. That creditor files a lawsuit against the debtor requiring a court appearance. A notice to appear in court is supposed to be given to the debtor. If they fail to show up, a warrant is issued for their arrest.

Beverly Yang, a legal aid attorney with Land of Lincoln Legal Assistance, says most debtors don't know their rights.

In fact, she says, some judges don't even know debtors' rights, which could result in the debtor being intimidated into a pay agreement.

"I've seen this even when I'm standing in the court room as the legal aid attorney," Yang says. "The judge will ask if they can pay, how about $150 a month. How about $75 a month? How come you can't even pay $50 a month? Did you apply for a job last week?"

Leveraging Payments

The Federal Trade Commission received more than 140,000 complaints related to debt collection in 2010. That's nearly 25,000 more than the previous year.

Yang says some creditors are eager to use harsh tactics. "Whatever the creditors or the creditors' attorneys can do to leverage some kind of payment, it will help their profits enormously because they have, literally, millions of these."

Kevin Kelly, president of the Illinois Creditors Bar Association, says members of his organization only issue warrants in extreme situations.

"There's an assumption in what you're saying that we'd rather throw them in jail than work with them," he says. "And I don't find that to be true at all."

Sometimes it's the debtor who's keeping information from the collectors, Kelly says. That prevents important documents from getting to the right place.

He says most collectors want to make reasonable arrangements, but it's difficult when the vast majority don't respond to the notices sent to them.

Illinois Attorney General Lisa Madigan thinks more can be done. It's illegal in Illinois for people to be sent to jail because they're in debt. But Madigan thinks some creditors are abusing the law.

"You wouldn't be in that predicament if you didn't have debt," Madigan says. "But for being in debt, you wouldn't be in prison. And that essentially equates to being thrown in jail, debtors' prison."

She says courts need to be certain they have correct information to serve notices. Madigan also says judges need to be properly educated in these proceedings to prevent a debtor from needlessly going to jail.

The Illinois attorney general also says the state is investigating agencies that it thinks are abusing the law.

As for Sanders, she has a remaining balance of about $160 on her medical bill. But at least she now knows she won't have to go to jail for it.

Thursday, December 8, 2011

Bankruptcy is the Best Way to Save Your Home

Bankruptcy is the Best Way to Save Your Home
by Brett Weiss, Maryland Bankruptcy Attorney
Link to article:

You want to save your home. Which is the best way to stop a foreclosure, get caught up on your monthly payments, and save your home? Is it loan modification? A workout? Or a bankruptcy?

A recent article, “The Home Ownership Experience of Households in Bankruptcy” by Professor Sarah W. Carroll, of the University of Pennsylvania Law School and Wenli Li, of the Federal Reserve Bank of Philadelphia, provided the first in-depth analysis of the home ownership experience of home owners in Chapter 13. Its conclusions mirror what most bankruptcy attorneys’ personal experience has been: Chapter 13 is one of the most effective ways to let you save your home.

The study followed homeowners who filed for Chapter 13 between 2001 and 2002 in New Castle County, Delaware, from the time of their filing to October 2007. (Since most Chapter 13 plans last five years, this was a fair trial period.) After analyzing the data, it found two important results:

First, the Chapter 13 filing was not always the solution: 27.9 percent of filers lost their houses in foreclosure despite filing for bankruptcy. This is typically a result of poor cashflow. If job loss, or illness continues and there is not enough money coming into the household, the house will be lost regardless of filing bankruptcy or not. Many of the homeowners in this group will end up converting their cases to one under Chapter 7, so that they can wipe out any personal liability for the mortgage(s), as well as most of their other debts.

However, when compared with homeowners who did not file, debtors who filed for bankruptcy were able to stay in their homes for, on average, 27.7 additional months, over two years. This figure includes those who ended up losing their homes.

So, if you’re behind on mortgage payments, consider a Chapter 13–it may let you stay in your home a lot longer than other options.