- I will lose all my property if I file Bankruptcy. Bankruptcy is intended to help those facing financial hardship. Taking away assets would do more harm than good. The bankruptcy code has various exemptions which protect people’s assets. These include social security, unemployment, home and car.
- Everyone will know I filed for Bankruptcy. Although bankruptcy filings are public record, that chances that an individual’s bankruptcy will become news is very rare. Bankruptcy filings are not indexed by search engines online. Unless one is searching for an individual’s financial information or the debtor shares that information with others, there is little change that their bankruptcy will be known.
- Both husband and wife must file bankruptcy. While in some cases it makes sense for both spouses to file joint bankruptcy, it is not required by California state or Federal law. Every bankruptcy case is unique, and sometimes it does not make sense to file jointly. For instance, if the majority of the debt is in one spouse’s name, then that spouse may file bankruptcy individually and protect the other spouse’s good credit.
- Back taxes are not discharged in bankruptcy. In some instances it is possible to discharge federal and state back taxes. There are specific rules on when this is possible and how much can be discharged. Certain types of taxes may not be discharged and others may be mitigated. It’s always best to check with an attorney.
- I can only file bankruptcy once. Bankruptcy is meant to get people back on their feet and give them a fresh start, but they may fall into debt again due to unforeseen circumstances such as, illness, divorce, unemployment, etc. The law is that people can get a discharge for Chapter 7 bankruptcy once every eight years. Additionally, they can file for a Chapter 7 after filing for a Chapter 13 or file for a Chapter 13 one year after their previous filing.
The decision to file bankruptcy is hard enough, without hiring an attorney who never returns emails, doesn’t bother to explain things, or who seems to have passed your case along to a secretary to handle. And yet so often this seems to be the case with many bankruptcy attorneys in Los Angeles. Don’t let this happen to you. Check out the personalized legal services my wife and I offer here at our small firm, where we are dedicated to serving the bankruptcy needs of our clients.
We can write and say great things about ourselves, but that does not really count. What counts the most is what our clients say about us. So here is what one of our client took the time to write about us on Yelp.
“Roland Kedikian is an EXCELLENT BK Attorney and his services are outstanding because he is extremely Organized & Professional, just like his office staff. He is extremely informative and responded to all my questions in a quick and timely manner. His Communication skills are above average and he is extremely pleasant to work with. I had the unfortunate displeasure of working with another Attorney (Not from Roland’s office) and this BAD attorney fit the negative stereotype we have of attorneys. It wasn’t until I met Roland & experienced his EXCELLENT services that I changed my opinion of attorneys in general and that there are actually a few GOOD people in this world, Roland and his staff being top on the Good List!”
Who long will it take you to rebuild credit after bankruptcy? 6 months to a year after the bankruptcy discharge order you will start getting offers for new credit cards. Sometimes clients would be skeptical thinking I am painting a rosy picture to encourage them to file bankruptcy. But in reality a creditor is measuring the amount of risk you are to them.
If you have a high debt and unable to pay, and have NOT filed bankruptcy, you are a high risk individual. Creditor will consider you high risk because you can turn around and file bankruptcy and the creditor will never get back the principle. But if you have already filed bankruptcy, you can NOT file again and get a discharge for 8 years. To the creditor, you have no where to go but pay and therefore a low risk client. You want proof, here is an article on cnbc
The amount of student borrowing crossed the $100 billion threshold for the first time in 2010 and total outstanding loans and exceeded $1 trillion for the first time last year. Americans now owe more on student loans than on credit cards.
Evidence is mounting that student loans could be the next trouble spot for lenders. Individually, college seniors who graduated with student loans in 2010 owed an average of $25,250, up five percent from the previous year. Borrowing has grown far more quickly for those in the 35-49 age group, with school debt burden increasing by a staggering 47 percent. Parents have an average of $34,000 in student loans and that figure rises to about $50,000 over a standard 10-year repayment period.
Of the Class of 2005 borrowers who began repayments the year they graduated, one analysis found 25 percent became delinquent at some point and 15 percent defaulted. The Chronicle of Education puts the default rate on government loans at 20 percent.
This concern is echoed by bankruptcy attorneys from across the country who report that what they are seeing at the ground level feels too much like what they saw before the foreclosure crisis crashed onto the national scene: more and consumers seeking their help with unmanageable student loan debt, and with no relief available.
We need to restore the bankruptcy discharge for student loans.
Student loans are among the few types of debts that generally are not dischargeable in bankruptcy. In contrast to student loans, most other debts are dischargeable in either a Chapter 7 liquidation process or Chapter 13 debt adjustment plan. Other debts singled out as non-dischargeable include child support, alimony, court restitution orders, criminal fines and some taxes. It wasn’t always this way. Prior to 1976, all student loan debt was dischargeable in bankruptcy, just as if it were any other type of unsecured debt.
Bankruptcy is an option available to everybody. Even Celebrities are not immune from the difficult times we are experiencing. Court records show Gary Busey,The actor and reality show star, has filed for bankruptcy on 2/7/2012 and is listing more than $500,000 in estimated personal debts. Busey’s filing on Tuesday in Los Angeles states the debtor has less than $50,000 in assets and more than $500,000 in debts.
This comes on the heel of another celebrity filing for debt relief. Sports agent Leigh Steinberg, the inspiration for the “show me the money” character in the movie “Jerry Maguire,” filed for bankruptcy protection for debt ranging from $1 million to $5 million in January of 2012.
Bankruptcy options are available and debtors should not be hesitant in getting a fresh start. Financial difficulties are a part of life, much like health, happiness and taxes. Some day you will have to deal with a difficult financial situation, seek help from a professional and get a fresh start. Bankruptcy laws are there to protect you.
Once you decide you want to move forward, The next step is a detailed interview with the attorney himself to flush out and gather all the facts and documents needed to prepare a complete bankruptcy petition. By now, you have had the initial meeting with the attorney and the different bankruptcy option explained and a recommended course of action advised by your attorney. More importantly, you have had time to think about it and had all your questions answered.
For the interview, It usually takes me between 45 minutes to 1 hour to get all the facts I need to prepare my client’s bankruptcy. All the client will do during this time is answer my questions and hand me as many of the documents bellow that the client was able to gather uo. I do not ask clients to complete forms. Prior to the meeting I would have advised the clients to bring or gather up as much of the following documents as possible.
- Tax returns for last 2 years filed.
- Pay stubs for last 60 days (both spouses, if married).
- All credit card statement and collection letters.
- All vehicle payment statements.
- All mortgage payment statements including, 2nd and 3rd mortgages, if any.
- All student loans.
- All back taxes due.
- Any and all lawsuits against you.
- Any documents that claim you owe someone money.
- Your credit report. You can obtain a copy of your credit report for free from AnnualCreditReport.com Make sure you print each of the reports from each credit reporting agency you were able to access on paper or PDF file .
It is not unusual to have some of the above documents unavailable or missing, do not worry, I usually pull credit reports of my clients directly as well. And there are other places where I can gather other information that might not be readily available to the client. but the more you can provide, the better and more complete of a petition preparation I can do.
Once the interview is complete, It will take me about 2 weeks to have the petition ready for signature. However, in urgent circumstances, we can file within 24 hours. In the mean time, I provide the client instructions on completing the credit counseling course that must be completed prior to the filing of the bankruptcy. So while you complete the 1st of the required courses (don’t worry, it takes about 45 minutes to do it online) I go ahead and get everything ready. We will meet again in about 2 weeks time at which point I will go over the petition with you myself, and if all is well, the client will sign the petition for filing.
Next I will cover what happens after the petition is filed.
Bankruptcy stages start from initial consultation and end at post-discharge issues. The first step should be the initial consultation with a bankruptcy attorney.
Bankruptcy is a difficult choice for clients. Often the client has been unwilling to file bankruptcy for months or sometimes years. The reasons I see are many. Some are feeling ashamed believing that filing for bankruptcy is an admission of failure. Some are overwhelmed with the debt and simply do not want to deal with it. Sometimes clients are misinformed and believe that they either do not qualify or does not apply to their circumstances.
Sometimes I get clients who have tried or are trying to deal with creditors but are realizing that despite their best efforts, their financial circumstances are not improving. They are very discouraged for many reasons. Sometimes the creditor does not care and asks for much more that the client can afford. Sometimes the potential clients are making some payments but the interest rate is so high that the balance just keeps going up or will never be paid down. Sometimes the potential client has been working with a “debt consolidation company” only to discovery that the first 18 payments of a 60 month plan that was proposed to them, was going to pay the debt consolidator’s fees. And none of the payments have been going to any creditor and now they are being sued.
In my practice since 1997, I have never had a client who was just eager to file bankruptcy. I do not blame them that is the way its supposed to be. But when they do pickup the phone and call for help from an attorney, I applaud them for finally seeking legal and credible information to deal with their financial difficulties. Whether they ultimately decide to file bankruptcy or not is not important. What is important is that the client get the correct information about their particular circumstances and make an informed decision.
The first step in seeking knowledge and solutions about your financial difficulties is to meet with a bankruptcy attorney, not a paralegal, and not an an attorney who does everything else including bankruptcy. I have heard so many times from clients that come to my office telling me that they meet with a paralegal or an attorney who told the client, “they can file bankruptcy”. I tell them great, and continue with asking all the questions that I need to ask to familiarize myself with the financial situation of the potential client.
When I am done with my questions, the client is left wondering why the paralegal did not ask all these questions? how did the paralegal know if bankruptcy is the right choice? which chapter? what are the consequences? When the client voices their concerns about the paralegal. I tell them, “The paralegal told you they (the paralegal) can file bankruptcy” that is they can fill the forms and upload the petition to the court. The paralegal did not tell you bankruptcy is the right choice for you or that you, the client, should file bankruptcy.
Your first meeting with a bankruptcy attorney should be detailed as much as possible. It should be free of charge and It should be in person with the attorney himself who will be handling the case from beginning to the end. This meeting is as much as for the client to get to know the attorney as it is for the attorney to find the facts and circumstances of the client. After the initial questions, I explain what bankruptcy is, the different chapters, the process, my recommendation, the cost and give you the opportunity to ask any questions you want.
A bankruptcy attorney should be able to advise you whether bankruptcy is the right choice for you. Whether you qualify for chapter 7 bankruptcy or you must file a chapter 13 bankruptcy or you are better off negotiating your debts. Whether the timing is right, or if waiting couple of months may put you at a better advantage. What of your assets will be protected. What will be at risk. The answers to these questions are highly dependent on the exact circumstances of your particular circumstances.
At the end of the meeting, I will thank you for meeting with me, and I will ask you to go home and think about it or discuss it with you spouse. You should never be pressured to file bankruptcy by anybody.
Roland Kedikian is a Los Angeles bankruptcy attorney, providing bankruptcy solutions to debtors since 1997.
In this series of posts, I will discuss option available to you on handling debt. Lets start with credit card debt since this is the most common debt that consumers overwhelmingly have when filing bankruptcy.
If you are unable to make minimum payments on your credit cards, your credit score will be damaged, and you will get many calls form your creditor asking for payment.
1) Try calling your creditors and see if they will arrange a payment plan. Suggest to them, closing the account, reducing the interest rate and making reasonable payments on a monthly basis. Offering them $10 a month or “whatever I can” will not work, your figures must be reasonable given your circumstances and the balance that you owe.
2) Try consolidating your debt together with a low interest rate debt that you may be able to get on another credit card such as a balance transfer. But of-course to be able to have this option, your credit should still be intact, in other words, you can see the difficulties you are about to have and are preparing yourself in advance. Now here you may also be able to consolidate with a home equity line, but you must be very careful. In doing so, you are converting the nature of your debt from unsecured to secured debt that attaches to your house. (generally not advisable unless you are 95% sure you will be able to pay back in full and in a relatively short period of time)
3) Try debt management firms that might be able reduce the interest on each card and manage the payment to these cards. A reputable firm will charge you about $35 per month for their service. You must be very careful, there are many “companies” that charge you $6,000.00 before you realize that all the payments you are initially making is going to pay their “fees”. If you can not find a reputable firm that charges you monthly, try doing it yourself. That is try #1 above.
4) Try debt settlement. If you are behind about 6 months, your credit card debt is sold to a collection agency. They typically will offer 30% – 40% of the amount you owe to settle. However, often these collection agencies tag high interest and penalties and within a span of 6 months your original balance can rise substantially more that it was. Sometimes you end up with more debt than what the credit limit was on the original card. When negotiating with collection agencies, stick to what you think the balance that you owe and start offering them a percentage from there. Make sure you do not give any personal information to them like who you work for or your checking account number and bank information.
5) Finally there are bankruptcy options available to you. While there is a negative stigma attached to bankruptcy, In certain circumstances its the best option for you and your creditor. If you do not believe there is a way to pay back within one year, filing bankruptcy is a legal and most expedient way to resolve your financial predicament. This also will get the creditor to realize that they will not recover and move on without spending any more time, money and effort on this debt. You can read more about bankruptcy chapter 7 and chapter 13 at our website www.LosAngelesBKLaw.com or consult an attorney in your area.
In following posts I will discuss how to deal with other debt such as student loans, taxes, medical bills, Mortgage payments 1st and 2nd, Auto payments and medical bills.
Bank of America has been running commercials touting its “cash rewards” credit card offering no annual fee, a $50 sign-up bonus, then a 1 to 3 percent cash refund on your spending. The same bank, until public pressure forced it to recant last week, wanted to charge customers $5 a month to use a debit card.
So, was America’s second-biggest bank trying to tell us all to put away our debit cards and use credit cards instead? Yes. Bankers now make more money when you say credit instead of debit. Credit cards remain the golden goose of banking. Congress plucked a few feathers last year when it banned banks from raising interest rates willy-nilly on existing credit card balances, along with other nasty practices. But the cards remain profitable. Banks charge an average of 13 percent interest to the unfortunate souls who don’t pay their balance in full every month. (A little less than half of Americans carry balances.)
Chapter 7 or Chapter 13 bankruptcies enable consumer debtors to get a financial “fresh start” by discharging most and sometimes all of their credit card debts. But what about tax debts?
Getting tax relief through bankruptcy is not easy. Whether a tax debt will be dischargeable depends on the type of tax involved as well as the taxpayer meeting certain requirements.
Requirements to Discharge Personal Income Taxes
There are rules that determine whether a debtor may discharge their personal income taxes. To be eligible, the taxes must meet the following requirements:
- Three-Year Rule: The tax must be for taxes that were due at least three years prior to filing the bankruptcy.
- Two-Year Rule: The tax return must have been filed at least two years prior to filing the bankruptcy.
- 240-Day Rule: The IRS cannot have assessed the tax liabilities within 240 days prior to filing the bankruptcy. These timing requirements are complex, and can be reset by numerous events, so caution is advised when calculating them.
-The taxpayer must have filed their tax return for their debt to be dischargeable. Although taxing entities will sometimes file taxes on a taxpayer’s behalf when he or she fails to file their own return, liabilities from these returns will be non-dischargeable because the taxpayer did not file them.
-Fraudulent tax returns are not dischargeable. This logically follows the general bankruptcy rule that any debt incurred through fraud is non-dischargeable.
Similarly, any taxpayer who has intentionally evaded taxes by moving or hiding assets, or attempted to use another person’s name or social security number on a return will be ineligible for discharge of their taxes.