Category Archives: Bankruptcy Help

Credit scores: Not all that and a bag of chips

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Without a doubt, one of the most frequent questions I get is about credit scores. The question is always some version of: Will a bankruptcy ruin my credit score forever?

Americans have an unhealthy obsession with bad credit, as though a credit score were an indicator of self worth. This obsession is unnecessary. You don’t need a good credit score to live a fulfilling and happy life. Even if you have bad credit, the sun will still come out tomorrow.

Do you want to work for a bank? Do you want to buy real estate someday? If so, you probably have legitimate reasons to be concerned with how your credit report looks to others. If not, stop worrying about your credit. It is not worth the energy you spend on thinking about it, believe me. But if it is a priority, there are ways you can rebuild credit.

And you’d think people who are on the verge of filing for bankruptcy must be starting out with good credit, considering all the energy they expend worrying about how it might ruin their credit scores. But you’d be wrong, for the most part. Sure, some people who file for bankruptcy early enough might still have a decent score, but honestly, most people who are serious about it already have bad credit.

If you are legitimately concerned with your credit, consider this: Those starting out with bad credit should look at how a bankruptcy can help begin to rebuild credit by providing a fresh start. Those starting out with good credit, but who have dischargeable debts they can’t pay, should be looking at how far down their credit score can go if they let their untenable debt situation continue its downward spiral.

Thinking about a bankruptcy in New Jersey? Call Jennifer Weil at 201-676-0722 for a free telephone consultation or email me at jweil@jenlawyer.com.

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Will I be able to keep anything when I file for bankruptcy?

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Can you keep your property through a Chapter 7 bankruptcy? The short answer to this question is: Maybe. It depends on your situation.

This is what something called “exemptions” are for. The way I explain it to clients is this: When you file for bankruptcy, something called the “bankruptcy estate” is created, kind of like the estate that is created when someone dies. Everything in the that estate temporarily comes under the Chapter 7 trustee‘s control. The trustee can sell estate assets to pay off your creditors. If something is NOT in the bankruptcy estate, it will not come under the trustee’s control.

How do you keep your stuff out of the bankruptcy estate? You list all it in your filing. Then you cite to the statutes allowing you to exempt each item from the estate. The laws allowing you to keep property out of the bankruptcy estate are generally called “exemptions”.

Does that mean you can exempt anything from the bankruptcy estate, no matter how expensive the it is? NO. Unfortunately not. Exemptions are limited. And they vary greatly by state.

How are exemptions limited? Generally, they are limited by type of property and by amount. For example, you might find that the statute that applies to jewelry might be limited in amount to $1500. This means you could exempt only $1500 worth of jewelry from your bankruptcy estate (that’s just an example – I made it up, so don’t rely on that statement for jewelry!). Limitations like this can make it difficult (and sometimes impossible) to exempt very valuable items like real estate, newer cars, or valuable collectors’ items.

How do you value your items? Generally speaking, you value your property by determining its resale value – how much could you get for it at a garage sale or on an auction website?

How do I exempt items that I don’t want to list in my papers? You don’t. Unlisted property is not exempted.

The bottom line is that you need to speak to a bankruptcy attorney in the state where you live to find out what the exemptions limitations are. And don’t make the mistake of transferring property to someone else just to keep it out of the bankruptcy estate.

If you are in New Jersey and need a bankruptcy attorney for a potential Chapter 7, please call Jennifer Weil at 201-676-0722 for a free telephone consultation or email me at jweil@jenlawyer.com.

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How long does a bankruptcy stay on your credit report?

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Bankruptcy filers who would like to rebuild their credit are justifiably concerned about how long a bankruptcy can appear on their credit report.

The answer is that bankruptcy information can stay on your report for 10 years. Most other types of negative information can be reported for 7 years.

Usually, a Chapter 7 stays on a credit report for 10 years while a Chapter 13 stays on a report for 7 years.

The Federal Trade Commission has a website explaining how to get free copies of your credit reports from the 3 major credit reporting companies. You should check your reports on a regular basis to make sure they do not contain any false information.

It is still possible to build a positive credit report even with a bankruptcy on your record, so long as you act carefully and methodically. If you’ve ever received credit card offers before, you are likely to receive them again after your bankruptcy.

If your goal is to build good credit, it’s worth your while to consider the post-bankruptcy card offers that you receive with an eye toward building a record of consistently and fully repaying an open line of credit.

If you are in New Jersey and considering Chapter 7 bankruptcy, please call me for a free telephone consultation at 201-676-0722.

How much do I need to owe to file for bankruptcy?

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Many people who call are concerned about their eligibility for a Chapter 7 bankruptcy and wonder if their level of debt will allow them to file for bankruptcy.

The answer is that there is no minimum debt amount required to file a Chapter 7 bankruptcy. A more important issue is whether you earn enough income to pay off your debts.

If you earn enough money to pay your debts off over time, you may have difficulties successfully filing a Chapter 7 bankruptcy. So you should look at your debts in proportion to your income to determine whether you can pay off your debts over time while still paying your reasonable housing and food expenses.

If you are concerned about being eligible for a Chapter 7 bankruptcy in New Jersey, please call 201-676-0722 for a free consultation or email jweil@jenlawyer.com.

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How long does bankruptcy take?

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Once a Chapter 7 bankruptcy is filed, it takes a day or two to receive notice of the date and time for the meeting of creditors, which is generally scheduled two to three weeks away from the filing date.

Once the meeting of creditors takes place and assuming there are no complicating factors in your Chapter 7, it’s about 60 days before you receive your bankruptcy discharge of all your dischargeable debts.

Regarding how long it takes from the time your hire an attorney to begin the process up until the time of filing, a lot of it depends on your individual situation. If you have loose ends that need tying up, such as an unfiled tax return from a prior tax year, you will probably need to get these things taken care of before you can file.

Also, it may take people some extra time to gather all of the documentation required for an attorney to complete the bankruptcy papers. And some attorneys may take installment payments for their attorney fees, which can delay the filing date, since all attorneys fees must be paid before a bankruptcy can be filed.

Chapter 13 bankruptcies, on the other hand, can take anywhere from 3 to 5 years to complete, since a Chapter 13 involves making monthly payments over time to your creditors.

If you think you might need a bankruptcy attorney in New Jersey, please call me at 201-676-0722 for a free telephone consultation.

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3 mistakes to avoid when paying credit card debt

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You will see all sorts of advice about “managing debt.” But when it comes to credit card debt, mere “management” can get you into trouble.

Truth is, the best way to “manage” credit cards is not to carry a balance at all. Don’t spend more than you can afford. Pay off the entire balance at the end of every month.

But you will find advice out there about how to pay down credit-card balances and keep ahead of the game, as though everyone were in an equal starting position in a game of Monopoly. Some of this advice may be right for you if you can afford it and if it will successfully lead you to a goal of getting all your credit card debt paid off.

Unfortunately, people often don’t realize, until they’ve made even worse financial mistakes, that the advice they tried to follow to pay down on their credit-card debt or to pay it off just wasn’t right for them.

If you are in a position where you are thinking about getting money from somewhere other than your regular source of income just to pay off your credit card debt or to pay it down “just enough,” you are thinking along the wrong lines.

Here are my personal “do not” rules for paying down credit card debt:

* Do not borrow money to pay off credit cards. “Borrowing money” includes things you might not normally think of as borrowing, like using your checking account’s line of credit or overdraft protection.

* Do not take money out of a retirement account to pay off credit cards. Especially do not cash out, or withdraw any money from, a 401k account – you will not only be cashing out part of your future safety net, but you will also be incurring a huge tax liability in the process. A tax liability that – by the way – is likely not dischargeable in bankruptcy.

* Do not spend money on a debt consolidation company (or a debt whatever company) to pay off credit cards. You would be spending extra money to just to repay money. Some people do this successfully, but the people who manage to pull this off already have sufficient income to pay off their debts eventually. And those people could probably pay off their debt without a debt consolidation company by reducing their expenses and making large enough payments toward their debt to pay it all off – and they can also call up the credit card companies themselves to try and negotiate better payment arrangements.

If you’ve looked at your income and found that you “have to” do one of these three things in order to pay off (or even to pay down) your credit cards over time, stop and consult a bankruptcy attorney. Do not dig yourself into a bigger financial mess by making one of these three mistakes.

Don’t make even bigger financial mistakes! If you are drowning in credit-card debt and can’t dig your way out, call me for a free bankruptcy telephone consultation at 201-676-0722.

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Bank of America drops arbitrations for cardholders

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Bank of America recently agreed to drop the requirement that cardholders resolve disputes in arbitration. The bank did this as part of a settlement of a lawsuit in which they were accused of conspiring with other banks to require credit-card holders to arbitrate disputes instead of going to court.

Other banks are still involved in the lawsuit, which is in Federal Court in New York. These other banks include Capital One, Chase, Citibank, Discover and HSBC. The lawsuit accuses them of violating antitrust laws by requiring cardholders to enter into arbitration for all disputes.

Many believe that credit card arbitrations are biased in favor of the credit card company.

Earlier this year, National Arbitration Forum, a large arbitration company, dropped out of the credit-card arbitration business as a result of a lawsuit against it.

Do I have to go to court when I file for bankruptcy?

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Most bankruptcy filers do not have to go to court.

Instead, every Chapter 7 case will be scheduled for a meeting of creditors, which does not take place in a courthouse. In Newark, New Jersey, the meetings of creditors take place in a downtown office building. Most large creditors (such as credit card companies) typically do not show up for these meetings, which usually only last about 5 minutes.

At the meeting of creditors, the trustee assigned to your case will ask you a series of questions regarding your bankruptcy while you are under oath.

But sometimes, a bankruptcy case is more complicated than average and a court hearing might be needed. David Harris, a Pennsylvania bankruptcy lawyer, provides a good outline of some instances when a court appearance might be required.

If you are in New Jersey and seeking a Chapter 7 bankruptcy lawyer, call 201-676-0722.

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Will they take my property after I file bankruptcy?

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Exempt
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One reason people find themselves in the position of wanting to transfer their assets before filing for bankruptcy is that they are afraid the bankruptcy trustee will take their stuff after they file. But you might not need to worry about that, especially in New Jersey.

Why not? Because you might be able to declare and exempt all (or most) of your property.

What does it mean to “exempt” your property? Generally, once you file for bankruptcy, a “bankruptcy estate” is created, which contains all of your non-exempt property. The trustee can decide what to do with the property in the bankruptcy estate – such as whether to sell it for the benefit of your creditors.

A bankruptcy “exemption” refers to the legal means of keeping your property outside of the bankruptcy estate.

In order to claim an exemption for property you own, you specifically list the property on the bankruptcy papers, the property’s value, and the specific statute section allowing you to exempt that piece of property. This process should be used for all property – including all personal property, such as furniture – so that the trustee cannot claim it for the bankruptcy estate. If you don’t list it and exempt it, you may lose it.

New Jersey gives you the choice to use either the Federal exemptions or the New Jersey exemptions. And the Federal exemptions are quite generous.

In New Jersey and looking at a 7? Call me at 201-676-0722.

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How to screw up your bankruptcy before it has begun

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Screwup
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Planning on transferring your largest asset to a relative just before filing for bankruptcy so that the bankruptcy court can’t get to it? As a bankruptcy lawyer, I must say – PLEASE DON’T. It’s a bad idea because it can really get you into trouble and it can deny you your ultimate goal of getting your debts discharged.

The Bankruptcy Code contains a section (727) allowing the Bankruptcy Court to deny a discharge to debtors who transferred, destroyed, or concealed their own property within a year before filing for bankruptcy. Debtors also should not mess around with their property right after filing for bankruptcy – wait until the discharge comes through.

The reason why is that, especially since the 2005 change in the bankruptcy law was enacted, the courts have been cracking down on bankruptcy fraud. The court doesn’t like it when you try to hide assets. They don’t think of your moving your property around to avoid losing it in bankruptcy as ‘innocent,’ even if you do.

In fact, if a debtor does enough things that the court doesn’t like, it may see the entire bankruptcy filing as abusive.

Besides, if you really have assets worth so much that you can’t exempt them from the bankruptcy estate, you may be able to save them by filing a Chapter 13 instead of a Chapter 7. Talk with a lawyer about your options – just don’t transfer any property around before doing so!

In New Jersey and looking at bankruptcy as an option? Call a New Jersey bankruptcy lawyer at 201-676-0722.

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