Not All Debt is Discharged through Bankruptcy

Just because you file and are granted bankruptcy doesn’t mean you won’t be responsible for paying back some of the credit card debt you’ve accrued.  Some transactions – particularly ones made for non-essentials after the debtor was unable to make payments on time – are looked at unfavorably by the courts. If the courts see that you were unable to make steady, on-time payments, but were still charging nonessential items like travel, entertainment, or electronics to your card, they will likely be hesitant to discharge those debts.  

If you are considering filing for bankruptcy, the best thing to do is to immediately stop using credit.  All types of credit card transactions should be stopped, particularly if they are in a non-essential category or for something other than food or gas.  Even essential purchases can fail to be discharged if your card use was recent. 

Other types of debt that will likely not be discharged through bankruptcy are debts for taxes, fines, alimony, or child support.  Student loan debts are equally as difficult to have discharged – mainly because many of them are funded in part or in full by the government. You might get a portion of the interest rates lowered but depending on the lender of the loan, full discharge of student loan debt is unlikely. 

   

Filing for bankruptcy might be a good option if you have mostly consumer debt on high-interest credit cards.  If most of your debt is not consumer debt, or is debt related to student loans, bankruptcy might still be a viable and wise option for you.  An attorney will be able to look at your specific situation to help you determine all of your options, including whether or not bankruptcy is the best idea for you to get back on track financially.  

Reasons Most People File for Bankruptcy

Of the top reasons people file for Bankruptcy in the U.S., the following list of three factors accounts for the purposes of the bulk of bankruptcies filed in this country. 

1. Medical Debt

Anyone who has ever fallen ill from an unexpected sickness or has been diagnosed with a life-threatening and life-altering disease understands the enormous cost of medical care.  Even if you are insured, many insurance policies are underwritten to save the company as much money as possible, leaving you on your own to pay for high-cost tests or treatment options for life-threatening diseases.  If you are uninsured, then there is no doubt that the medical costs of a major accident or diagnosis can add up quickly, depleting your hard-earned savings and putting your family in debt that seems impossible to escape. 

2. Creditor Harassment

If you have gotten behind on credit card payments, car payments, or other debt, you already know the extent to which creditors can harass you.  Despite legislation limiting how creditors can contact you, they will still call multiple times throughout the day; call your job; call your friends and known relatives; and overall, make the stress of financial problems many times worse. 

3. Downsizing or Loss of Job

If you are one of the millions of Americans affected by the sustained job loss of the past 5 years, you already know how a few months of missed work can eat into your savings and leave you unable to make your payments.  If you lose your job and have a lot of debt, your financial future can seem overwhelming, and bankruptcy then becomes one of the few ways to reestablish a solid financial future.  

How Debts Are Discharged In Bankruptcy

A common misconception is that when debts are discharged during a bankruptcy, the tax payer picks up the burden.  This is simply not true – in the process of a bankruptcy, the creditors are the ones who take a financial hit.  They do this by often getting pennies on the dollar amount of what they originally loaned, so it’s never a pleasant process for them.  

When a court declares your debts discharged, it essentially becomes illegal for creditors to contact you about the debt.  However, not all debts are discharged and this is why it is important for you to contact someone who can advise you regarding bankruptcy law and which part of your debt is most likely to be discharged.  Every bankruptcy is different and bankruptcy laws vary widely, state by state.  A bankruptcy attorney will be able to counsel you regarding the laws that are particular to your state and give you a good indicator if bankruptcy is really your best option. 

Starting fresh is an important part of beginning on a road to financial freedom and recovery.  A court will be able to look at your situation – past, present, and future – and determine your ability to reasonably pay off your debt.  If the court finds that some debts should be discharged, they will focus on the high-interest ones and determine if you will pay them back partially, or not at all.  Since each bankruptcy is different, it is impossible to determine exactly which debts will be cleared by the courts, but a bankruptcy attorney will be able to give you a good estimate of what might happen in your particular situation.  

Embarrassed About Filing for Bankruptcy? Celebrities Aren’t – Why Should You Be?

Have you have been considering bankruptcy for a while but are embarrassed about the idea of filing it?  Maybe you’re worried about your friends and co-workers finding out and attempting to hide your financial distress.  Or maybe you think that there is another way to get out of debt and that with a little time, your financial problems will go away on their own.  Before you wait too much longer, consider this: multiple celebrities and high-profile business owners have filed bankruptcy to get back on track financially.  There is nothing embarrassing about it and everyone has made poor financial decisions.  

In fact, this month, Gary Busey – an American film and stage actor best known for his acting in Gunsmoke, Walker, Texas Ranger, Law & Order, and Entourage – filed Chapter 7 bankruptcy.  Busey received an Academy Award nomination for Best Actor in The Buddy Holly Story. In addition to Busey, Gary Coleman, Burt Reynolds, Jerry Lee Lewis, Anna Nicole Smith, Sarah Ferguson (Duchess of York), P.T. Barnum, Donald Trump, Patricia Kluge, Abraham Lincoln, Walt Disney, and other famous celebrities and business people, all filed bankruptcy.  

What this means is that you should never be embarrassed to take advantage of the debt relief that is legally and rightfully available to you – the same relief that billionaire Donald Trump took.  No one is perfect, and every day, people make unwise financial decisions.  Beyond this, lost jobs, divorce, unexpected medical expenses, a bad economy, and a host of other situations can blindside even the smartest of financial plans, leaving you unable to pay your monthly bills and sinking further and further into debt.  

Filing bankruptcy is a smart move for a lot of people right now.  Sometimes, debt relief through bankruptcy is not only the smartest option – it’s the only option for getting out of debt.  Don’t delay the inevitable, thinking that your financial problems will go away on their own, especially when you have a legal option to forge a fresh financial start. 

One of my top ten favorite bankruptcy cases

The last step of the bankruptcy process is when you receive your discharge notice. Both you and your attorney receive this notice and it means that the court has wiped out your debt and you are now able to start over, debt free. I recently received a discharge notice for Miguel C. that caught my eye. His was an especially rewarding case. He had been a law enforcement officer for ten years and had partial ownership in a business. He earned over 80k a year but had over 50k in credit card debt and a growing family that made meeting his monthly obligations impossible. He had been told time and again by other attorneys that he did not qualify for a chapter 7 bankruptcy due to his income and business ownership. NOT TRUE. The “means test” which determines whether a person qualifies for a chapter 7 bankruptcy is based on both income and expenses. It takes a qualified, skilled bankruptcy attorney to determine whether a person qualifies for a chapter 7. Thanks to us, Mike was able to:

• Keep his primary home

• Get out from under an investment property that was dragging him down

• Keep his 2008 Toyota SUV

• Enjoy a better relationship with his family and loved ones

• Concentrate more at work without distracting collection calls or financial pressures.

Every week I cringe when I talk or meet a perspective client who “heard from a friend”, or “read online” about what a bankruptcy can or cannot do, what happens post bankruptcy or how someone should act prior to filing bankruptcy. Shouldn’t you get your information from a qualified bankruptcy attorney expert? To schedule your free initial consultation call us at 305-663-3281or email john@bankruptcylawclinic.net.

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The Truth About Car Repossessions And Bankruptcy

Are you avoiding the repo man? Are you still receiving harassing phone calls even after you turn the car back in? We can help!

 If you have fallen behind on your car or truck payments, filing bankruptcy can help! One of bankruptcy’s most powerful tools is the fact it can start to work right away. Its “automatic stay” can stop the repo man immediately. Once a bankruptcy has been filed, it is very difficult for the finance company to repossess your car or truck. WE CAN SLOW DOWN THE PROCESS OR EVEN STOP IT ENTIRELY. Bankruptcy may even help you get your car back after it has been recently repossessed, but you must act fast.

In some cases, a good bankruptcy attorney can spread your past due auto payments over 36 or 60 months without further penalties or interest in a Chapter 13 bankruptcy reorganization plan. In other cases, we may be able to reduce the TOTAL amount you owe on the vehicle. THAT MEANS THAT instead of paying THE $15,000.00 you owe on the car, you only have to pay the $9,000.00 that it is currently worth and we can work at putting you into a comfortable payment plan. The sooner you see us, the more options you may have. Before your car gets repossessed is when you have most power over the banks, and we can help you the most.

On the other hand, sometimes it’s not worth keeping a car. MAYBE you can’t afford the payments or the car is just not worth what you owe. In many bankruptcy cases, we simply include the money you owe on your car in with your other debts and wipe it out in the bankruptcy. No more stress for you and no dealing WITH the repo guy!

Some people think that once their car or truck has been repossessed, they no longer owe any money. The bank got the car back and the debt should be gone. WRONG! That is not how it works. Once your car has been repossessed, it will be sold at auction. If it sells for less than what you owe (which it nearly always does) the bank will come after you for the difference. They can start the harassing calls again, file a lawsuit and even garnish your wages. You might be able to avoid all this from happening.

If your car has been repossessed or is in danger of being repossessed call us NOW for a free no obligation consultation at 305-663-3281. The sooner you do, the sooner we can discuss your options, the sooner we could find a solution for your problems and the sooner you will feel relief.