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Understanding Bankruptcy

Questions To Ask Your Bankruptcy Lawyer

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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

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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.

A Guide to Filing Bankruptcy

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A Guide to Filing Bankruptcy

 When you realize that your current financial situation would best be served by declaring bankruptcy, the following response is “How?”.  How do I file for bankruptcy? What is required? Do I need a lawyer? These questions and more will be answered as we explain the filing processes for chapter 7 and chapter 13 bankruptcy and how to get started.

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

FIRST STEP

Before you can file for bankruptcy, you legally must attend credit counseling with an approved credit counseling agency within 180 days before filing. A counseling session typically costs around fifty dollars, but if you are unable to pay the agency should be able to waive the fee. After completing the course, you will receive a certificate that must be submitted with the other required documents when you file.

WHAT IS CH. 7 AND DO I QUALIFY?

Chapter Seven bankruptcy relieves the debts of individuals, partnerships, or businesses through a process called liquidation. Liquidation is the use of eligible assets to pay off as much of the filers’ outstanding debt as possible and eliminating the remainder. You may lose some property, but there is an exemption form to complete for eligible assets that will not be used in liquidation. Important to know is that complete discharge of qualifying debts is only available to individuals. There are debts such as child support and fraudulently accrued debt that will not be eliminated. 

DOCUMENTS

When filing for bankruptcy, you will complete a petition, statement of affairs, and schedules. The first step will be the petition which officially declares and outlines your case for bankruptcy. Your list of assets and liabilities will be included in the statement of affairs, and the schedules are forms that outline your financial status and includes a form to list permitted property for exemption. There is a lot of information that fills these documents. You’ll need to know:

  1.  The names of all your creditors
  2. The amount and nature of their claims
  3.  The total amount of income you take in, its source, and frequency
  4. A list of all of your property
  5. All your monthly living expenses in detail

After compiling and submitting all of the required information, you will wait on the court to notify you if your petition is approved or denied, and the bankruptcy procedures will continue from there.

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 Bankruptcy?

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Back to Basics

What is Bankruptcy?

Filing for bankruptcy is an opportunity to start new. While it does affect your credit score for several years, you have the chance to begin rebuilding it as soon as your case is approved and closed.  If you are an individual looking to file bankruptcy, contact your local bankruptcy attorney to help you through the process. Attorneys offer expertise in court and negotiations. They can help you get the best deal from your case and assist you through the legal procedures and terminology that you may not understand.

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 you acquire more debt than you and your income can handle, it may be time to file for bankruptcy. It may sound frightening or embarrassing, but the reason the program exists is to help you, not to hurt you.  Bankruptcy is a federal court procedure to help reduce, restructure, and/or eradicate debt. However, this does not mean any debt for any one can be forgiven. There are qualifications one must meet before he or she can file for bankruptcy.

Individuals and businesses who have a debt so large, they are not able to repay it all may be eligible to file. There are different qualifications for each type of bankruptcy. The first and most common type of bankruptcy applies mostly to individuals. It is Chapter 7 bankruptcy, and it allows debts to be forgiven and certain assets to be exempt from liquidation. Your not essential/ non exempt assets will be sold/ obtained to repay some of your debt if possible. The remaining balance will be forgiven.

Chapter 13 bankruptcy is sometimes known as “wage-earner’s” bankruptcy. Your debt cannot exceed a certain amount, and you will create a 3-5 year payment plan. If your payment plan is successful, the remainder of your debts will be forgiven. An important note, these bankruptcy reports will stay on your record either 7 (chapter 13) or 10 years (chapter 7). Which makes purchasing a new line of credit or finding a new job much more difficult. 

Although Chapter 7 and Chapter 13 are the most popular forms of bankruptcy, there are a few other forms that aid individuals and businesses in more specific cases. Chapter 9 applies to cities and towns to protect them from creditors as they develop a plan to repay their debts. Chapter 11, also known as “reorganization bankruptcy”, allows businesses to continue serving customers while figuring out a payment plan. Chapter 12 is a lot different than the others. It is specifically applicable to family farmers and fishermen who make no more than $4.07 million for farmers or $1.87 million for fishermen. These filers will have a payment plan that must be completed within five years (with seasonal consideration). Finally, for those with debts and assets in both the United States and another country or countries, there is Chapter 15 bankruptcy. The U.S. court will handle the case regarding the assets and debts in the United States only.

Bankruptcy does not discharge the following types of debt: federal student loans, taxes, alimony and child support, debt acquired after filing for bankruptcy, and some debt if acquired 6 months prior to filing. It also does not eliminate debt from fraudulent loans or personal injury from driving while intoxicated. It also does not release a co-signer from his or her responsibility to pay your loan in full or in part, if you fail to do so. 

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.