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By Doree Lewak
NYC cabbies are being driven to the edge of financial ruin and despair as ride-hail apps like Uber and Lyft continue to take their customers.
Last week, in the fourth driver suicide since November, Nicanor Ochisor, 65, hanged himself inside his Queens home, depressed over the plummeting value of the taxi medallion he owned that was supposed to finance his home and looming retirement. The value plunged from $1 million to around $180,000 over the last five years.
Last month, longtime black-car driver Doug Schifter shot himself in front of City Hall over money troubles. And two livery drivers killed themselves in recent months, one of whom, Danilo Castillo, pointedly wrote his suicide note on the back of a Taxi and Limousine Commission summons.
“We’ve seen this building over the past three years in particular. The financial crisis is crushing enough, but it’s the political silence that’s destroying people,” said Bhairavi Desai, executive director of the New York Taxi Workers Alliance.
Without the political will to cap them, the number of for-hire cars in circulation has swelled to about 100,000 (roughly two-thirds are Uber drivers). The number of yellow cabs is capped by the city at 13,587.
The resulting yellow-cab ridership is way down, going from about 475,000 fares per day in 2014 to between 175,000 to 250,000 per day now, according to the TLC.
“Very clearly, there is less work to go around. [Taxi driver] earnings have taken a hit,” said TLC spokesman Allan Fromberg.
Full-time daytime cabbies saw a 23 percent drop in their annual earnings from 2013 to 2016, from $45,529 to $35,344, the Alliance says.
While Uber and Lyft drivers have little overhead (they do pay onetime $550 TLC license fees), hacks who own their own medallions, which are usually financed through banks, have average monthly expenses of “$6,000 to $9,000 per month,” said Desai.
This perfect financial storm has many cabbies — mostly immigrants with few career options — silently suffering, or seeking exits like bankruptcy, or worse.
“Some people are too proud to tell anybody they’re failing,” said one medallion-leasing veteran.
“For every 40 bankruptcy cases, I now see two or three cabbies. That’s a significant number of filings — all in the last two years,” a bankruptcy attorney told the Post.
“Guys walk into the TLC to return their medallions in tears,” he said.
Here five drivers share their stories:
Nicolae Hent, 61, was Ochisor’s best friend. The cabbie of 30 years predicts a bleak future for fellow hacks.
“There will be more like that — he’s not the first and he won’t be the last,” he said of his pal, whose words haunt him.
“After the cold in January, he said, ‘I can’t make money — I think we’re in big trouble,’ and I told him, ‘We have to fight — things will get better.’”
Hent, who owes about $140,000 on his medallion mortgage, told The Post, “I’m in worse shape than him. I’m scared — but I won’t [take my life.] I’ll fight my whole life.”
He blames the inaction of lawmakers who refuse to level the playing field between ride-sharing apps like Uber and yellow cabs.
“I like competition, it’s good for consumer,” he said. ”But it’s not competition when you have a free license.”
He estimates he brought home less than $35,000 last year, after a decade of making upwards of $45,000.
“My plan at 62 was to retire and give my medallion to a broker,” he said. Now he has to work harder than he did as a young man.
“I don’t know why my wife is still with me,” he said. “I spend more time in this cab than I do with my own wife.”
Mohammed Sheikh, 62, is drowning in debt.
The Bronx-based married father of three who worked the night shift seven days a week for 18 years, reminisces about the good old days. “I used to make very good money — it was much easier,” he said of his $50,000 take-home.
Passengers “would fight. One guy comes from the right, one from the left, and scream, ‘He’s stealing my cab.’ It was never empty.”
Then Uber came along.
Last year he estimates his pay at a paltry $17,000. “It’s not enough. I have to quit very soon. Every day I struggle about what to do — I can’t survive doing this anymore.
“I never imagined this — I was always making good money. I would work seven days, but when you make good money, you don’t get tired.”
His two adult children help support Sheikh, who suffers from diabetes, and his wife, but he’s on the brink.
“The only way to survive is use credit cards” he said.
“I just make rent,” he said of the $1,500-a-month two-bedroom. With a son off to college next year and tuition looming, Sheikh is panicked. “I’m going into debt with the credit cards — I’m more than $10,000 in debt.”
Nick A., 28, is a rookie from St. Petersburg, Russia, who started driving a yellow taxi eight months ago.
He thought he’d make some extra money for his family — his wife, 4-year-old son and year-old daughter — while working as a manager at Yellow Cab Management, where he’s been working four days a week for past two years.
Now, he works seven days a week, starting his day at 3am tooling around in his Ford hybrid, armed with a pack of Newports and water bottle.
“Sometimes you can drive for an hour and no passengers. Right now it’s hard, business is terrible, but it will get better.”
This past week was his worst — netting $60 one day — but he’s determined to stay in the business and own his own medallion one day. “I still think I can make money in this business.”
Still, if things get tough, the whippersnapper with an economics degree from Russia can always reinvent himself. “Besides yellow cab, I can always do another job. I would never make a decision like [he] did,” he said of Ochisor. “Maybe he bought medallion when it was high. You can still make money from the medallion.”
Vinod Malhotra, 53, is a worrier.
The 53-year-old Hicksville, LI married father of three is anxious about paying for college for his teen children, but he credits his kids for never hounding him for the latest phones and gadgets. “The kids are wise — they understand my income is down. They don’t ask for picnics or vacations. They say,
‘Don’t worry — we’ll get a [college] scholarship.’”
Still, the night-shift driver, who works from 5pm to 5am six days a week, worries about foreclosure and bankruptcy. He never imagined being in this position back in 2010 when he snagged a medallion for $600,000. “At that time, you feel lucky to get it for under a million. And now we are very worried about how to pay our [$6,000 monthly] bills.”
Last year his take-home pay was $30,000, down from $45,000 during boom times. “We cannot survive long — we can’t make payments.”
When it’s slow, he drives by Penn Station on Thursday rush hour to join a conga line of 15 cabs. “That never would have happened five years ago. Before, the customer would wait 15 minutes. Now, we do.”
A close friend and fellow medallion owner is battling stage 4 kidney cancer and can’t work or even sell his medallion. “Anything can happen at any time,” said Malhotra. “We always thought the medallion was our pension. Now it only creates debt.”
Bernard Sasu, 50, is about to jump ship.
The married father of two teens from downtown Brooklyn is grim. “It doesn’t matter if you start early, if you start late. It’s the same thing every day. You don’t make any money.”
His saving grace? “Old people don’t know how to use Uber.”
When he first started driving in 2011 he’d take home $200 a day. “When I first started, it was all about the money. This is NYC — you can’t lose with a taxi.
“Now, forget about it. You have the kids going to school, the parents going to work, but by 10 or 11, there’s nothing.” He said he can drive the length of Manhattan — sometimes for up to two hours — without a fare. “That’s all we do — drive around.”
And that means critical cutbacks for his family. “You have to change some things?” he said, like not eating out or going to the movies.
“You can’t go on vacations like you used to,” said Sasu, who would regularly visit his family in Ghana. “I haven’t been in five years — it’s too expensive.”
Like many of his driver friends who fled in the past few years to become doormen, Sosa is ready to start over, having applied to be an MTA conductor three months ago. “You have to keep going, you can’t give up on life. If you can’t be a driver you do something else,” he said.
“When I came to this country I was a dishwasher. I’m not going back to that.”
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This is not a trick question.I received this letter today from American Express regarding the balance owed by one of my Chapter 13 bankruptcy clients whose case was dismissed. The letter acknowledges that because of the age of the debt, Amex cannot sue my former client, nor can they report the unpaid balance to the credit bureaus. Yet they are giving him the opportunity to “settle” this debt for 45% of the balance.Can you think of any reason why anyone would pay Amex anything on this stale account? I can’t. But I wonder how many people agree to make payments and possible waive the statute of limitations bar to collections. If you get a letter with a notice that the debt is stale, don’t even think about making a payment.
The post Do You Want to Give Money You Don’t Owe to a Credit Card Company? appeared first on theBKBlog.
This is not a trick question.I received this letter today from American Express regarding the balance owed by one of my Chapter 13 bankruptcy clients whose case was dismissed. The letter acknowledges that because of the age of the debt, Amex cannot sue my former client, nor can they report the unpaid balance to the credit bureaus. Yet they are giving him the opportunity to “settle” this debt for 45% of the balance.Can you think of any reason why anyone would pay Amex anything on this stale account? I can’t. But I wonder how many people agree to make payments and possible waive the statute of limitations bar to collections. If you get a letter with a notice that the debt is stale, don’t even think about making a payment.The post Do You Want to Give Money You Don’t Owe to a Credit Card Company? appeared first on theBKBlog.
I have to pay more in taxes than received from my lawsuit!!!
I have been around enough not to be overly surprised by lack of common sense from Congress and our President, but the latest revelation makes my stomach hurt.
What Now??
With the new Tax Cuts and Jobs Act (TCJA) it is just coming to light that a person injured and later successful in suing must pay taxes on their entire recovery – including the attorney fees award.
Scenario #1: You hire a lawyer to sue for the wrongful death of your spouse. That attorney does a terrible job (does not show up for court, fails to file necessary documents, etc.) After losing the wrongful death action (which everyone says should have been a slam dunk) you sue the attorney for malpractice. You are awarded $100,000; the attorney takes their fees $40,000 which leaves you with $60,000.
Result: You pay taxes on the entire award of $100,000, depending on your tax rate, it could be $30,000. Minus your attorney fees of $40,000, which leaves you with $30,000. Your attorney also pays taxes on $40,000 fees.
How was it before the 2018 tax law?
You pay taxes on $60,000 left after your attorney is paid, probably around $18,000 (again depending on your tax rate) leaving you with $42,000. Your attorney pays taxes on $40,000.
There can also be a situation where you pay more in attorney fees and taxes than you actually receive.
Scenario 2: Your neighbor or employer makes your life a living nightmare. You sue and after years of litigation you receive an award of $5,000, plus $45,000 in attorney fees.
Result: you pay taxes on $50,000 of about $12,500 (assuming you can use the 25% rate), BUT YOU ONLY RECEIVED $5,000. Your attorney pays taxes on $45,000.
Why this insanity?
Because the new tax law removed the miscellaneous itemized deduction category on tax returns, which is where you normally deduct payments to professionals such as an attorney.
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About the Author:
Diane L. Drain is a well known and respected Arizona bankruptcy attorney. She is an expert in both consumer bankruptcy and Arizona foreclosure. Since 1985 she has been a dedicated advocate for her clients and spokesperson for Arizona citizens. As a teacher and retired law professor, Diane believes in offering everyone, not just her clients, advice about the Arizona bankruptcy and foreclosure laws. She is also a mentor to hundreds of Arizona attorneys. 
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*Important Note from Diane: Everything on this web site is available for educational purposes only, is not intended to provide legal advice nor create an attorney client relationship between you, me, or the author of any article. Any information in this web site should not be used as a substitute for competent legal advice from an attorney familiar with your personal circumstances and licensed to practice law in your state.*
The post You Sue & Win, but Pay More in Taxes Than $$ Received. Thanks New Tax Law appeared first on Diane L. Drain - Phoenix Bankruptcy & Foreclosure Attorney.
Debt consolidation is a finance strategy which entails taking all a debtor’s debts, especially high-interest debts, and melding them together into a single monthly payment with preferably a lower interest rate. This may seem like a dream come true for any individual struggling with their finances, but there are still some issues to consider before deciding debt consolidation is best for you. Depending on the circumstances, filing bankruptcy in California may be a more useful approach. If you need help getting your debt under control, the Roseville Chapter 7 bankruptcy lawyers of The Bankruptcy Group can help you understand your options.
Types of Debt Relief
There are generally four different types of debt consolidation an individual could choose from:
- A credit card balance transfer
- A debt consolidation loan
- A home equity loan
- A personal loan
A credit card balance transfer allows a debtor to take the balance from various credit cards and transfer it to a single credit card. This would allow a debtor to make a single monthly payment on all of their credit card bills with, hopefully, a lower interest rate. However, consolidation of credit card debt is not without its pitfalls as well. For instance, some debt consolidation companies may offer lower interest rates for a limited time, but after that time is up, a debtor may end up paying off their debt at a higher interest rate than they originally expected. Another issue to think about is that consolidating your credit card debt could lower your credit score until you have made good progress with your payments.
A debt consolidation loan differs from a personal loan, which is described below, because a debt consolidation loan is borrowed for the specific purpose of paying consolidated debt. A personal loan could theoretically be used for anything, but a debt consolidation loan is controlled by the lender who pays off the borrower’s debt. The borrower will not even touch the money from a debt consolidation loan.
A debt consolidation loan is not always beneficial for a debtor. First, a debtor generally needs a good credit score to obtain the loan in the first place – and moreover, if a debtor wants a lower monthly payment, they must typically extend their repayment period. A longer repayment period may mean a debtor would once again pay more than their original debt.
A home equity loan is a loan that is secured by using the equity in your home as collateral. The amount of money you can borrow is tied to your income, credit history, and the equity or fair market value of your home. The downside is that your home can be foreclosed upon if the payments become unbearable. By comparison, Chapter 13 bankruptcy can help you avoid foreclosure.
The final method, a personal loan, may also be used as a debt consolidation loan. Whether the debtor can receive a personal loan large enough to cover all their consolidated debt would depend upon the state of their credit score. Personal loans are usually unsecured, meaning the debtor does not need to put up property as collateral. If the debtor can obtain the loan, the idea is to use it wipe out their consolidated debt and make fixed payments to the creditor over a certain period until the loan is paid. However, debtors should be aware that having a high interest personal loan could cost them more money than their original debt.
Advantages and Drawbacks of Debt Consolidation in CA
There can be pros and cons to consolidating your debts. Read on to see some of the potential benefits – and potential drawbacks – of this approach to debt management in California.
Benefits of Debt Consolidation
There are some pros to debt relief in California to be considered. First, having all of your bills consolidated into a single bill with a single deadline would be less to manage than having multiple bills due all at multiple dates. Having to deal with multiple bills at various times can be stressful and having a single payment for all your debts would be ideal to some.
One of the main benefits that attracts people to debt consolidation is the possibility of centralizing their debt and reducing their interest rate on payments as well. This would ideally allow debtors to pay less money on their consolidated debt than they would on their original debt.
Finally, being in a debt consolidation plan allows a debtor to pay off their debt on a schedule that fits their income.
Cons of Debt Consolidation
There are downfalls of debt consolidation that one should consider before determining if it’s best for them. The consolidation of debt is likely most effective when a person can curb their spending habits in order to make all their payments. Keep in mind, when a debtor defaults in making a payment on their consolidated debt, they will likely be reverted to the original creditor agreement they sought to avoid. Additionally, it should be noted that creditors are not required to accept debt management plans from debtors at all.
One of the reasons debt consolidation may not always be preferred is that debtors must often commit to paying off their debts over a fixed period. This period usually lasts several years, which may scare away debtors who hoped the process would be quicker. By comparison, Chapter 7 bankruptcy can rapidly wipe out dischargeable debts, including medical bills and credit card debt, in a matter of months to a year.
Our Roseville Bankruptcy Attorneys Can Help You with Debt Management
Debt consolidation is just one avenue an individual could take to handle their debt. While every case is unique and must be evaluated on its own merits, you should think about potentially filing for bankruptcy if debt consolidation is on your mind. Under the right circumstances, bankruptcy can offer several financial benefits which are lacking from debt consolidation. If you are curious about debt consolidation, bankruptcy, or debt relief in California, call the Roseville bankruptcy lawyers of The Bankruptcy Group today at (800) 920-5351 for a free consultation.
The post The Pros and Cons of Debt Consolidation in California appeared first on The Bankruptcy Group, P.C..
It can be tempting to seek a bankruptcy without an attorney to avoid legal fees. But you may end up with unnecessary stress and spending an excessive amount of time on your case if you go it alone. If you are considering filing Chapter 7 bankruptcy, it’s important to talk to an attorney as soon as possible. With extensive experience in helping clients navigate the bankruptcy system, Allmand Law can help you. Call us today at 214-884-4020.
Making Sure You File the Right Chapter 7 Legal Documents
Filing Chapter 7 requires a lot of paperwork. If the legal documents are not drafted precisely and completed accurately, your case may not be accepted or it may be dismissed. Many debtors who represent themselves fail to complete all of the necessary paperwork and end up spending an excessive amount of time revising documents that they do file.
Although the court clerk, whom you file paperwork with, can help you find document templates online, they cannot give you legal advice. They also cannot fill out paperwork for you. To make sure your filing is complete, you should consult with a bankruptcy lawyer.
Making Sure You Protect Your Property
Chapter 7 bankruptcy is a liquidation of debt, allowing you to completely get rid of most of what you owe. However, it also requires that you sell or forfeit some of your assets to pay for debt. A skilled bankruptcy lawyer can help you protect some of your property, such as your house or car, when filing Chapter 7. If you attempt to file alone, you may end up losing valuable property, such as family heirlooms.
Attending Your Hearings With You, or Even for You
When you file Chapter 7 bankruptcy, you must attend several hearings. In many cases, your attorney can attend these for you. However, you will have to attend a meeting of creditors along with your attorney. If you attempt to file Chapter 7 alone, you may face creditors by yourself and answer questions from the bankruptcy trustee without knowledge of the law. An attorney can help when filing Chapter 7. You should be thoroughly prepared for questions about your debts, income, spending, and assets.
Facing Adversary Actions With You
When dealing with creditors after filing Chapter 7, you may have to face adversary actions. These may challenge the dischargeability of your debt or accuse you of fraud. It’s important to have a knowledgeable attorney on your side at the meeting of creditors and other hearings to face any adversary actions that are filed. Otherwise, you may not be able to discharge all of your debt, or you may be unable to defend yourself against accusations of dishonesty.
Meeting Deadlines When Filing Chapter 7
All legal procedures involve strict deadlines and timelines. You must establish residency within your bankruptcy district prior to filing, you must present proof of debt within a certain amount of time, and you must file legal documents in certain time restrictions. Statements of current income and a Means Test must be completed on time. It’s important to comply with all court deadlines and understand how bankruptcy timelines impact your case.
A Lawyer Can Help You Avoid Pitfalls When Filing Chapter 7
Financial difficulty can be embarrassing, but you shouldn’t try to handle the situation alone. A skilled bankruptcy lawyer can help you navigate the system and manage your finances in a discrete manner. If you are considering filing Chapter 7, contact Allmand Law at 214-884-4020.
The post Why You Need an Attorney When Filing Chapter 7 Bankruptcy appeared first on Allmand Law.
Debt consolidation is a finance strategy which entails taking all a debtor’s debts, especially high-interest debts, and melding them together into a single monthly payment with preferably a lower interest rate. This may seem like a dream come true for any individual struggling with their finances, but there are still some issues to consider before […]
The post The Pros and Cons of Debt Consolidation in California appeared first on The Bankruptcy Group, P.C..
By Janet Berry-Johnson
Bankruptcy laws were designed to give people in dire financial situations a chance to start over. Whether your troubles stem from bad decisions or just bad luck, bankruptcy can help you resolve your debt and get back on stable financial footing.
While stories of big companies declaring bankruptcy tend to make the news, individual bankruptcies are far more common. In 2017, there were just 23,157 business bankruptcy filings, compared to 765,863 non-business bankruptcies, according to the Administrative Office of the U.S. Courts. Of those, Chapter 7 is by far the most common, making up more than 60 percent of all non-business bankruptcy filings in 2017.
If you’re facing financial troubles and considering declaring bankruptcy, you likely have some questions about what type of filing is right for you and the effect it will have on your credit score and assets. This guide will explain Chapter 7 bankruptcy, who is eligible to file Chapter 7, and how that will affect you now and in the future.
Table of contents:PART I: Chapter 7 Bankruptcy Explained
How does Chapter 7 affect my credit and for how long?
Is Chapter 7 Bankruptcy right for me?
PART II: Filing for Chapter 7 Bankruptcy
Not ready for bankruptcy? Other ways to tackle debt
Life after bankruptcy
PART I: Chapter 7 Bankruptcy ExplainedChapter 7 bankruptcy is named for Chapter 7 of the Bankruptcy Code. In Chapter 7, the debtor’s assets are liquidated, or sold to pay off creditors. Other forms of bankruptcy, such as Chapter 13, typically allow the debtor to keep their property and work out a plan to repay creditors, but Chapter 7 does not.
Eligibility requirementsTo qualify for Chapter 7, an individual must pass a means test, which is done using an official form.
James Shenwick, personal and business bankruptcy attorney with Shenwick & Associates in New York, NY, says completing the means test calculations is very complicated and virtually impossible to do without a software program, so you should seek help from an experienced bankruptcy attorney before you attempt to complete the form on your home.
The form requires you to provide your income and expenses, then make calculations using the information entered. Some of that information, such as your current monthly income, will come from your own records. Other information will come from the IRS and the Census Bureau but are available through the U.S. Department of Justice.
The means test is designed to determine whether you have the means to repay a portion of your debts. If the calculation determines you can, then you don’t qualify for Chapter 7 bankruptcy. If the calculation determines you don’t have the means to repay your debts, you may consider filing for Chapter 13 bankruptcy.
The forms needed to complete the means test and the instructions for completing them are available for download through the U.S. Courts website. They include:
- Form-122A-1, Chapter 7 Statement of Your Current Monthly Income
- Form 122A-2, Chapter 7 Means Test Calculation
- Form 122A-1Supp, Statement of Exemption from Presumption of Abuse Under §707(b)(2)
Chapter 13 vs. Chapter 7Chapter 13 Bankruptcy vs. Chapter 7 BankruptcyChapter 13Chapter 7● Set up a plan to repay all or part of your debts while keeping your home, vehicle, and other personal property● Liquidate all non-exempt assets and use the proceeds to pay creditors● For debtors with a stable monthly income and the ability to make payments under the proposed plan● For low-income debtors with little or no assets● Cannot have more than $394,725 of unsecured debt or $1,184,200 of secured debt● No upper limit on debt● Receive discharge of eligible remaining debts after completion of repayment plan (usually three to five years)● Receive discharge of remaining eligible debts typically within three to five months● Allows the debtor to catch up on missed payments and avoid foreclosure or repossession● May not provide a way for the debtor to avoid foreclosure or repossession (depends on state law)● Remains on your credit report for up to seven years● Remains on your credit report for up to 10 yearsWhich debts can be forgiven?After Chapter 7 bankruptcy, many of your debts will be discharged, or wiped out, at the end of your case. However, this isn’t true of all debts. The discharge of debt is established by federal law. Some debts cannot be discharged in bankruptcy, so you will still owe them after your other debts have been discharged.
Officially, any debts that you did not list on your bankruptcy paperwork can remain after you’ve declared Chapter 7 bankruptcy, but Shenwick says, in practice, that doesn’t usually happen.
There are two types of Chapter 7 bankruptcies: asset (where the debtor owns assets that can be sold and the proceeds distributed to creditors) and no asset (where the debtor doesn’t own any nonexempt property, cash or valuables).
“If a creditor is omitted and it’s a no-asset case, the debt will be discharged. If it’s an asset case, the paperwork can be reopened, and the omitted debt can be added,” Shenwick says.
Debts that CAN be discharged in a Chapter 7 bankruptcy include:
- Credit card debt
- Medical bills
- Lawsuit judgments
- Most debts arising from car accidents
- Obligations under leases and contracts
- Personal loans
- Promissory notes
Debts that CANNOT be discharged in bankruptcy include:
- Child support and alimony
- Fines, penalties, and restitution you owe for breaking the law
- Certain tax debts
- Debts arising out of someone’s death or injury as a result of your intoxicated driving
And finally, some debts can be discharged in a Chapter 7 bankruptcy unless a creditor objects and convinces the court that they should not be discharged.
These include:
- Debts arising from fraud
- Debts for luxury purchases or cash advances made within a period of time prior to filing
- Debts arising from willful and malicious acts
- Debts arising from embezzlement, theft or breach of fiduciary duty
Shenwick says, in his experience, less than one in ten debts are objected to by creditors in court.
“It’s rare for the creditor or the trustee to object,” Shenwick says. “The presumption in bankruptcy is that the person is entitled to a discharge. The goal is a fresh start, so as many debts as can be wiped out should be discharged.”
What assets will I lose?Chapter 7 bankruptcy requires the debtor to sell certain assets and use the proceeds to pay their debts. But some assets are exempt under federal and state bankruptcy laws, meaning the individual is allowed to keep the assets.
The home is often the asset most people considering Chapter 7 bankruptcy are concerned with losing. Most states allow homeowners to protect a certain amount of the equity in their home from creditors. This is called the homestead exemption. The federal homestead exemption is currently $23,675, or double that amount for a married couple jointly owning a home.
So if you own a home worth $300,000 with a mortgage of $285,000, your equity of $15,000 would be fully protected by the federal homestead exemption. That’s because the $23,675 exemption amount is larger than and covers the entire amount of the $15,000 equity. However, in some states, the state homestead exemption is much lower than the federal one, and not all states allow their residents to use the federal exemption amounts. So it’s a good idea to consult with an experienced bankruptcy attorney in your area to find out which set of exemptions apply.
Federal bankruptcy law permits each state to adopt its own exemption laws in place of the federal exemption. In some states, the debtor has the option to choose between the federal and state exemption lists and select the one most beneficial in their circumstances.
Exemptions may enable you to keep your home, one car, clothing, household items and even some proceeds from the sale of your property. Keep in mind that exemptions are not automatic. For an asset to qualify for an exemption, you must list the item on the exemption form and specify the amount of the exemption you’re claiming.
The amount of exemption you are entitled to claim for different assets may also vary by state.
For example, in California, you can claim a $2,300 exemption for a motor vehicle. If your vehicle is worth less than $2,300, you can keep your vehicle. If your vehicle is worth $5,000, the bankruptcy trustee will likely sell your car, pay you $2,300 for the exemption, and use the remainder of the proceeds to pay off your creditors.
How does Chapter 7 affect my credit and for how long?Bankruptcy will no doubt hurt your credit score, but the extent of its impact depends on over overall credit profile.
In reality, if you are in a position where your debts are so overwhelming that you need to file bankruptcy, chances are your score is already pretty low to begin with. And because of that, your score may not see a huge drop at all. However, if you have good credit, you can definitely expect to see a significant dip. .”
Expect a Chapter 7 bankruptcy to remain on your credit report for up to 10 years from the date filed. But the negative impact of the bankruptcy on your credit score will lessen over time, meaning a bankruptcy that is only one year old will have a more significant impact than one that happened eight years ago.
Pros and Cons of Chapter 7 Bankruptcy
Pros & Cons of Chapter 7 BankruptcyBenefitsRisks● A fresh financial start● Will remain on your credit report for up to 10 years● You may be able to keep certain exempt assets● May impact your ability to get credit, buy a home, buy a car, rent an apartment, or even get a job for quite some time● Collection efforts by your debtors must stop as soon as you file
Is Chapter 7 Bankruptcy right for me?Mark Billion, CEO of BankruptcyAnywhere.com, a software program that helps people act as their own attorney for a bankruptcy filing, says Chapter 7 may make sense for people who:
- Make less than 50% of the median income level in their state. “Those who make more than 50% of the median income for their state have to explain to the Court why they deserve to file,” Billion says.
- Are current on their rent/mortgage and car payment. “If you are not trying to catch up on secured debt (the technical term for loans secured by your home or car) a Chapter 7 should be your best bet. It eliminates payday loans, credit cards, medical bills, personal loans, and pretty much everything else.”
- Have little or no disposable income.
- Have not successfully filed Chapter 7 during the previous eight years.
If you don’t meet the means test for Chapter 7, and you have income, but either through bad luck or bad decisions got in over your head in debt, Chapter 13 may be a better option. Chapter 13 bankruptcy helps you work out a court-approved payment plan to help you pay off your debts over a period of three to five years. Once the payment plan is completed, any remaining debts are discharged.
If Chapter 13 is a viable option, it may be preferable. A Chapter 13 bankruptcy may be removed from your credit report after seven years (as opposed to 10 years with Chapter 7). Also, some creditors look more favorably on Chapter 13 bankruptcies since you’re paying more of your debts off than you would under Chapter 7.
PART II: Filing for Chapter 7 BankruptcyHere’s an overview of the steps involved in filing for Chapter 7 bankruptcy.
Find an attorneyMany blogs and websites have bankruptcy information, but your best course of action is speaking to an experienced personal bankruptcy attorney who is familiar with the laws of your state.
Shenwick says in his experience, once a person realizes they have a problem that may lead to bankruptcy, they speak to their accountant. The accountant may know about the issue anywhere from six to 12 months before the individual consults an attorney.
“So many people say they wished they’d come to see me a year ago,” Shenwick says. “It’s the avoidance reaction – they put off what is unpleasant or uncomfortable.” Despite those fears, Shenwick says delaying the inevitable is a mistake. “Some people make their problems worse by attempting to transfer assets to friends and family – that’s a big no-no. Or they might pay the wrong creditors. If you sense you’re in trouble, speak to an attorney as soon as possible to prevent mistakes that can make matters worse.”
Shenwick recommends getting a referral from your accountant, family attorney or friend. If you can’t find someone through word of mouth, call your local bar association. They maintain a list of bankruptcy attorneys in your area.
Great ready for credit counselingThe federal Bankruptcy Code requires individuals filing for bankruptcy to get credit counseling within a 180-day period before filing a bankruptcy petition. If you are married, both spouses must attend credit counseling.
The credit counseling agency must be approved by the U.S. Trustee Program. You can find a list of approved agencies from the U.S. Department of Justice.
Petition and paperworkNext, you’ll file a petition with the bankruptcy court in your area. In addition to the petition you will also have to submit:
- A schedule of assets and liabilities
- A schedule of current income and expenses
- A statement of financial affairs
- A schedule of contracts and unexpired leases
- Certificate of credit counseling
- A copy of any debt repayment plan developed through credit counseling
- Pay stubs (if any) for the last two months
The court is required to charge a $245 case filing fee, a $75 miscellaneous administrative fee, and a $15 trustee surcharge. In most cases, you have to pay these fees before filing, but in some cases, the court will permit you to pay in installments over the course of 120 days.
A trustee is appointed to your caseAfter your petition is filed, the U.S. trustee appoints an impartial case trustee to your case. It’s the trustee’s job to administer your case and liquidate any nonexempt assets.
The trustee is also required to ensure that you understand the potential consequences of bankruptcy, including its effect on your credit rating, your ability to file for bankruptcy in the future, and the financial impact of receiving a discharge of your debts.
It’s crucial to cooperate with the trustee and promptly deliver any financial records or documents the trustee requests.
Time to meet your creditorsSomewhere between 21 and 40 days after your petition is filed, the trustee will hold a meeting of creditors. During this meeting, you will be placed under oath and must answer questions posed by the trustee and your creditors. You are required to attend the meeting and answer questions about your finances and assets.
Your lawyer will prepare you for the meeting of the creditors and attend the meeting with you. In most cases, the questions will be very similar to the ones already asked by your attorney. The purpose of this meeting is simply to get you to confirm, under oath, that the written disclosures you provided in your paperwork are true and complete.
Eligibility confirmedAt this point, your trustee has gathered enough information for the court to make a decision on whether or not you are eligible for Chapter 7 protection. If you are eligible according to the means test, your case will proceed. If you’re not eligible, you have the option to file for Chapter 13 bankruptcy.
Nonexempt property is liquidatedIf you have nonexempt assets, the trustee will determine whether they are worth seizing and selling. In some cases, you may be able to keep certain non-exempt assets if the trustee determines that selling them is not worth the effort. For instance, if you own a boat worth $3,000, but owe $2,800 on the loan you used to purchase the boat and the cost to transport and sell the boat would be $200, the trustee may determine it’s not in your creditor’s best interest to sell the boat.
The trustee also has the power to recover money or property under their “avoiding powers.” This includes the ability to reverse certain transfers made to creditors within 90 days of your petition for bankruptcy and undo certain transfers of property.
Discharge
Once the trustee has sold nonexempt assets and paid out creditor claims, remaining eligible debts are discharged, and the creditors are no longer allowed to take any collection actions. In most cases, the Court issues the discharge order within 60 to 90 days of the meeting of the creditors.
Not ready for bankruptcy? Other ways to tackle debtBankruptcy can give people in dire circumstances a fresh start, but it’s not a decision to be taken lightly. Bankruptcy has serious and long-term consequences. Before you file, consider some alternatives.
Debt consolidationWith debt consolidation, you can roll all unsecured debts such as credit cards, personal loans, and medical bills into one new loan with one monthly payment. In most cases, you’ll also negotiate lower interest rates or a reduced balance with your creditors, so your payments are manageable.
Debt consolidation still has a negative effect on your credit score because you aren’t paying your debts as agreed, but its impact is typically not as severe as declaring bankruptcy.
Debt settlementDebt settlement involves negotiating with creditors to settle your debt for less than is owed. This is most often used when you have one large debt with a single creditor, but it can be used to deal with multiple creditors.
Debt settlement still has a negative impact on your credit score because you aren’t paying the full amount owed. Also, the debt that is forgiven will be reported to the IRS and may increase your taxable income.
Liquidating assetsIf you have cash in the bank or own other assets that can be sold to pay off your debt, this may be a viable alternative to declaring bankruptcy. Take into account any potential consequences. If you tap your retirement account to pay down debt, you may owe tax on the distribution as well as a ten percent penalty for early withdrawals. You could pay off one debt, only to find yourself owing the IRS.
Default on payments/Do nothingIgnoring your debt problems won’t make them go away and may even make your situation worse. Interest and late fees will continue to accrue while you do nothing and the debt collectors may initiate a lawsuit.
If you find yourself unable to pay your bills, work with a qualified credit counselor to explore your options and possibly set up a debt management plan. If that doesn’t work, seek out an experienced bankruptcy attorney who can help you navigate the bankruptcy filing process.
Many people facing financial troubles fear they won’t be able to afford an attorney’s fees, but Shenwick says personal bankruptcy is handled on a fixed-fee basis, based on the complexity of your case, and often the attorney will adjust the fee based on the client’s ability to pay. “You’ll find that most bankruptcy attorneys are compassionate people. They do this work because they want to help people,” Shenwick says.
Life after bankruptcyAfter filing a Chapter 7 bankruptcy, your credit score will be lowered, possibly by hundreds of points and the bankruptcy will remain on your credit report for the next ten years.
But this doesn’t mean you won’t be able to access credit for the next decade. “After bankruptcy, your best bet is simply to start from scratch,” Billion says. “Get a credit card (they’re typically available starting six months after settling your bankruptcy case) or failing that, a secured credit card. Use them responsibly and do not keep a balance. Assuming you don’t go back into massive debt, you can get a car loan at a decent interest rate in one year and a home loan in two years.”
It will take time to rebuild your credit score, and there’s no legal way to remove the bankruptcy from your credit report before the ten-year time frame has elapsed. But bankruptcy does give you a second chance, so don’t waste it. If you take this opportunity to learn a lesson about handling debt responsibly, over time, your credit score will begin to reflect that.
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Filing for bankruptcy can discharge (wipe out) various forms of debt, or reorganize the debt into a more manageable payment plan. However, some types of debt cannot be discharged in bankruptcy. For example, in California, filing for bankruptcy will not halt child support payments. However, filing for Chapter 13 bankruptcy in Roseville may allow a parent to get their child support payments into a more practicable repayment plan. If you need assistance determining if filing bankruptcy is right for you, contact the Sacramento and Roseville bankruptcy attorneys at The Bankruptcy Group today.
Types of Bankruptcy in CA
There are many different types of bankruptcies that can be filed by individual debtors or even business entities. Some examples include:
- Chapter 7 (Liquidation, straight bankruptcy)
- Chapter 9 (Municipal bankruptcy)
- Chapter 11 (Reorganization)
- Chapter 12 (Family farmer bankruptcy, family fisherman bankruptcy)
- Chapter 13 (Reorganization, wage earner plan)
- Chapter 15 (Ancillary bankruptcy)
- Chapter 20 (Colloquial term for Chapter 7 followed by Chapter 13)
Together, Chapter 7 and Chapter 13 account for the majority of bankruptcy cases in California, followed by Chapter 11. Therefore, our Roseville Chapter 7 bankruptcy lawyers will focus primarily on Chapter 7, 11, and 13 in this article.
What Forms of Bankruptcy Can Help with Child Support Payments?
Chapter 7 bankruptcy allows an individual debtor or business entity to liquidate their assets to pay off creditors and discharge debt. A debtor who petitions for Chapter 7 bankruptcy can have over a dozen forms of debt discharged, such as credit card balances, business debts, and medical bills, among others. However, as a “priority” debt, child support is not a form of debt which can be discharged by Chapter 7 bankruptcy.
Priority debts are obligations which are unsecured by collateral but prioritized by the U.S. Bankruptcy Code when there may not be enough assets to repay all a debtor’s creditors. As a result, priority debts are non-dischargeable and will remain with a debtor even after bankruptcy.
Chapter 9 bankruptcy cannot be filed by an individual debtor because it deals with the reorganization of financially distressed municipalities. Therefore, Chapter 9 is irrelevant when discussing individual bankruptcy cases.
Chapter 11 bankruptcy deals with the reorganization of debt and is usually filed by corporations or other business entities, but may also be filed by individual debtors as well. Under Chapter 11 bankruptcy, a debtor develops a plan of reorganization which takes into consideration factors like the debtor’s assets, liabilities, current income, and expenditures to formulate an efficient plan to repay creditors.
The reorganization plan is subject to bankruptcy court and creditor approval before it can be instituted. However, like Chapter 7 bankruptcy, child support is still considered a priority debt which cannot be discharged. Child support will continue to be a debt an individual must pay after filing for Chapter 11 bankruptcy.
Chapter 12 bankruptcy is primarily to help financially troubled family farmers or family fisherman to produce a repayment plan to handle all their debts. Child support remains a priority debt under Chapter 12 bankruptcy and cannot be discharged by the bankruptcy proceedings. The only distinction Chapter 12 provides when considering child support is that a repayment plan must be for five years and include all of the debtor’s disposable income, unless it opts to pay all of a domestic support claim.
Chapter 13 bankruptcy may be ideal for individual debtors who have a regular source of income and can develop an acceptable repayment plan spanning three to five years to repay creditors. As mentioned earlier, Chapter 13 bankruptcy cannot discharge child support. However, Chapter 13 bankruptcy allows a debtor to include child support payments in their repayment plan. The payments can even be stretched over a period of five years provided that the bankruptcy court accepts the repayment plan. A Chapter 13 debtor should be aware that if they fail to make any post-filing child support payments, the bankruptcy court could dismiss or convert the Chapter 13 bankruptcy case to a Chapter 7 bankruptcy case. Though each debtor’s situation is different, Chapter 13 bankruptcy is likely to have the greatest impact on a debtor who is responsible for providing child support to a former spouse or partner.
Chapter 15 bankruptcy deals with insolvency cases that include multiple parties and multiple countries. Chapter 15 bankruptcy does not concern domestic support cases.
Our Roseville Bankruptcy Attorneys Can Help You with Debt Management
Filing for Chapter 13 bankruptcy in Sacramento, Roseville, or Folsom could be the answer for a parent who seeks to deal with their child support payments in California. However, bankruptcy is not something to consider lightly or without the advice of an experienced bankruptcy attorney. If you are worried about mounting child support payments and are curious about bankruptcy as a possible solution, contact the Roseville bankruptcy lawyers of The Bankruptcy Group today at (800) 920-5351 for a free consultation.
The post Can Bankruptcy Stop Child Support in California? appeared first on The Bankruptcy Group, P.C..
Filing for bankruptcy can discharge (wipe out) various forms of debt, or reorganize the debt into a more manageable payment plan. However, some types of debt cannot be discharged in bankruptcy. For example, in California, filing for bankruptcy will not halt child support payments. However, filing for Chapter 13 bankruptcy in Roseville may allow a […]
The post Can Bankruptcy Stop Child Support in California? appeared first on The Bankruptcy Group, P.C..
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