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Understanding Bankruptcy

CARES Act Reduced Chapter 13 Bankruptcy Payments & Modified Plans

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Don’t miss this opportunity for additional relief with Chapter 13 Bankruptcy from the CARES Act.

COVID-19 has changed the world in numerous ways from putting entire countries on strict lockdown to taking the lives of millions to changing the way many companies do business. Many of these effects, like so many other world events, disproportionately negatively affect those who are struggling through difficult financial times.

Individuals who have declared bankruptcy have still had to make payments that were specified in their debt resettlement agreements. Thanks to the CARES Act, though, those who have outstanding Chapter 13 payments may be able to reduce their monthly payment amount.

DISCLAIMER: The following blog post is just advice, and you will be better served to call David S. Clark with your bankruptcy questions. This blog contains helpful tips and advice, but is not professional legal advice, and shouldn’t treated as such.

Need Bankruptcy Help? Call David S. Clark

Disposable Income Amendments

Any payments made under federal law relating to the national emergency declared by the President cannot be counted as “current monthly income” or “disposable income” when considering the debtors repayment plan.

This provision will benefit those who are currently paying off bankruptcy payments and future Chapter 13 bankruptcy pursuants.

Payment Plan Modifications

The CARES Act permits debtors to seek payment plan modification if they can prove that they have suffered a “direct or indirect” hardship due to the COVID-19 pandemic.

The law does not give extensive definitions for “direct or indirect” hardships caused by the pandemic, so pursuants will have to make a verifiable case that they suffered financial difficulties because of the coronavirus pandemic.

It is unclear the extent to which debtors will be able to alter their original payment plans. However, the law allows for debtors to seek modification in their favor, so debtors should take advantage of this opportunity.

How Long Will This Last?

These amendments were originally put into law on March 27, 2020 and were scheduled to sunset, or expire, on March 27, 2021. However, due to the continued economic uncertainty from the pandemic, these amendments were extended until March 27, 2022.

If these amendments are not extended past the latest expiration date, then debtors have about six months to take advantage of these helpful provisions for Chapter 13 Bankruptcy.

David S. Clark Can Help

Having helped people file for and carry out Chapter 13 Bankruptcy plans for over 20 years, David S. Clark has had to adjust to changes in the law, changes in the larger culture, and countless other changes relating to his clients’ bankruptcy cases.

These recent changes are intended to help debtors. David S. Clark can help walk you through taking advantage of this opportunity, rather than failing to make your payments because of additional financial hardships caused by the COVID-19 pandemic.

Call David S. Clark today for help with the CARES Act reduced Chapter 13 Bankruptcy payments and modified payment plans.

DISCLAIMER: The above blog post is just advice, and you will be better served to call David S. Clark with your bankruptcy questions. This blog contains helpful tips and advice, but is not professional legal advice, and shouldn’t treated as such.

How Not to Think About Bankruptcy

By | Attorneys & Lawyers, Understanding Bankruptcy | No Comments

Hiring an attorney can often add undue stress to an already fractious time. Bankruptcy cases are no different. 

As a bankruptcy lawyer in Auburn, Alabama, David S. Clark counsels numerous Lee County residents through shaky financial times. Over the years, he has encountered many different client responses to the fact that they need to declare bankruptcy. Some responses have been healthier than others and when clients have an unhealthy outlook on their situation, it can lead to a more difficult process and additional future financial hardships.

So, as a bankruptcy law firm in Auburn, we want to warn Auburn residents who may be considering bankruptcy about a few ways you should not think about it.

DISCLAIMER: The following blog post is just advice, and you will be better served to call David S. Clark with your bankruptcy questions. This blog contains helpful tips and advice, but is not professional legal advice, and shouldn’t treated as such.

Need Bankruptcy Help? Call David S. Clark

“I am incompetent with finances and there’s no hope for me to learn.”

If someone chooses to declare bankruptcy, then there is inevitably a serious disconnect between income and expenses in the actions of the client. This disconnect can occur for a number of reasons other than incompetence on the part of a client.

A sudden loss of income due to losing a job, unexpected expenses like hospital bills, or a miscalculation from the onset of a major purchase that leads to interest payments the client is unable to pay are all examples of events that can cause someone to declare bankruptcy.

There are mistakes that are made in all of these situations and others like them, but there is a fundamental difference between making a financial mistake and complete financial incompetence.

Everyone is able to improve their financial skills.

Don’t believe the lie that because you now have to declare bankruptcy and need help from a bankruptcy lawyer, you are financially incompetent.

Instead, take advantage of the resources provided to you during the process of bankruptcy like financial counseling and learn how not to find yourself in this situation again.

“Bankruptcy will solve all of my financial problems.”

Bankruptcy is a mechanism within our legal system by which debtors can find relief from debts that they can no longer pay.

It is not, however, a cure all for financial problems. 

Often the issues that cause bankruptcy cannot be cured with the relief of debt at one time. Foundational problems need to be dealt with by solutions outside of the scope of bankruptcy in order to avoid another financial catastrophe.

Debtors usually need counseling about healthy spending habits. They often need to begin taking more personal responsibility for the situation they are in. They sometimes need to find a more steady stream of income than they currently have.

Though a bankruptcy lawyer cannot directly “fix” any of these problems, he can point clients to other people and groups that can help.

“My debts are someone else’s fault.”

Bankruptcy can be an extremely painful and humbling time for debtors. Your finances are laid bare before creditors. You openly admit that you cannot make the payments you are obligated to make. You are subjected to numerous meetings in which others tell you how you must act in order to overcome your debt.

These are humbling, sometimes humiliating processes. Nevertheless, debtors respond to these processes with obstinate pride, insisting that they are not really the ones responsible for the situation that they are in.

A complex situation like bankruptcy often has complex causes. So, during the process of bankruptcy it may be revealed that several individuals and groups share some of the blame for a debtor’s situation. However, for a debtor to take little blame or worse yet, no blame at all, is detrimental to the likelihood of long-term financial recovery.

Admitting there is a problem within yourself and your actions, that this problem has played a major role in getting you into such a bad financial situation is key to your bankruptcy being a success.

Let David S. Clark Help You Think About Bankruptcy

David as an Auburn bankruptcy lawyer and his team of professionals have years of experience helping clients get out from under their debts by helping them to rightly think about bankruptcy and walking with them through the whole process.

If you are looking for a bankruptcy lawyer in Auburn, contact David S. Clark today for a free case evaluation.

DISCLAIMER: The above blog post is just advice, and you will be better served to call David S. Clark with your bankruptcy questions. This blog contains helpful tips and advice, but is not professional legal advice, and shouldn’t treated as such.

How COVID-19 Is Affecting Bankruptcy Law in Alabama

By | Bankruptcy Law, COVID-19, Understanding Bankruptcy | No Comments

Seeking bankruptcy in Auburn or Opelika will look a bit different after the COVID-19 pandemic. Make sure your bankruptcy attorney knows about these changes and is prepared to help you understand them.

There seems to be no area of society that the COVID-19 virus has not affected. 

One of the most significant effects and hotly contested issues is the role that this pandemic has played in the economic downturn that our entire country has experienced.

One thing that is certain, though, is that COVID-19 has made many people in Alabama suffer financially.

As an avenue for financial relief during personal economic crises, Chapter 7 and Chapter 13 Bankruptcy have, unsurprisingly, had some rules changed

Residents of Auburn and Opelika who are seeking to file bankruptcy should be aware of these changes so that they can take advantage of their benefits to debtors seeking relief.

Under the CARES Act and the Consolidated Appropriations Act of 2021 here are some of those changes:

DISCLAIMER: The following blog post is just advice, and you will be better served to call David S. Clark with your bankruptcy questions. This blog contains helpful tips and advice, but is not professional legal advice, and shouldn’t treated as such.

Need Bankruptcy Help? Call David S. Clark

Chapter 13 Payment Extension

If debtors can prove to their local bankruptcy court that they have endured a financial hardship due to the COVID-19 pandemic, then they may qualify for an extension to the payment plan for seven years.

Waived Original Signature Requirement

Because the entire country has been in lockdown at some point during the pandemic, some bankruptcy courts have decided to waive the requirement that a bankruptcy attorney must get a “wet signature” from his or her client on the bankruptcy petition.

This is simply the original signature from the debtor on the petition to file bankruptcy.

Debtors and their bankruptcy attorneys can review the necessary documents virtually rather than meeting in person.

This allows for the bankruptcy process to move forward without the physical contact that was previously required.

Section 341 Meeting of Creditors

Regardless of whether or not a debtor files for Chapter 7 or Chapter 13 Bankruptcy, he or she will have to attend a “meeting of creditors.”

This is where the debtor faces all of his or her creditors alongside the court-assigned trustee and discusses every relevant detail of what is owed so that everyone can have a unified, realistic expectation of what needs to be paid back.

Stimulus Money Cannot Be Counted as Income

When filing for bankruptcy, debtors have to list their income to submit to the courts.

With the stimulus checks that were given to many Americans, some people’s income drastically increased. If a debtor had to claim this as income, this could misrepresent the true financial situation of him or her.

In order to prevent this misrepresentation, the debtor is able to leave any money received from a stimulus check related to the coronavirus pandemic out of consideration when adding up income.

This list is a good start in the search for information on how the coronavirus pandemic has affected bankruptcy, but it is by no means exhaustive.

If you are an Auburn or Opelika resident who is considering filing for bankruptcy, you should consult an Auburn/Opelika bankruptcy lawyer who can explain in depth how bankruptcy law has been affected by recent COVID-19 legislation.

David S. Clark is a bankruptcy attorney who has represented numerous residents of Auburn, Opelika, and Lee County. Contact David S. Clark today for a free evaluation on your bankruptcy case!

DISCLAIMER: The above blog post is just advice, and you will be better served to call David S. Clark with your bankruptcy questions. This blog contains helpful tips and advice, but is not professional legal advice, and shouldn’t treated as such.

Debt Consolidation or Bankruptcy–Which Is Right for You?

By | Attorneys & Lawyers, Understanding Bankruptcy | No Comments

Bankruptcy and debt consolidation are tools for different financial situations. See which is right for you.

Financial difficulties are a fact of life for many people in Auburn and Opelika, AL.

If anything has brought this to light, the COVID-19 pandemic has. 

In 2020 the United States lost a total of 9.37 million jobs–that’s nearly 4.5 million more jobs than we lost during the 2009 financial crisis.

When financial markets crash, businesses shut their doors, and jobs are not to be found, bills still have to be paid. 

Through massive government stimulus many Auburn and Opelika residents were able to receive checks that have helped to keep the lights on in the house and food on the table for the kids, but this governmental help will not last forever.

Eventually Americans will have to pay their bills and settle their debts with lenders on their own dime.

This will inevitably put many Alabamians in financial trouble once again. They may come to the conclusion that some kind of debt rearrangement is necessary for their survival, but which is right?

Today, we will discuss the benefits of debt consolidation and bankruptcy for individuals and which might be right for you given your situation.

First we’ll describe the basics of both bankruptcy and debt consolidation in Alabama. Then, we’ll give a bit of guidance as to how each might help you depending on your circumstances.

DISCLAIMER: The following blog post is just advice, and you will be better served to call David S. Clark with your bankruptcy questions. This blog contains helpful tips and advice, but is not professional legal advice, and shouldn’t treated as such.

Need Bankruptcy Help? Call David S. Clark

Bankruptcy

Bankruptcy is a legal process by which debtors can legitimately find relief from their debts.

Though it is often characterized as a life-ending step this is not true.

American greats like Abraham Lincoln, Walt Disney, and Willie Nelson all declared bankruptcy at one point in their lives and it didn’t stop them.

Essentially bankruptcy works by an individual going to the courts willing to do what it takes to get out from under their debts. This is a tedious and time consuming process that requires giving judges, counselors, and creditors very extensive financial records like income, assets, debt amounts, and more.

Then the courts and counselors (your bankruptcy attorney) create a plan to pay off as much of the debt as possible given the individual’s assets.

Individuals seeking relief through bankruptcy will also receive much court-mandated guidance on how to avoid another incident like bankruptcy in the future.

Once the payment plans and debts are settled through the bankruptcy process the individual who filed is once again financially independent.

Depending on your income level and amount of secured and unsecured debts, you may choose to file Chapter 7 Bankruptcy or Chapter 13 Bankruptcy.

Learn more about filing Chapter 7 Bankruptcy in Auburn and Opelika, AL.

Learn more about filing Chapter 13 Bankruptcy in Auburn and Opelika, AL.

Debt Consolidation

Debt consolidation works by rolling your existing debts into a lump sum payment.

This payment is a smaller total amount than the sum of your individual debts because it is a loan with a smaller interest rate.

Debt consolidation is helpful for individuals because it gives them a more manageable payment amount each month.

The downside of debt consolidation, however, is that those who choose to consolidate their debt will have to make these smaller payments for a longer period of time. In the end, he or she will pay more than he or she would have paid if he or she had been able to make the original payments.

Which Is Right for You? It Depends on Your Situation

Debt Consolidation

Debt consolidation may be the better option if there still seems to be some light at the end of the tunnel, so to speak. If you believe that you can eventually pay off your debts, then you may want to choose debt consolidation.

Debt consolidation can give debtors a bit of “breathing room” in order to manage their monthly payments a bit better. 

However, if you are not willing to practice more conservative spending habits, then debt consolidation will just put the problem off until a later date and make you pay more than you would have with the original loans.

Bankruptcy

If you have gotten so deep into debt that you see no possible way out, then bankruptcy may be the best option for you.

Are you seeking debt consolidation or bankruptcy in Opelika or Auburn, AL? Contact David S. Clark, Attorney at Law. David has years of experience helping Auburn and Opelika residents escape financial stress through bankruptcy and debt consolidation.

DISCLAIMER: The above blog post is just advice, and you will be better served to call David S. Clark with your bankruptcy questions. This blog contains helpful tips and advice, but is not professional legal advice, and shouldn’t treated as such.

What Is Chapter 7 Bankruptcy?

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If you feel lost when researching Chapter 7 Bankruptcy, this quick guide is for you.

Chapter 7 Bankruptcy is defined by bankruptcy that relieves a debtor from his or her debts through the liquidation (the exchange of valuable assets like a home, car, television, etc. for cash) of assets and subsequent distribution of these assets to creditors.

DISCLAIMER: The following blog post is just advice, and you will be better served to call David S. Clark with your bankruptcy questions. This blog contains helpful tips and advice, but is not professional legal advice, and shouldn’t treated as such.

Need Bankruptcy Help? Call David S. Clark

Who Can File Chapter 7 Bankruptcy?

Individuals, partnerships, corporations, or other business entities can qualify for Chapter 7 Bankruptcy. However, not every individual, partnership, and corporation can file for bankruptcy.

In this post, we will focus only on individuals and how Chapter 7 Bankruptcy can affect them. 

There are a few requirements and restrictions on what an individual must do in order to qualify for Chapter 7 Bankruptcy:

  • First, someone seeking relief through Chapter VII Bankruptcy must be subject to a means test.
  • Secondly, a debtor must appear before the court and comply with court orders at least 180 days before the debtor wishes to file. Failure to do so will result in the case being dismissed without relief to the debtor.
  • A person who wishes to seek relief under Chapter 7 Bankruptcy must also receive professional credit counseling from a credit counselor that is approved by the court. This must happen at least 180 days before the debtor files. Failure to do this will result in the debtor’s case being thrown out and he or she will receive no relief.

How To File Chapter 7 Bankruptcy

An individual begins the process of filing Chapter 7 Bankruptcy by submitting a petition to the local bankruptcy court (click here to view an official bankruptcy court map). In addition to this, the person seeking relief must fill out several forms disclosing the entirety of their financial situation and history. These form include:

  • Schedules of assets and liabilities.
  • Schedule of current income and expenditures.
  • Statement of financial affairs.
  • Schedule of executory contracts and unexpired leases.

The debtor will then have to pay several court and service fees for filing. This is mandatory for everyone seeking debt relief under Chapter 7 Bankruptcy unless the individual’s income is less than 150% below the poverty level as defined by Bankruptcy Code.

If the debtor is married, he or she will have to fill out this information for his or her spouse regardless of whether or not they are filing jointly.

21 – 40 days from the date of petition, the case trustee (an impartial individual who is assigned by the state or federal government to administer the case and liquidate the debtor’s nonexempt assets) will meet with the creditors of the debtor. Here the trustee will subject the debtor to an oath and then the creditors will be able to ask any questions regarding the individual’s financial matters and property.

Helpful Chapter 7 Tips

It is very important that the debtor cooperates fully throughout the bankruptcy process with the bankruptcy court and the trustee assigned to the debtor’s case. This is especially true when the trustee calls the meeting of creditors.

Though the questions that will be asked will be difficult, complicated, and can sometimes be embarrassing, the debtor must submit fully to his or her oath of honesty. This will be to the ultimate benefit of the debtor and will hopefully end in his or her financial relief.

Additionally, If the debtor then recognizes that a different chapter of bankruptcy is more applicable and beneficial to the situation, he or she may be able to convert the case to the appropriate chapter so long as it has not already been converted from another chapter.

Filing for Chapter 7 Bankruptcy can be a scary process added on top of an already tumultuous time. Hiring a bankruptcy lawyer who is competent and compassionate can help relieve your stress during the filing process and can help you get the financial relief that you need. Contact David S. Clark today and get started on the road toward financial freedom!

DISCLAIMER: The above blog post is just advice, and you will be better served to call David S. Clark with your bankruptcy questions. This blog contains helpful tips and advice, but is not professional legal advice, and shouldn’t treated as such.

What Is Chapter 13 Bankruptcy?

By | Attorneys & Lawyers, Bankruptcy Law, Understanding Bankruptcy | No Comments

In our last blog post we learned that Chapter 13 bankruptcy is known as ““Adjustment of Debts of an Individual With Regular Income.” Let’s explore a bit more what exactly that means and how it can help you regain control of your financial situation.

A Brief History of Chapter 13 Bankruptcy

In a previous article entitled, “How Bankruptcy Law Has Changed” we gave a more in depth recounting of the bankruptcy story.

Some of the facets of Chapter XIII Bankruptcy go back in the American experiment to the drafting of the Constitution (One could make a strong argument that American bankruptcy originated in English Common Law in the 16th Century).

Chapter 13 Bankruptcy, however, became a specific category of debt relief with the passage of The Chandler Act of 1938.

Since then, it has been one of the most common avenues for Americans to obtain debt relief.

DISCLAIMER: The following blog post is just advice, and you will be better served to call David S. Clark with your bankruptcy questions. This blog contains helpful tips and advice, but is not professional legal advice, and shouldn’t treated as such.

Need Bankruptcy Help? Call David S. Clark

How Does Chapter 13 Bankruptcy Work?

After deciding to file Chapter XIII, a debtor must file a petition with the bankruptcy court of the area in which he or she has a domicile (legal address) or residence.

After filing the initial petition a debtor must also file schedules of: liabilities and assets, current income and expenditures, executory contracts and unexpired leases, and a statement of financial affairs.

Debtors then have to provide the court with proof that they have received financial counseling from a court certified counselor along with a few other miscellaneous documents listed here.

Then, the debtor must give the Chapter 13 case trustee with his or her tax returns or transcripts, this must also include returns filed during the case.

The debtor will then have to pay a charge of $235 for a case filing fee and a $75 miscellaneous administrative fee. This, fortunately, can be paid through installments.

Next, the debtor must compile:

  1. A list of all creditors and the amounts and nature of their claims;
  2. The source, amount, and frequency of the debtor’s income;
  3. A list of all of the debtor’s property; and
  4. A detailed list of the debtor’s monthly living expenses, i.e., food, clothing, shelter, utilities, taxes, transportation, medicine, etc. (Source: Chapter 13 – Bankruptcy Basics)

Then, the trustee will call a meeting with the debtor and all creditors. The debtor will be placed under oath, then be subjected to a series of questions from the trustee and creditors. During this meeting the actual disbursement plan is completed.

Following the trustee and creditor meeting, the court will hold the bankruptcy hearing.

After a confirmation of the plan by the bankruptcy court judge, the Chapter 13 plan will be implemented and it is up to the debtor to see that it is carried out to full success.

*Note that married couples can file jointly or separately.

Who Can File for Chapter 13 Bankruptcy?

Chapter XIII is fairly inclusive as to who can apply for it.

Here are the basic qualifications:

  • Debtor must have proof of regular income.
  • Unsecured debts can be no greater than $394,725.
  • Secured debts can be no greater than $1,184,200.

Benefits of Chapter 13 Bankruptcy

  • Because of the development of a legally binding debt payment plan with Chapter 13 bankruptcy, debtors are allowed to keep certain assets out of reach from creditors.
  • It allows a debtor to pay past-due payments like taxes, child-support, and alimony while protecting co-signers and allowing you to reduce debts like student-loan debt.

If you are considering filing for Chapter 13 bankruptcy, contact David S. Clark today!

DISCLAIMER: The above blog post is just advice, and you will be better served to call David S. Clark with your bankruptcy questions. This blog contains helpful tips and advice, but is not professional legal advice, and shouldn’t treated as such.

Questions To Ask Your Bankruptcy Lawyer

By | Attorneys & Lawyers, Bankruptcy Law, Understanding Bankruptcy | No Comments

Filing for bankruptcy is usually a journey into the unknown for many. So when beginning, you should have a few questions ready to ask your lawyer so that you can get started in the right direction.

What Type of Bankruptcy Should I File?

Not all bankruptcy is created equal. 

There are so many different forms of bankruptcy. Figuring out which specific type, or chapter, you should file for can be a daunting task.

You should ask your attorney which type of bankruptcy is right for your situation. The offices of David S. Clark deal with Chapter 7 and Chapter 13 bankruptcy cases.

DISCLAIMER: The following blog post is just advice, and you will be better served to call David S. Clark with your bankruptcy questions. This blog contains helpful tips and advice, but is not professional legal advice, and shouldn’t treated as such.

Need Bankruptcy Help? Call David S. Clark

What’s the Difference Between Chapter 7 and Chapter 13 Bankruptcy?

Chapter 7 Bankruptcy is also known as “Entitled Liquidation.” 

This means that a court supervised trustee takes over the assets of a debtor’s estate, turns them into cash (liquidates them), then distributes funds to creditors. In Chapter 7 the debtor has rights to make certain assets exempt.

Since the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 those seeking Chapter 7 Bankruptcy must undergo a “means test” to determine whether or not they qualify. There are income thresholds that, if a debtor exceeds, will disqualify the debtor from being able to declare Chapter 7 Bankruptcy.

Chapter 13 Bankruptcy is also known as “Adjustment of Debts of an Individual With Regular Income”

This is usually a more desirable avenue for debt relief than Chapter 7 because it enables a customer to keep certain valuable assets out of a creditor’s reach. The debtor then proposes a plan to repay creditors over a reasonable period of time.

Does Your Attorney Have a History of Success for His or Her Clients?

There are countless bankruptcies lawyers offering their services, but that does not necessarily mean that they have proven experience actually helping to get clients back on their feet.

Ask your lawyer about their case history. They should be able to provide you with a list of past clients that can reference how your lawyer worked with them.

Should I Even File for Bankruptcy?

While bankruptcy can be a helpful tool to help you get out of crippling debt, it may not be the right thing to do in your situation. 

There are several other ways to climb out of the hole of debt and your attorney should be able to give you adequate information about those.

Some of these other options include:

  • Debt Consolidation
    • This involves “rolling” all of your existing debts into one lump sum and is  helpful if you are able to refinance it at a lower interest rate and keep the rate low.
  • Foreclosure
    • This is selling an asset in order to pay back a creditor.
  • Wage Garnishments
    • This is where a person’s earnings are withheld by an order of the court to go directly to repaying debts.

The answers to these questions are not always clear. 

They are sometimes difficult to navigate. 

So having an attorney that will know in which direction to point you is crucial during a time of financial difficulty. What’s more is the importance of having an attorney who will take the time to listen to you and your situation, then inform you on what the best path forward for you is.

DISCLAIMER: The above blog post is just advice, and you will be better served to call David S. Clark with your bankruptcy questions. This blog contains helpful tips and advice, but is not professional legal advice, and shouldn’t treated as such.

How Bankruptcy Law Has Changed

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How Bankruptcy Law Has Changed

What you need to know about the history of bankruptcy in America 

Bankruptcy law in America has a long, storied history. It would take a whole section in the Library of Congress to give a full description of that history. So, we are going to summarize that information for your convenience.

DISCLAIMER: The following blog post is just advice, and you will be better served to call David S. Clark with your bankruptcy questions. This blog contains helpful tips and advice, but is not professional legal advice, and shouldn’t treated as such.

Need Bankruptcy Help? Call David S. Clark

When It All Started

1787.

This is the year that the United States Constitution was drafted and signed by all 13 states. Bankruptcy is enshrined in the U.S. Constitution (Article 1, Section 8). It gives congress the right to establish “uniform Laws on the subject of bankruptcies throughout the United States.”

Developments Over the Next 150 Years

As with all political matters, bankruptcy policy was subject to years of troubled debate. In 1800, Congress passed the Bankruptcy Act. This gave district judges the authority to create commissions to help oversee bankruptcy cases. However, too much power was given to creditors in this act. Because of corruption and high expenses, this act was repealed only 3 years later. For 30 years after, states took up the responsibility to regulate bankruptcy law.

In 1839 a development took place which was very favorable to those in large amounts of debt. A federal law outlawed imprisonment for debt. Can you imagine that? Without this law those looking to file bankruptcy would have the added stress of possible imprisonment for their debt!

In 1841 Congress passed a new Bankruptcy Act. This act was very similar to the Bankruptcy Act of 1800. This law, though, gave significantly more rights to those in debt than the original act gave. Some of these included:

  • Allowing those who owe money to file for bankruptcy, rather than just the creditors initiating a bankruptcy case
  • Allowing personal assets to cover as collateral for debts
  • Allowing debtors in any type of industry to file for bankruptcy

This act, though, was repealed only 2 years later.

Two more Bankruptcy Acts were signed into law over the next  50 years.

Each of these acts essentially stipulated more protections and rights for debtors in bankruptcy cases. Each of these acts were relatively more successful than their predecessors in that they survived as law for a combined 111 years.

This success was due in large part to the lessons learned in bankruptcy law in the early days of our Constitutional experiment. 

The Chandler Act of 1938 was another factor that helped the latter Bankruptcy Act to last for so long.

This act categorized previous reorganization amendments to the 1898 law into “Chapters”

  • Chapter X for corporate reorganizations
  • Chapter XI for arrangements
  • Chapter XII for real property arrangements
  • Chapter XIII for wage earner plans

The Bankruptcy Reform Act of 1978

When signed into law bankruptcy was further federalized. The president was given the responsibility of assigning bankruptcy judges to serve 14 year terms. It also consolidated Chapter X, XI, and XII Bankruptcy into Chapter XI bankruptcy.

This act stood only for about 15 years.

The Bankruptcy Reform Act of 1994

Simply put, this act gave the district bankruptcy courts more legal authority to investigate proceedings by creating appellate panels.

Bankruptcy Abuse Prevention and Consumer Protection Act of 2005

The 2005 law is still in effect today, so it is the most important for those seeking bankruptcy to understand.

This act substantially altered the 1978 and 1994 acts by:

  • Creating a means test for debtors
  • Mandating credit counseling for relief plans
  • Requiring financial management training for Chapter 7 and Chapter 13 debtors
  • Permitting immediate dismissal for failing to file required documents

There were also several other revisions to the law, but the aforementioned are the most pertinent to those seeking bankruptcy today.

Although bankruptcy has been a part of our nation even before the U.S. was a one, it has evolved throughout the centuries into an institution that is capable of helping anyone out of many seemingly lost financial situations. For the most part, the changes that have occurred have been with the debtor in mind. Bankruptcy today is for you.

DISCLAIMER: The above blog post is just advice, and you will be better served to call David S. Clark with your bankruptcy questions. This blog contains helpful tips and advice, but is not professional legal advice, and shouldn’t treated as such.

What to Avoid When Filing for Bankruptcy?

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Common Mistakes When Filing Bankruptcy

What to Avoid When Filing for Bankruptcy?

Bankruptcy is a solution to changing your financial situation and alleviating current debts. To make bankruptcy a positive experience, understand what to avoid when you decide to go through the bankruptcy process.

DISCLAIMER: The following blog post is just advice, and you will be better served to call David S. Clark with your bankruptcy questions. This blog contains helpful tips and advice, but is not professional legal advice, and shouldn’t treated as such.

Need Bankruptcy Help? Call David S. Clark

Filing for Bankruptcy

Bankruptcy can be a complicated process that entails careful consideration of your finances and a clear understanding of rules that should be followed. Whether a mistake is made by accident or through innocence, a bankruptcy court may hold you responsible and it could hurt your case. Before filing bankruptcy, contact a local attorney to guide you through your case and help you understand some common mistakes to avoid.

Not Consulting a Local Attorney

A common mistake people make is not considering how long and complicated the bankruptcy process may be and underestimating the benefit of hiring a local attorney to help navigate the process. Bankruptcy laws are consistent among every state, but each state may have exemptions. If filing in Alabama, a resident can avoid errors with filing and understand how to benefit from their state’s exemptions by consulting an attorney who is familiar with local laws rather than filing on their own. 

Transferring Assets

There is no easy way out of debt when filing for bankruptcy. It is best to be completely honest about what assets you may own rather than transferring them to different accounts or family members. Placing a car title in a spouse’s or child’s name will not protect that asset from a bankruptcy court’s decision. Making transfers of assets is a red flag for courts since it can be viewed as dishonest or fraud. Bankruptcy does not mean total loss of assets and your attorney will be able to advise you on managing assets during a bankruptcy case. 

Giving Away Assets 

There is a misconception that giving rather than transferring an asset to a friend or family member during bankruptcy may be acceptable. This is a warning sign to bankruptcy courts that you are engaging in dishonest activity and will negatively impact your chances of being able to keep that asset. 

Use of Credit Cards 

When filing for bankruptcy, credit card use should be suspended. As a bankruptcy case proceeds, the court may view the use of credit as acquiring more debt. When this happens, the credit card company has to be listed as a creditor on your paperwork or you may be accused of fraudulent borrowing during your bankruptcy case. Consult with an attorney on how to pay normal living expenses with a debit card and minimizing or eliminating the use of credit cards. 

Using Retirement Funds 

During the bankruptcy process, retirement funds will be exempt and an attorney will guide you on how to protect those assets. Many assume the best way to use a retirement account is to start draining the money to pay off debts. Paying off certain debts is not permitted when you have filed for bankruptcy. It will cause more legal trouble for you and the loss of money that would have been protected otherwise. 

Failing to Understand the Bankruptcy Process 

Bankruptcy is a process that should be left to attorneys who specialize in these cases. Not all debts can be solved by filing for bankruptcy and even when they do, it may not be the right time to file for bankruptcy. In the state of Alabama, those planning to file for bankruptcy are responsible for meeting certain requirements, gathering paperwork, and considering your assets. Consulting with an attorney before you begin to file, ensures you understand bankruptcy and what you will need to do to go through the process. 

If you are considering filing for bankruptcy, contact a local bankruptcy attorney to understand what errors to avoid before filing and receive the best guidance for your case.

DISCLAIMER: The above blog post is just advice, and you will be better served to call David S. Clark with your bankruptcy questions. This blog contains helpful tips and advice, but is not professional legal advice, and shouldn’t treated as such.

Foreclosure vs. Bankruptcy

By | Bankruptcy Law, Understanding Bankruptcy | No Comments

While foreclosure and bankruptcy are familiar terms to most, the difference between the two is often difficult to determine, because one can often lead to another within the process of working with the bank. Filing bankruptcy has the option of giving or surrendering the property back to the bank. When the bank takes the home from you, that is forclosure. 

The main difference between bankruptcy and foreclosure is whether or not the person will owe money to the bank after the process is complete. Within the process of filing bankruptcy, forclosure is likely to happen in order for the title to be cleared and for the bank to sell the house. In this case, the homeowner no longer owes the bank anything. If a foreclosure is forced on the homeowner, they can end up owing the difference in the mortgage and the price of the home in a foreclosure sale. 

Uderstanding the differences between bankruptcy and foreclosure and the process of each, what happens when you decide to go with one over the other and what it looks like when bankruptcy leads to foreclosure and temporary and lasting impacts on your financial life and credit score can be beneficial moving forward. 

What does everything mean?

Different states have different laws, but the concept of bankruptcy is similar across the board in the context of a mortgage. A mortgage is a loan from a bank to help in the financing of a home. When you sign a mortgage agreement, you agree to pay off the loan you took out plus interest. The home is called “collateral” within the agreement. You sign a statement saying the bank can take the home from you if you do not meet the terms of the agreement. This where the term collateral is enforced. 

The largest term in a mortgage agreement is making the required monthly payments to the bank. Monthly payments consist of a certain amount and include interest.  If payments are not met, the bank will foreclose on your home and become the new owners of the property. Falling behind on the monthly payments leads to potentially having to declare bankruptcy and makes the bank the new owner of your home

Filing for bankruptcy stops all collectors from collection lawsuits or forced foreclosure on your home. You do have the option to sell your house back to the bank in order to pay off debts.  Turning your home over to the bank voluntarily after filing for bankruptcy is considered “surrendering” your home.

What happens after?

When you file bankruptcy and choose to surrender your home to the bank, foreclosure still takes place. Your things will be sold in an auction in order to cover the loan you took out to cover the collateral. The difference in foreclosure and surrendering is that after you have surrendered the home to the bank, you are done and no longer owe the loan payment. In a foreclosure, the house is sold and if the price it is sold for is deemed acceptable, you do not owe anything else. If the payment is not deemed acceptable, you will be required to pay the difference in can be charged in the form of a lawsuit. 

Bankruptcy can stay on your credit report for 10 years, but bankruptcies don’t have a separate section on the reports. Filing and completing a bankruptcy claim can take your credit score down 130-240 points. Foreclosure can stay on your report for seven years. Lenders take foreclosure records and these reports very seriously. Foreclosure can drop your credit score down 85-160 points. Missed payments can also drop your credit score 75 points.

 

Choosing to fight foreclosure or file bankruptcy is up to you, the individual. Each situation is different and has many moving parts that are up to the person to decide what to do. Whatever you decide, make sure you have a reliable and trusted bankruptcy lawyer that can help you make the most informed decision possible in the circumstance and provide you the best outcome. For more information, check out the National Bankruptcy Forum website.

DISCLAIMER: The above blog post is just advice, and you will be better served to call David S. Clark with your bankruptcy questions. This blog contains helpful tips and advice, but is not professional legal advice, and shouldn’t treated as such.