Friday, October 29, 2010

Discharging Payday Loans in Bankruptcy

In these tough economic times, many Americans are desperate to make ends meet. Some are becoming trapped in a destructive cycle of payday loans. A payday loan is a short term, high interest loan that is secured by a post-dated check. The company loans the borrower a few hundred dollars that is repaid on the borrower’s next payday. What is meant to be a small, convenient, and short term loan to pay an immediate expense (an overdue electric bill, for instance), often results in multiple loans and an endless cycle of debt. Unfortunately, many payday loan borrowers are unable to free themselves from this cycle and are forced to seek bankruptcy protection.

Individuals often worry that the payday loan company may file a criminal “bad check” charge if the payday loan is included in the bankruptcy. The payday loan company wants you to believe this, and many have their customers sign a certification that the borrower is not contemplating bankruptcy.

While there are a few exceptions, generally being unable to pay a post-dated check is not a crime. When you wrote the check both you and the payday loan company knew there were not sufficient funds in your bank account to pay the check. Because there was no present intent to pay, the post-dated check is not a “bad check,” only a future promise to repay the loan.

Even after your bankruptcy is filed, a post-dated check may be presented for payment. In some cases (notably in the 6th and 8th Circuit Court of Appeals) courts have stated that the presentment of the post-dated check does not violate the automatic stay provisions of the bankruptcy code. However, some courts have said that the funds collected by the payday loan company is an “avoidable transfer” meaning the bankruptcy court could order the company to return the money.

If you have payday loans, consult with an experienced bankruptcy attorney. It is important to identify any outstanding payday loan before filing bankruptcy. Most payday loans are discharged without issue; however, payday loan companies are becoming increasingly more knowledgeable and aggressive towards debtors in bankruptcy. Discuss the matter with your attorney and protect your legal rights.

Monday, October 25, 2010

How Much Debt Do I Need To File Bankruptcy?

There is no qualifying minimum debt limit for an individual bankruptcy. Debtors who otherwise qualify for Chapter 7 bankruptcy can file with any amount of secured or unsecured debt. The purpose of a Chapter 7 bankruptcy is to provide the debtor a fresh start without the burden of overwhelming debt. In some cases this debt may be objectively very small (perhaps only a few thousand dollars), but it be relatively very large to a person on a fixed income from retirement, disability, or otherwise.

In cases where the amount of dischargeable debt is objectively small, both the bankruptcy attorney and the client should take care to consider all of the consequences of filing. First, bankruptcy is not cheap. There is a court filing fee, a credit counseling fee, a personal financial management course fee, and, of course, your attorney’s fees. In some extreme cases some or all of these fees may be waived. Second, a bankruptcy filing can significantly impair the debtor’s ability to borrow money and obtain credit, at least for the short term. Finally, non-exempt property may be at risk. For many poor debtors, these consequences have little, if any, affect. Many poor debtors seek bankruptcy protection simply to rid themselves of the nuisance of debt collection.

While there is no minimum amount of debt required to file a Chapter 13 bankruptcy, the bankruptcy laws set a ceiling on the amount of secured and unsecured debt a person can have in a Chapter 13 case. These limits as of April 1, 2010 are $1,081,400 for secured debt and $360,475 for unsecured debt. The Chapter 13 debt limits adjust every three years. Cases that exceed these limits are ineligible for Chapter 13 bankruptcy, but may qualify under Chapters 7 or 11. There is currently some confusion in our courts as to how these debt limits apply in a joint husband and wife Chapter 13 case. Some courts will separately consider debt that is individual and not joint, effectively increasing the Chapter 13 limits.

An experienced bankruptcy attorney can evaluate your case and discuss any issues surrounding your case. Whatever the amount of your debt, if you are unable to pay, the federal bankruptcy laws can offer you substantial relief. Speak with an experienced bankruptcy attorney and discover how the federal bankruptcy laws can help you.

How Much Debt Do I Need To File Bankruptcy?

There is no qualifying minimum debt limit for an individual bankruptcy. Debtors who otherwise qualify for Chapter 7 bankruptcy can file with any amount of secured or unsecured debt. The purpose of a Chapter 7 bankruptcy is to provide the debtor a fresh start without the burden of overwhelming debt. In some cases this debt may be objectively very small (perhaps only a few thousand dollars), but it be relatively very large to a person on a fixed income from retirement, disability, or otherwise.

In cases where the amount of dischargeable debt is objectively small, both the bankruptcy attorney and the client should take care to consider all of the consequences of filing. First, bankruptcy is not cheap. There is a court filing fee, a credit counseling fee, a personal financial management course fee, and, of course, your attorney’s fees. In some extreme cases some or all of these fees may be waived. Second, a bankruptcy filing can significantly impair the debtor’s ability to borrow money and obtain credit, at least for the short term. Finally, non-exempt property may be at risk. For many poor debtors, these consequences have little, if any, affect. Many poor debtors seek bankruptcy protection simply to rid themselves of the nuisance of debt collection.

While there is no minimum amount of debt required to file a Chapter 13 bankruptcy, the bankruptcy laws set a ceiling on the amount of secured and unsecured debt a person can have in a Chapter 13 case. These limits as of April 1, 2010 are $1,081,400 for secured debt and $360,475 for unsecured debt. The Chapter 13 debt limits adjust every three years. Cases that exceed these limits are ineligible for Chapter 13 bankruptcy, but may qualify under Chapters 7 or 11. There is currently some confusion in our courts as to how these debt limits apply in a joint husband and wife Chapter 13 case. Some courts will separately consider debt that is individual and not joint, effectively increasing the Chapter 13 limits.

An experienced bankruptcy attorney can evaluate your case and discuss any issues surrounding your case. Whatever the amount of your debt, if you are unable to pay, the federal bankruptcy laws can offer you substantial relief. Speak with an experienced bankruptcy attorney and discover how the federal bankruptcy laws can help you.

Wednesday, October 20, 2010

Saved By the Bell: The Emergency Bankruptcy Petition

The Bankruptcy Code provides real relief for individuals who have run out of financial options and can protect the debtor from creditor collection action even at the last minute. By filing an emergency bankruptcy petition a debtor can stop a foreclosure or other legal action dead in its tracks.

When a debtor files a bankruptcy case all creditor collection action must cease immediately and automatically. The bankruptcy automatic stay stops foreclosures, repossessions, garnishments, the commencement or continuation of nearly all lawsuits, and other creditor collection action dead in its tracks. Because the effect of the automatic stay takes place immediately upon filing of the bankruptcy petition, it is not uncommon for a debtor to seek bankruptcy protection on the eve of a foreclosure, repossession, or other legal action. A bankruptcy filing mere minutes before a foreclosure sale or lawsuit will stop the action or void the sale or judgment.

Waiting until the eleventh hour to seek out a bankruptcy attorney can be dangerous for the bankruptcy debtor. First, the Bankruptcy Code mandates that to be eligible to file a personal bankruptcy the debtor must first complete a session with an approved credit counseling agency. It is challenging to have an initial meeting with a bankruptcy attorney and complete this counseling on the same day you file bankruptcy. The bankruptcy courts waive this requirement only under the most extreme emergency situations when credit counseling was not available to the debtor. While it may seem that your case is an emergency situation, chances are that a waiver request will be denied.

Second, your bankruptcy attorney must explore your finances with you and will require information that you may not be able to provide at the initial meeting. Your attorney needs information in order to protect your assets with legal exemptions and identify potential problems with property transfers. Certain financial dealings may unknowingly thrust friends, family members, or business partners into your bankruptcy case.

Filing an emergency bankruptcy petition can stop creditors in their tracks, but it can also present potential problems for the debtor. If you are considering a bankruptcy filing to protect your property, consult with an experienced attorney as early in the process as possible. Your bankruptcy attorney can explain how the federal bankruptcy laws can help your family and identify any areas of concern.

Monday, October 4, 2010

Divorce Debt and Bankruptcy

Since 1967 there have been several studies that rank stress due to a traumatic life event. The studies agree that divorce causes tremendous stress in a person’s life, and is number two in the rankings for most studies, behind death of a spouse or child.

Since divorce is such a stressful time, it is no wonder that people make mistakes with their finances during a divorce. Many couples either overlook or ignore the economic realities of their changed financial condition. In some cases financial mistakes made during the divorce can lead to bankruruptcy. In other situations bankruptcy is simply inevitable.

One financial mistake divorced couples commonly make is a misunderstanding of the family court’s “assignment” of a joint debt to one of the spouses. The family court has the authority to order one spouse to pay a particular joint debt. For instance, husband pays the MasterCard; wife pays the car payment and keeps the car. The court order may contain a “hold harmless” provision that means that if the obligated spouse does not pay the debt, and the other spouse is harmed, the obligated spouse is responsible to repair the harm (usually this means money damages). This order is enforceable through the court’s contempt power.

Many people mistake this assignment as an alteration of the contract with the creditor. The family court’s order does not change the couple’s joint obligation on the debt because the creditor was not a party to the couple’s divorce case. A joint debt remains legally enforceable against both or either party even after the divorce. If the obligated spouse does not pay pursuant to the family court’s order or the terms of the contract, the only recourse is to cry foul to the family court judge. The creditor can pursue any legal action to collect on the debt including reporting the delinquent account to the credit bureaus, filing a lawsuit against both spouses, and repossession or foreclosure as authorized by law.

Many couples can benefit from filing bankruptcy before a divorce is final. In most circumstances property that is owed by a husband and wife receives better protection from creditors than it receives if owned by a single person. Some debts that are ordered by a family court cannot be discharged by the bankruptcy court, so it is better to discharge those debts prior to a family court order. In some cases, if one spouse files bankruptcy and discharges a debt, a family court cannot reassign that debt to the discharged debtor.

Divorce can complicate the legal obligations of a divorcing couple’s finances. If you and your spouse are considering divorce and have significant debt, speak with an experienced bankruptcy attorney and discuss your options before finalizing your divorce.

Divorce Debt and Bankruptcy

Since 1967 there have been several studies that rank stress due to a traumatic life event. The studies agree that divorce causes tremendous stress in a person’s life, and is number two in the rankings for most studies, behind death of a spouse or child.

Since divorce is such a stressful time, it is no wonder that people make mistakes with their finances during a divorce. Many couples either overlook or ignore the economic realities of their changed financial condition. In some cases financial mistakes made during the divorce can lead to bankruruptcy. In other situations bankruptcy is simply inevitable.

One financial mistake divorced couples commonly make is a misunderstanding of the family court’s “assignment” of a joint debt to one of the spouses. The family court has the authority to order one spouse to pay a particular joint debt. For instance, husband pays the MasterCard; wife pays the car payment and keeps the car. The court order may contain a “hold harmless” provision that means that if the obligated spouse does not pay the debt, and the other spouse is harmed, the obligated spouse is responsible to repair the harm (usually this means money damages). This order is enforceable through the court’s contempt power.

Many people mistake this assignment as an alteration of the contract with the creditor. The family court’s order does not change the couple’s joint obligation on the debt because the creditor was not a party to the couple’s divorce case. A joint debt remains legally enforceable against both or either party even after the divorce. If the obligated spouse does not pay pursuant to the family court’s order or the terms of the contract, the only recourse is to cry foul to the family court judge. The creditor can pursue any legal action to collect on the debt including reporting the delinquent account to the credit bureaus, filing a lawsuit against both spouses, and repossession or foreclosure as authorized by law.

Many couples can benefit from filing bankruptcy before a divorce is final. In most circumstances property that is owed by a husband and wife receives better protection from creditors than it receives if owned by a single person. Some debts that are ordered by a family court cannot be discharged by the bankruptcy court, so it is better to discharge those debts prior to a family court order. In some cases, if one spouse files bankruptcy and discharges a debt, a family court cannot reassign that debt to the discharged debtor.

Divorce can complicate the legal obligations of a divorcing couple’s finances. If you and your spouse are considering divorce and have significant debt, speak with an experienced bankruptcy attorney and discuss your options before finalizing your divorce.