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Bankruptcy is the legal process pertaining to people who cannot afford to pay their remaining debts in order to get a chance to a fresh start. The Bankruptcy laws offer unburdens overwhelmed debtors who are unable to pay their outstanding balances and, at the same time, help the creditors get paid from whatever kind of assets the debtor has no need for. Bankruptcies are often used as a last resort but it is not a sure way to solve all your financial problems. It will cover only certain debts that are eliminated when you file for bankruptcy.
What is a Discharge?
A discharge enables the debtor to be free of debt and prevents the creditors from taking collecting actions against the debtor. In simpler terms, the debts are wiped out and the debtor no longer needs to pay those that are discharged.
However, while most debts can be discharged, not all kinds of debts are removed when you declare bankruptcy.
What are the Debts that can be Discharged?
In a bankruptcy, “Common Categories of Dischargeable Debts,” states that the debt must meet the qualifications and timing requirements. It works by filing for bankruptcy in the bankruptcy court before and after the case described as follows:
- Pre-filing debt – is a pre-petition debt obligation that you have before you file for bankruptcy. When the case ends, the court will wipe out or discharge the debts included and qualified in the pre-petition debt such as credit card balances, medical debt, and personal loans.
- Post-filing debt – are the debts and bills you need to present to the court that you incurred after submitting the pre-petition debt. In all kinds of bankruptcy cases. You are still obligated to pay for the balances the you incur even if the case isn’t over.
Among all the debts obtained, only those debts that you have before filing bankruptcy will be discharged. As for the subsequent debts, you still need to repay those. Take note that if you either fail to follow the bankruptcy process or your debt doesn’t qualify for a discharge, then these can be barriers for you to have your debts wiped out.
Common Categories of Dischargeable Debt
Under the Bankruptcy Code, there are 19 categories of debt that are not capable of being discharged. Everything else not included can be wiped out. However, you need to be mindful that misconduct or fraud in connection to the debts are grounds to make them non-dischargeable:
- Charges of credit cards (including overdue and late fees)
- Collection agency accounts
- Medical bills
- Personal loans
- Utility bills
- Dishonored checks (except if fraudulent)
- Student loans (in cases where it is proven that you endured undue hardship)
- Repossession deficiency balances
- Auto accident claims (except DUI related cases)
- Business debts
- Rent debts (including past rents that are due)
- Civil court judgments
- Tax penalties and unpaid taxes
- Attorney fees (except those pertaining to child support and alimony cases)
- Revolving charge accounts
- Social security overpayments
- Veterans assistance loans and overpayments
Non-Dischargeable Debts in Bankruptcy Chapter 7
There are different types of Bankruptcy, some debts are nondischargeable in Chapter 7 but can be wiped out in Chapter 13. These types of debts in Chapter 7 are automatically deemed as nondischargeable without needing a hearing in court:
- Unscheduled debts (all kinds of debts that are not in the bankruptcy petition), with the exception that the creditor had actual knowledge or notice about such filing
- Certain taxes
- Spousal or child support debts or alimony
- Debts owed to former spouse or child if they arose out of a divorce or separation
- Fines, penalties and debts to government agencies
- Student loans (if not exempted)
- Personal injury debts caused by the debtor driving a motor vehicle while under the influence of alcohol
- Certain tax-advantaged retirement plans debts
- Certain condominium debts or cooperative housing fees (such as homeowners association fees)
- Attorney fees in child custody and support cases
- Court fines and penalties, including criminal restitution
Debts not Dischargeable if the Creditor Objects
Not all debts are automatically wiped out. The creditors must ask the bankruptcy court first to know whether or not such debts can be discharged. If the creditors do not raise any objection or issue or if they do but the court doesn’t allow it, these debts are discharged.
- Credit card purchases for luxury goods
- Cash advances
- Debts obtained by fraud or false pretenses
- Debts incurred due to willful and malicious injury
Planning to file for a Chapter 7 Bankruptcy?
While declaring bankruptcy and bankruptcy filing may be done by any person without a bankruptcy lawyer, you will be responsible for fully understanding everything related to the law. We at Allmand Law are experienced in the field of bankruptcy cases. If you want to know how to file for bankruptcy but you are not sure of what bankruptcy form to avail or maybe you’re worried about potential liabilities, our bankruptcy attorneys can help you. We may be able to answer such questions for you including bankruptcy exemptions, debt settlement, insolvencies, mortgage payments, debt management and many more. Call us now for free legal advice.
The post Understanding Dischargeable Debts in Chapter 7 Bankruptcy appeared first on Allmand Law Firm, PLLC.
Commercial leases in New York City, COVID-19 and Recent ProtestsAs a result of COVID-19, recent protests and the advent of technologies such as Zoom and Google Meet, many tenants have excess office space/s that they cannot or do not want to continue to rent and would like to terminate their lease or stop paying rent.At Shenwick & Associates, we have received many calls from clients with these issues and we have developed a strategy to address them.First, we review the company's financial information including a recent balance sheet, income statement, the commercial lease and guaranty, if any. Second, we determine if the company is a candidate for a bankruptcy filing, either chapter 7 (a liquidation where the company closes as a result of the filing), a small business Subchapter 5 bankruptcy filing, or a full-blown chapter 11 business bankruptcy filing.In the case of a Chapter 7 filing, the lease will terminate; however, the Chapter 7 bankruptcy trustee appointed to the case will also liquidate or close the business. For businesses that are losing money or do not see a bright future, this may be a good strategy.A company that wants to remain in business, but terminate or reject their lease, should consider a bankruptcy filing under new Subchapter 5, which is a fast-paced, less costly chapter 11 business bankruptcy filing. As part of a Subchapter 5 bankruptcy filing, the lease can be rejected, and the landlord would be paid their lease rejection damages and other monies owed over 5 years or less from disposable income of the business.If Subchapter V does not work due to the debt limit of $7,500,000 or for other reasons, a company can consider a full-blown chapter 11 bankruptcy filing. However, they would want to consider the cost from a chapter 11 filing, versus the expected savings from rejecting the lease. Chapter 11 is a complicated, risky and expensive process for many companies.Another strategy that we have been using with much success is preparing a bankruptcy petition, without filing the petition (a so called Pro-Forma Bankruptcy Petition). This bankruptcy petition would accurately disclose the assets, liabilities and earnings of the company. Then we would forward that bankruptcy petition to the landlord or their counsel indicating that if the tenant and landlord cannot reach an agreement where the tenant is allowed to terminate their lease (pursuant to a Lease Surrender Agreement), then the tenant or company will file for bankruptcy. The benefit of this strategy is that it is quick, relatively inexpensive, the landlord gets financial disclosure regarding the company or tenants finances upfront without litigation or discovery and we convince the landlord that releasing the tenant from their lease is a “win-win” for both the tenant and the landlord. How is this strategy a win for the landlord? The landlord keeps the tenant’s security deposit, the Landlord will also save substantial money on bankruptcy and landlord tenant legal fees, they remove an unprofitable tenant from their building, and they obtain possession of the premises quickly allowing them to re-let the space.One of the reasons that we have had much success with this strategy in these trying times is that we have been filing bankruptcy petitions for over 20 years and the landlord or their counsel can Pacer our law firm’s bankruptcy filings, or visit our website and blog. Based upon our work and experience in this area of the law, landlords realize that bankruptcy is a real option for the tenant not an idle threat. Clients or their advisors who would like to discuss these strategies with Jim Shenwick or schedule a consultation can reach him at 212-541-6224 or email him at [email protected]
A Tidal Wave of Bankruptcies Is Coming
Experts foresee so many filings in the coming months that the courts could struggle to salvage the businesses that are worth saving.
Already, companies large and small are succumbing to the effects of the coronavirus. They include household names like Hertz and J. Crew and comparatively anonymous energy companies like Diamond Offshore Drilling and Whiting Petroleum.
And the wave of bankruptcies is going to get bigger.
Edward I. Altman, the creator of the Z score, a widely used method of predicting business failures, estimated that this year will easily set a record for so-called mega bankruptcies — filings by companies with $1 billion or more in debt. And he expects the number of merely large bankruptcies — at least $100 million — to challenge the record set the year after the 2008 economic crisis.
Even a meaningful rebound in economic activity over the coming months won’t stop it, said Mr. Altman, the Max L. Heine professor of finance, emeritus, at New York University’s Stern School of Business. “The really hurting companies are too far gone to be saved,” he said.
Many are teetering on the edge. Chesapeake Energy, once the second-largest natural gas company in the country, is wrestling with about $9 billion in debt. Tailored Brands — the parent of Men’s Wearhouse, Jos. A. Bank and K&G — recently disclosed that it, too, might have to file for bankruptcy protection. So did Weatherford International, an oil field services company that emerged from bankruptcy only in December.
More than 6,800 companies filed for Chapter 11 bankruptcy protection last year, and this year will almost certainly have more. The flood of petitions from the worst economic downturn since the Great Depression could swamp the system, making it harder to save the companies that can be rescued, bankruptcy experts said.
Most good-size companies that go into bankruptcy try to restructure themselves, working out payment agreements for their debts so they can stay open. But if a plan can’t be worked out — or isn’t successful — they can be liquidated instead. Equipment and property are sold off to pay debts, and the company disappears.
Without reform in the system, “we anticipate that a significant fraction of viable small businesses will be forced to liquidate, causing high and irreversible economic losses,” a group of academics said in a letter to Congress in May. “Workers will lose jobs even in otherwise viable businesses.”
Among their suggestions: increasing budgets to recall retired judges and hire more clerks, and giving companies more time to come up with workable plans to prevent them from being sold off for parts.
“Tight deadlines may lead to overly optimistic restructuring plans and subsequent refilings that will congest courts and delay future recoveries,” they wrote.
The pandemic — with its lockdowns, which have just started to ease — was enough on its own to put some businesses under. The gym chain 24 Hour Fitness, for example, declared bankruptcy this week, saying it would close 100 locations because of financial problems that its chief executive attributed entirely to the coronavirus.
But in many cases, the coronavirus crisis exposed deeper problems, like staggering debts run up by companies whose business models were already struggling to deal with changes in consumer behavior.
Hertz has been weighed down by debt created in a leveraged buyout more than a decade ago, and added to it with the acquisition of Dollar Thrifty in 2012. As it was battling direct competitors, the ascent of Uber and Lyft further upended the rental-car industry.
J. Crew and Neiman Marcus were carrying heavy debt loads from leveraged buyouts by private equity firms while struggling to deal with the changing preferences of shoppers who increasingly buy online.
Oil and gas companies like Diamond and Whiting borrowed heavily to expand when commodities prices were much higher. Those prices started to fall as production increased, and plunged further still when Russia and Saudi Arabia got into a price war shortly before the economic shutdowns began.
(And then there are cases that have nothing to do with the pandemic but nonetheless take up time and energy in the courts. Borden Dairy, a Dallas company with a history that goes back to 1857, declared bankruptcy in January, a victim of declining prices, rising costs and changing tastes.)
A run of defaults looks almost inevitable. At the end of the first quarter of this year, U.S. companies had amassed nearly $10.5 trillion in debt — by far the most since the Federal Reserve Bank of St. Louis began tracking the figure at the end of World War II.
“An explosion in corporate debt,” Mr. Altman said.
Having a lot more debt to deal with is likely to make the coming bankruptcies a bruising experience for unsecured creditors, who may include retirees with pensions or health benefits, vendors waiting to be paid, tort plaintiffs whose lawsuits are cut short and sometimes even current workers. If a company goes into bankruptcy with more secured debts than the value of its assets, the secured creditors — including vulture investors who bought up the debt for a song — can walk away with virtually everything.
The sums at play in some of these cases will be enormous. Mr. Altman expects at least 66 cases with more than $1 billion in debt this year, eclipsing 2009’s mark of 49. He also predicted 192 bankruptcies involving at least $100 million in debt, which would trail only 2009’s record of 242.
Robert J. Keach, a director of the American College of Bankruptcy, said many companies had so far managed to put off bankruptcy by amassing cash and conserving it as best they can: drawing down existing credit lines, furloughing workers, delaying projects and taking advantage of federal and state pandemic-relief programs.
But when those programs expire, the companies will start burning through their cash. That’s when bankruptcy filings are likely to soar and stay elevated, Mr. Keach said.
Expect “a Covid-19 cliff” in the next 30 to 60 days, he said.
Companies that received loans under the federal Paycheck Protection Program may be waiting to file, said Mr. Keach, who practices bankruptcy law with the firm of Bernstein Shur in Portland, Maine. The loans can be converted to grants if the companies meet certain requirements, and if the borrowers can put off bankruptcy until they’re sure they won’t have to pay the money back, they will have more cash when they file.
That’s an important consideration, because Chapter 11 is expensive. A bankrupt company must pay the fees of the lawyers and other professionals that help it reorganize, as well as the fees of those who advise the official creditors’ committees.
The experts’ recommendations to Congress walk a fine line. They suggest allowing companies more time to come up with reorganization plans, even though Chapter 11 cases are supposed to move quickly so bankrupt companies don’t burn through their cash before they reorganize.
Generally, the longer a company stays in bankruptcy, the greater the chances of a liquidation. And that increases the likelihood that the company’s troubles will spread: Suppliers of raw materials could fold if a manufacturer languishes in bankruptcy, and smaller stores in entirely differently lines of business can suffer if a shopping-mall anchor can’t stay open.
These risks are real, said Robert E. Gerber, who retired in 2016 as a bankruptcy judge in the Southern District of New York. One of his cases was the 2009 bankruptcy of General Motors, which moved at lightning speed to keep the automaker from going under for good.
“If G.M. had failed, God knows how many companies in the supply chain would have failed, and this would have snowballed terribly,” said Mr. Gerber, who is now of counsel with the Joseph Hage Aaronson firm. The cascade would have wiped out paychecks to workers throughout the supply chain, threatening other businesses and even the finances of the local governments that count on them for tax revenue.
That, Mr. Gerber said, makes it imperative that the bankruptcy system have the resources to deal with the coming rush of cases.
“Bankruptcy can’t print money for those companies,” he said, “but it can give a good number of them a chance of survival.”
Should I file for bankruptcy? This is one of the most asked questions among people in financial distress who owe more than what they can pay. If you are in the same situation, don’t consider filing bankruptcy as a dangerous option. In fact, a bankruptcy petition may give you the faster route to debt relief as compared to emptying your savings and finances. There are several types of bankruptcy available depending on your situation.
Before filing bankruptcy, make sure to conduct an evaluation of your financial condition. To get you started in your personal assessment, here are some answers to the most frequently asked questions of debtors considering bankruptcy:
- Are you experiencing creditor harassment?
When loan payments are missed, creditors may constantly give you demands through calls, visits, or even lawsuits. Evading those you owe is not the preferred option as there may be legal consequences. When you file for bankruptcy, you can attain relief from those harassing you because of the “automatic stay” that the bankruptcy court will issue. This order shall temporarily put all collection activities on hold, allowing a debtor some distance from the stress.
- Do you have credit card debt or outstanding balances in your personal accounts?
When a credit card is the only way you are able to pay for basic necessities, then bankruptcy presents as a good option. You may want to consider Chapter 7 which is casually referred to as straight bankruptcy. Declaring Chapter 7 bankruptcy will liquidate your remaining assets to pay off your loans to banks and credit card companies.
- Do you feel that your finances are spinning out of control?
For those whose medical expenses and personal loans are piling up continually, choosing bankruptcy becomes an easy option especially when there is no reliable source of income due to unemployment or other reasons. Likewise, losing track of all monthly payments owed over an extended period of time is often another indicator to declare bankruptcy and put a halt on your running debt total. A bankruptcy lawyer may enlighten you on how bankruptcy petitions may help you regain control of your finances.
- Do you have liquid assets and properties?
Your assets include motor vehicles, savings, and other accounts, retirement funds, stocks, and bonds, or real estate. Having any of these in your possession can help you get out of insolvency as these are key determinants for qualifying under Chapter 7 bankruptcy. If you are unable to pay loans with your current or projected future income, Chapter 7 is a good choice since you can expect to receive a debt discharge notice from the court in less than four months after filing bankruptcy. The downside here is that almost all of your nonexempt property will be sold off and the record of being bankrupt will reflect on your credit report, thereby hurting your credit score in the next ten years.
Debtors who own valuable personal assets such as a company or home, and have consistent annual income, may choose bankruptcy Chapter 13 instead, also known as a reorganization bankruptcy. Under this type, they may keep their properties but will need a repayment plan specifying how they will be paying off their debts in the next three to five years.
Evaluating Your Financial Circumstances
An affirmative response to any of the five questions raised above indicates the need for a more in-depth financial scanning. This means that it is time to collect all the loans, utility bills, credit statements, or mortgages piling up to get your running total on personal debts. Then, try to subtract the total amount owed to the estimated value of the assets in your possession. If there is a large deficit, then you may consider declaring bankruptcy with the court to help you bridge the gap.
Are you considering filing for bankruptcy? We are here to help you!
At first, it may be difficult to admit how deep in debt you are. This is why the bankruptcy law was created – to protect your best interest. If you have a lingering desire to wipe your financial slate clean, then it may be the best time to face the next question “How should I file for bankruptcy?”.
Once you voluntarily file for bankruptcy, you will need to consult with credible bankruptcy lawyers to weigh all your options and determine the best type of bankruptcy that applies to you. Having a good bankruptcy attorney and the right legal knowledge on bankruptcy laws are essential to a seamless bankruptcy process. A well-planned and organized bankruptcy filing has a higher chance of getting your debts discharged, giving you a better chance of putting an end to your financial problems.
Ready? Receive a free consultation from one of our experienced bankruptcy attorneys through Northwest Debt Relief Law Firm and take the first step toward a fresh start.
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The post Should You File Bankruptcy? Assessing Your Financial Situation appeared first on Vancouver Bankruptcy Attorney | Northwest Debt Relief Law Firm.
Figuring out your financial situation is imperative in a bankruptcy petition. For starters, you need certain details to be able to correctly accomplish your bankruptcy forms. In case you’re hiring a bankruptcy lawyer, the information is also important for him or her to provide you with proper legal help with the right debt relief solution. Unfortunately, many potential filers go to bankruptcy lawyers without any idea what their financial situation is like.
Hiring a lawyer specializing in bankruptcy law is actually the most prudent first step to take if you want to declare bankruptcy. The bankruptcy code has different types of bankruptcy, so your lawyer will help you understand which bankruptcy chapter you should file bankruptcy under. If you’re filing personal bankruptcy, you’ll get legal advice on whether to opt for liquidation or reorganization. You can rest assured that you’ll be making informed decisions as well as avoiding any violation of bankruptcy laws.
Making Lists
Filing bankruptcy with the bankruptcy court requires that you have a clear picture of your finances, so before you file for bankruptcy protection, take the time to gather the relevant data. If you want to petition for bankruptcy to rid yourself of financial problems and get out of debt, there are a couple of lists you need to make before filing.
- All debts you’ve been unable to pay – secured and unsecured debts, as well as dischargeable and non-dischargeable debts.
- All your exempt and non-exempt assets with their respective current values.
- List of Debts
Filing for bankruptcy definitely requires that you furnish a list of all your debts and creditors. You must include all debts, every secured debt such as a car loan or a mortgage, and every unsecured debt such as medical bills and credit card debt. Name every creditor as well and how much you owe each one. Also include debt collection agencies that have contacted you. This way, your bankruptcy attorney can formulate a strategy for dealing with all the debt collectors involved in your bankruptcy case.
In a bankruptcy filing, certain debts like child support and student loans cannot be discharged. It’s important to include them even if you cannot discharge them since they directly impact your disposable income. You also have to indicate to your lawyer if you have a lawsuit filed against you or if there’s a possibility that somebody might file one against you.
- List of Assets
Disclosing all your assets is necessary to the bankruptcy process, so when declaring bankruptcy, you need to disclose everything, including ones that you can claim as bankruptcy exemptions. Unfortunately, some assets such as furniture, vehicles, and real estate are not that easy to assign value to. Here are some things bankruptcy attorneys advise their clients to do so they can give a good estimate of an asset’s value.
- Furniture and other personal items – Price them as you would for a yard sale. Go to Craigslist and eBay to see how much similar items are worth. Don’t let your sentimental attachment to them cause you to overprice.
- Vehicles – Go to Edmunds.com to check how sellers are pricing your car model. Make sure to consider your own car’s mileage and condition when you price it.
- Real estate – Price your property as you would for an absolute auction or go online to see how much similar properties in the area are selling for. You could also simply look at your current tax bill and base your price on the county’s property value administrator’s estimate.
Other Pertinent Bankruptcy Information
Besides the assets, debts, and creditors lists, you also need to figure out the following data:
- Your entire household’s monthly income.
- Your household’s monthly expenses (get the average of the last three months.)
Want Legal Advice for This Legal Process? Contact a Texas Bankruptcy Attorney Today!
Bankruptcies can give bankrupt debtors the fresh start they need. For help with bankruptcy proceedings, call us at Allmand Law Firm, PLLC to schedule a free legal consultation with one of Texas’s experienced bankruptcy attorneys.
The post Bankruptcy Information You Need appeared first on Allmand Law Firm, PLLC.
Figuring out your financial situation is imperative in a bankruptcy petition. For starters, you need certain details to be able to correctly accomplish your bankruptcy forms. In case you’re hiring a bankruptcy lawyer, the information is also important for him or her to provide you with proper legal help with the right debt relief solution. Unfortunately, many potential filers go to bankruptcy lawyers without any idea what their financial situation is like.
Hiring a lawyer specializing in bankruptcy law is actually the most prudent first step to take if you want to declare bankruptcy. The bankruptcy code has different types of bankruptcy, so your lawyer will help you understand which bankruptcy chapter you should file bankruptcy under. If you’re filing personal bankruptcy, you’ll get legal advice on whether to opt for liquidation or reorganization. You can rest assured that you’ll be making informed decisions as well as avoiding any violation of bankruptcy laws.
Making Lists
Filing bankruptcy with the bankruptcy court requires that you have a clear picture of your finances, so before you file for bankruptcy protection, take the time to gather the relevant data. If you want to petition for bankruptcy to rid yourself of financial problems and get out of debt, there are a couple of lists you need to make before filing.
- All debts you’ve been unable to pay – secured and unsecured debts, as well as dischargeable and non-dischargeable debts.
- All your exempt and non-exempt assets with their respective current values.
- List of Debts
Filing for bankruptcy definitely requires that you furnish a list of all your debts and creditors. You must include all debts, every secured debt such as a car loan or a mortgage, and every unsecured debt such as medical bills and credit card debt. Name every creditor as well and how much you owe each one. Also include debt collection agencies that have contacted you. This way, your bankruptcy attorney can formulate a strategy for dealing with all the debt collectors involved in your bankruptcy case.
In a bankruptcy filing, certain debts like child support and student loans cannot be discharged. It’s important to include them even if you cannot discharge them since they directly impact your disposable income. You also have to indicate to your lawyer if you have a lawsuit filed against you or if there’s a possibility that somebody might file one against you.
- List of Assets
Disclosing all your assets is necessary to the bankruptcy process, so when declaring bankruptcy, you need to disclose everything, including ones that you can claim as bankruptcy exemptions. Unfortunately, some assets such as furniture, vehicles, and real estate are not that easy to assign value to. Here are some things bankruptcy attorneys advise their clients to do so they can give a good estimate of an asset’s value.
- Furniture and other personal items – Price them as you would for a yard sale. Go to Craigslist and eBay to see how much similar items are worth. Don’t let your sentimental attachment to them cause you to overprice.
- Vehicles – Go to Edmunds.com to check how sellers are pricing your car model. Make sure to consider your own car’s mileage and condition when you price it.
- Real estate – Price your property as you would for an absolute auction or go online to see how much similar properties in the area are selling for. You could also simply look at your current tax bill and base your price on the county’s property value administrator’s estimate.
Other Pertinent Bankruptcy Information
Besides the assets, debts, and creditors lists, you also need to figure out the following data:
- Your entire household’s monthly income.
- Your household’s monthly expenses (get the average of the last three months.)
Want Legal Advice for This Legal Process? Contact a Texas Bankruptcy Attorney Today!
Bankruptcies can give bankrupt debtors the fresh start they need. For help with bankruptcy proceedings, call us at Allmand Law Firm, PLLC to schedule a free legal consultation with one of Texas’s experienced bankruptcy attorneys.
The post Bankruptcy Information You Need appeared first on Allmand Law Firm, PLLC.
Figuring out your financial situation is imperative in a bankruptcy petition. For starters, you need certain details to be able to correctly accomplish your bankruptcy forms. In case you’re hiring a bankruptcy lawyer, the information is also important for him or her to provide you with proper legal help with the right debt relief solution. Unfortunately, many potential filers go to bankruptcy lawyers without any idea what their financial situation is like.
Hiring a lawyer specializing in bankruptcy law is actually the most prudent first step to take if you want to declare bankruptcy. The bankruptcy code has different types of bankruptcy, so your lawyer will help you understand which bankruptcy chapter you should file bankruptcy under. If you’re filing personal bankruptcy, you’ll get legal advice on whether to opt for liquidation or reorganization. You can rest assured that you’ll be making informed decisions as well as avoiding any violation of bankruptcy laws.
Making Lists
Filing bankruptcy with the bankruptcy court requires that you have a clear picture of your finances, so before you file for bankruptcy protection, take the time to gather the relevant data. If you want to petition for bankruptcy to rid yourself of financial problems and get out of debt, there are a couple of lists you need to make before filing.
- All debts you’ve been unable to pay – secured and unsecured debts, as well as dischargeable and non-dischargeable debts.
- All your exempt and non-exempt assets with their respective current values.
- List of Debts
Filing for bankruptcy definitely requires that you furnish a list of all your debts and creditors. You must include all debts, every secured debt such as a car loan or a mortgage, and every unsecured debt such as medical bills and credit card debt. Name every creditor as well and how much you owe each one. Also include debt collection agencies that have contacted you. This way, your bankruptcy attorney can formulate a strategy for dealing with all the debt collectors involved in your bankruptcy case.
In a bankruptcy filing, certain debts like child support and student loans cannot be discharged. It’s important to include them even if you cannot discharge them since they directly impact your disposable income. You also have to indicate to your lawyer if you have a lawsuit filed against you or if there’s a possibility that somebody might file one against you.
- List of Assets
Disclosing all your assets is necessary to the bankruptcy process, so when declaring bankruptcy, you need to disclose everything, including ones that you can claim as bankruptcy exemptions. Unfortunately, some assets such as furniture, vehicles, and real estate are not that easy to assign value to. Here are some things bankruptcy attorneys advise their clients to do so they can give a good estimate of an asset’s value.
- Furniture and other personal items – Price them as you would for a yard sale. Go to Craigslist and eBay to see how much similar items are worth. Don’t let your sentimental attachment to them cause you to overprice.
- Vehicles – Go to Edmunds.com to check how sellers are pricing your car model. Make sure to consider your own car’s mileage and condition when you price it.
- Real estate – Price your property as you would for an absolute auction or go online to see how much similar properties in the area are selling for. You could also simply look at your current tax bill and base your price on the county’s property value administrator’s estimate.
Other Pertinent Bankruptcy Information
Besides the assets, debts, and creditors lists, you also need to figure out the following data:
- Your entire household’s monthly income.
- Your household’s monthly expenses (get the average of the last three months.)
Want Legal Advice for This Legal Process? Contact a Texas Bankruptcy Attorney Today!
Bankruptcies can give bankrupt debtors the fresh start they need. For help with bankruptcy proceedings, call us at Allmand Law Firm, PLLC to schedule a free legal consultation with one of Texas’s experienced bankruptcy attorneys.
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Because of the safety protocols imposed in response to the global COVID-19 pandemic, many federal bankruptcy courts throughout the United States have adopted modified operations to ensure that physical distancing is observed at all times and to prevent beginning a contagion in a United States bankruptcy court.
In Washington, many courthouses have closed, leaving those dealing with bankruptcy to wonder how they’re supposed to proceed. Debtors who have filed for bankruptcy in a now temporarily closed bankruptcy court would still be covered by the automatic stay. If you’re already in the middle of bankruptcy proceedings, you may continue to enjoy this bankruptcy protection preventing debt collectors such as creditors and collection agencies from pursuing repayment through wage garnishment, lien, or even a simple phone call.
Meanwhile, if you had just been about to file bankruptcy when the court where you’d typically file closed, or if the pandemic has made it necessary for you to file for bankruptcy protection in the midst of court closures, contact a local attorney to find out what you can do to file a bankruptcy petition at this very irregular time.
As for courts that have chosen to stay open, filing for bankruptcy in them means going through additional steps and modified protocols. If you’re considering bankruptcy now, make sure that you find out what the current rules are in the district and courthouse where you’re supposed to file for bankruptcy.
Waiving of Wet Signature Requirement
Bankruptcy lawyers usually have to get their client’s original signature on the petition for bankruptcy, even when filing documents online. Find out how your bankruptcy court stands on this as many have waived this requirement to eliminate the need for bankruptcy attorneys and their clients to review paperwork and get the wet physical signature in person.
Meeting of Creditors by Telephone
The Bankruptcy Code requires Chapter 7 and Chapter 13 filers to attend a meeting of creditors under Section 341. However, the US Trustee Program has issued an order for bankruptcy filings through July 10, 2020, to conduct these meetings either by telephone or another form of remote communication while the coronavirus remains a threat.
CARES Act and Modified Bankruptcy Rules
The CARES (Coronavirus Aid, Relief, and Economic Security) Act has also given rise to some changes, albeit temporary, to the standard bankruptcy rules. The modification, which is to expire on March 27, 2021, created distinct differences in bankruptcy procedures like giving a filer under Chapter 13 seven years to carry out the approved payment plan instead of the usual maximum of five years. Take note, though, that if you’re the debtor, you have to show cause for an extension, proving that the pandemic is causing you material financial hardship.
Keep in mind as well that coronavirus-related payments like stimulus checks are not regarded as current monthly income if you’re filing under the liquidation bankruptcy chapter (7). If you’re filing under the reorganization chapter (13), they won’t be considered disposable income. They have no effect on your eligibility to declare bankruptcy under either filing chapter. If you’re an entrepreneur filing under Chapter 11, you should know that a business bankruptcy filing under Subchapter V has a significantly increased debt limit.
Do You Need Help with Bankruptcy at This Time? Contact a Washington Bankruptcy Lawyer Now!
It’s easy to see how these difficult times may be pushing many to consider filing bankruptcy. If you yourself have overwhelming financial problems and think the bankruptcy procedure bears the best solution, consult an attorney specializing in bankruptcy law for legal advice and guidance. Call us at Northwest Debt Relief Law Firm to speak with a skilled and experienced Washington bankruptcy attorney about your case.
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COVID Has Exposed Many of Our Neighbors to an Ugly Financial Reality
The next 12 to 18 months is going to be financially difficult for many of our neighbors
Our new normal is homeschooling, face masks and self-isolation. What few are talking about is the financial consequence of COVID-19. Many of our neighbors are faced with difficult choices – pay the mortgage or buy food and pay utilities?
But, I thought Congress provides resources to help those who are not receiving a paycheck
You are correct – the law is called the Paycheck Protection Program (PPP), under the CARES Act. Employers (that includes those who are self-employed) can apply for loans to keep workers on the payroll, but the employees still have to work if the employer requires it.
The application process is difficult and not a guaranty to receive any funds. It took me (a lawyer) hours to help my self-employed daughter fill out the forms and to understand the strings attached to the funds. Good news – she finally received her money, but only after two months of waiting. Fortunately, her partner was paying the basic living expenses, but still she is way behind on her other bills.
Childcare:
Returning to work is fine, so long as you do not have children who need adult supervision. Childcare is difficult to find right now. The parent has the additional concern about the steps the childcare provider is taking to protect the children from being exposed to the virus.
Unemployment:
The CARES Act provided federal funds for those on unemployment ($600 per week), plus whatever the state pays. In many cases that meant the worker received far more by staying on unemployment then going back to work. As of May 1, 2020, more than 30 million Americans have filed for unemployment insurance since the COVID-19 crisis hit the U.S. (author’s opinion – Congress really did not think that one through.) Important note – unemployment income must be claimed on the worker’s tax returns.
Rent:
Many low-income renters are unemployed, waiting for unemployment to come in, but faced with a monthly rent bill. Federal and statewide eviction moratoriums were put in place (generally three to six months).
This moratorium is on the tenant being evicted, it does not excuse the tenant’s obligation to pay rent. At the end of the moratorium the tenant is supposed to come up with the missing rent, or be evicted. The problem will be exacerbated because the moratorium is based on COVID-19 timetables that are “too short” and don’t consider predictions from medical experts that the pandemic could persist into the fall and beyond.
Landlords:
Many landlords depend on the rents to pay their own bills. The moratorium puts them facing their own default of the mortgage and possible foreclosure, resulting in their own eviction.
Homelessness:
Evictions lead directly to homelessness, which increases the burden on the taxpayer and the various agencies that help those without a place to live. Crime will increase because people become desperate to just survive.
What about other bills?
In addition to worrying about where to live, the worker is also faced with demands from credit card companies, vehicle payments and other debts. By this time they are so desperate that many have shut down emotionally. They are not seeking help from those who can look at the big picture, rather are looking only at how to survive today. That is completely understandable, if you cannot get through today, why should you care about tomorrow? The answer – because tomorrow will always come.
Education is the key:
Our job is to help the worker step back from their current focus and talk about the future. Life will change. There will be a cure for virus. People will go back to work. Landlords will need tenants. Car dealers will need buyers. Mortgage companies will need borrowers.
I want to help the worker plan for their future. But, I am not the only one offering their help, there is a new breed of selfish attorneys who don’t care about their clients. They are only on this earth to take as much money from their clients as possible, while offering little to no education. They even have false reviews created by employees, and Internet companies. Use your common sense when talking to anyone who may have ulterior motives (take your money).
MUSINGS FROM DIANE:
When you hear “we are all in this together” stop and think – are we really? One person buys something or pays a bill, that money is used to buy more products or pay more bills. Round and round goes that dollar. So, yes, we are all in this together. I am ignoring the wealthy who don’t worry about how to pay their mortgage or buy food for their family. Instead, I am talking about the other 90 percent of our community. Congress did its best to come up with an idea about putting money into the hands of those who really need it, but much of that money was detoured into the hands of the wealthy. We must be responsible for ourselves and look for our own way out of this situation. Be smart about your choices and stay away from the “quick fixes” – they are scams.
How Can I Help You?
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New Law Governing the Paycheck Protection Program – June 5, 2020
SBA issues rules and guidance regarding the amended Paycheck Protection Program.
Legislation signed June 5 lowered to 60% from 75% the minimum percentage of PPP funds borrowers have to spend on payroll costs to have the loans forgiven. Plus, extended the covered period from eight weeks to 24 weeks, after loan disbursement.
New rules, guidance, applications coming
(reprint from Journal of Accountancy) The SBA, in consultation with Treasury, will “promptly” issue rules and guidance, a modified borrower application form, and a modified loan forgiveness application implementing the amendments to the PPP made in the new law, the statement said. In addition to confirming that June 30, 2020, remains the last date on which a PPP loan application can be approved, the new rules will implement the following changes:
- Extend the covered period for loan forgiveness from eight weeks after the date of loan disbursement to 24 weeks after the date of loan disbursement, providing substantially greater flexibility for borrowers to qualify for loan forgiveness. Borrowers that have already received PPP loans retain the option to use an eight-week covered period.
- Provide a safe harbor from reductions in loan forgiveness based on reductions in full-time-equivalent (FTE) employees for borrowers that are unable to return to the same level of business activity the business was operating at before Feb. 15, 2020, due to compliance with requirements or guidance issued between March 1, 2020, and Dec. 31, 2020, by the secretary of Health and Human Services, the director of the Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration related to worker or customer safety requirements related to COVID-19.
- Provide a safe harbor from reductions in loan forgiveness based on reductions in FTE employees, to provide protections for borrowers that are both unable to rehire individuals who were employees of the borrower on Feb. 15, 2020, and unable to hire similarly qualified employees for unfilled positions by Dec. 31, 2020.
- Increase to five years the maturity of PPP loans that are approved by the SBA (based on the date the SBA assigns a loan number) on or after June 5, 2020.
- Extend the deferral period for borrower payments of principal, interest, and fees on PPP loans to the date that the SBA remits the borrower’s loan forgiveness amount to the lender (or, if the borrower does not apply for loan forgiveness, 10 months after the end of the borrower’s loan forgiveness covered period).
MUSINGS FROM DIANE:
What no one discusses is that if the loan is forgiven, these funds cannot be deducted on your tax returns. Otherwise, this would be ‘double dipping’. The company gets PPP money to pay its’ employees, then the company’s obligation to repay the loan is forgiven, in total or partially. Therefore, the company receives a windfall if the company deducts the same employee costs on their taxes as overhead. Talk to your CPA and make sure to disclose any “free money” from any stimulus funds.
How Can I Help You?
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