A New Way to look at Retirement

Many Americans have entered their “golden years” only to find that they’re not so golden.  People who planned to retire at 65 are realizing that they will have to continue working in order to afford to live.  Not only has the stock market decline greatly reduced their retirement accounts, but the housing prices have caused their little real estate nest egg to be worth a whole lot less.

If you’re in your 30s, 40s or even 50s, you may think that you have plenty of time to save for retirement.  It always seems like such a long way off, but putting off saving now can cause devastating results.  Results that only become obvious when it’s too late.

The first question to ask yourself is why am I not saving for my retirement?  The majority of us will have one of two answers (or possibly both).  1) You are not making enough to pay for living expenses due to a decrease in wages or job loss, or 2) You make enough to pay your living expenses, but any additional money you make is quickly used up on minimum payments to credit cards and other unsecured debt.  Minimum payments that, if never increased, will cause it to take you decades to pay off the debt.  And if you continue to use that credit card, this pushes the decades to virtually never.

If you fall into the first category, you may need to re-budget and come up with ways to lower your living expenses so that you can afford to live off of what you are bringing in.  If your mortgage and/or car payment is part of the problem, you may need to look into ways to lower those monthly payments.  Refinancing your home is an option, but there are many pitfalls involved and banks are offering this option less and less.  You can try to trade in your car to get a cheaper model with a lower payment, but this may not be enough to reduce your monthly expenses. 

If you’re not saving for retirement because of minimum payments on credit cards and other unsecured debts, you may also need to work to reduce your monthly expenses to allow you more money for these payments.  However, this may either not be an option, or not be enough. 

As extreme as it may sound, you may find that you need to give up your home or car.  If this is the case, looking into bankruptcy is a must.  Filing for bankruptcy allows you to surrender your house, car, or both.  It also allows you to discharge unsecured debt, getting rid of the minimum payments that are getting you nowhere.  It’s a smart move to talk to a bankruptcy attorney before you start to get overwhelmed by your debt so that you can find out what your options are. 

Getting rid of the debts that are putting you behind each month, and coming up with a livable budget, may just allow you to start savingfor your golden years.  When retirement finally comes around, you’ll be happy that you did.

Contact Greenwald & Hammond today to schedule a free consultation with a bankruptcy attorney.

Submitted by:

Kerry Hammond. Esq.

Are Finances the Strain on Your Marriage?

Many lawyers will tell you, "Bankruptcy and Divorce go hand in hand."  While financial trouble may not be the cause of all divorces, debt and financial troubles can certainly put a strain a marriage.  When finances are tight, individuals may have differing needs and wish to use limited resources for different purposes.  When one party is the primary bread winner the other may feel powerless and out of control.  Fights often stem from decisions about spending.  People often indicate that finances were a big stress on their marriage.

As bankruptcy attorneys we have seen many couples who are feeling suffocated by their debt but have found that filing for bankruptcy may have saved their marriage.  In many instances a husband and wife cannot even on whether or not to meet with an attorney to find out their options.  Some are resistant to even discuss the matter amongst themselves.  A bankruptcy can eliminate the crushing debt that may be driving the parties apart. 

In some instances, a marriage may not be saved by bankruptcy, but the issue of who will assume responsibility oft the marital debt can be resolved.  When filing for divorce, a couple must determine the distribution of their marital property as well as the distribution of the marital debt.  Unfortunately the order of a divorce court, while enforceable against the parties to the divorce, is probably not enforceable against an unpaid creditor.  Therefore if a former spouse fails to pay creditor for the debt that was jointly incurred, creditor may seek recovery of the debt from the spouse that was "not responsible" for the debt under the divorce decree.  This can result in additional costs such as paying an attorney to assist in enforcing the divorce agreement or orders.

Often my advice to individual bankruptcy candidates who are contemplating getting divorced with lots of marital debt is, "file bankruptcy together, even if it is the last thing that you two ever do together."  Filing together can save on attorney's fees, court fees and can ensure that both parties are relieved of the marital debt.  If the divorce occurs first then each must file their own bankruptcy and it will surely cost more.  If after a divorce, one party files and the other does not, the party that does not file may wind up responsible for most, if not all of the joint debt. 

There are some instances where the parties are better off filing separately once the parties are separated or after a divorce is final.  In some cases the parties may not pass the means test and therefore do not qualify for a chapter 7.  While the marital debt may be overwhelming, the couple may not want to be "stuck together" in a chapter 13 for three to five years.  In such cases waiting to file might be beneficial.  Also when the incomes are not combined, the parties may each separately pass the means test and qualify for a chapter 7 filing. 

If your marriage is drowning in debt, don't try to resolve the issues alone.  An experienced bankruptcy counselor at Greenwald & Hammond may be able to guide you and your spouse to a "fresh start" financially.  Who knows, perhaps eliminating debt can allow you to focus on the things you really like about each other.  Alternatively, if you are considering divorce and drowning in debt, consult with a bankruptcy attorney to determine whether filing together is the best option.

Submitted by:

Mindy Greenwald, Esq.





  

Can You Afford to Hire a Bankruptcy Attorney?

I think the better question is: can you afford to NOT hire a bankruptcy attorney?  When a person chooses to represent him or herself in a court action, they are acting pro se, or on their own behalf.  Many people would never dream of trying to repair their own furnace when it breaks, but when it comes to navigating the ins and outs of a complicated legal proceeding, they think they can do it on their own.

We’ve heard a lot about the downside of hiring an attorney (along with many amusing lawyer jokes).  We are warned by friends and family that attorneys will overcharge, take advantage, never return our calls, etc.  What people don’t talk about are the dangers of not hiring an attorney, especially in areas of law where there is so much at stake.

For most, deciding to file bankruptcy is an emotional decision, one that takes time and much deliberation.  Although finally deciding to file may make you think you’ve jumped the highest hurdle, don’t get fooled.  Bankruptcy law is very complicated, and can frustrate and overcome even lawyers who attempt to dabble in it.  Not hiring an experienced attorney can end up costing you more than you would have paid had you hired one.

One of the most common mistakes people make when deciding to file pro se is not knowing how to protect their assets.  The exemptions allowed by law represent the property that the court feels should be safe from your creditors, property each debtor needs to keep in order to move on and get a fresh start.  Many people have property that may not be covered by these exemptions and without a knowledgeable attorney, this property may be seized by the trustee and sold for the benefit of your creditors.

Another important factor involved is dischargeable versus non-dischargeable debt.  Deciding to file bankruptcy to rid yourself of your unsecured debt may seem like a great idea.  But after you’ve gone to the time and trouble, and paid a hefty filing fee to the court, finding out that much of your debt is non-dischargeable isn’t helpful.  If a debt is non-dischargeable, it does not go away after the bankruptcy is over.  An experienced attorney can explain which of your debts are dischargeable and which you will still be responsible for after your bankruptcy discharge.

These and many other factors make it important to at least consult with an attorney prior to going it alone.  If it sounds like I’m trying to scare you into talking to an attorney, you’ve gotten my message.  Debtors’ attorneys, like those at Greenwald & Hammond, don’t like to see the trustee take assets.  Our firm takes pride in giving our clients the best possible service, while keeping their assets safe. 

You’re doing yourself a disservice if you don’t at least talk to a bankruptcy attorney first.  Many offer a free consultation and can let you know if you have any assets or debts that may make filing bankruptcy not in your best interest.   Paying for an attorney up front can save you money in the long run.  Read Mindy Greenwald’s blog, offering advice on how many people afford to pay an attorney.

Contact Greenwald & Hammond to set up an appointment for a free consultation with a bankruptcy attorney.  Be smart about your fresh start.

Submitted by:

Kerry Hammond, Esq.

Chapter 7 Gives Many a Fresh Start

You may have heard the term "fresh start" in the context of bankruptcy before, but have you wondered "how can that be?"  After all, many people think that Bankruptcy means financial devastation and filing will destroy your credit.  In most cases this is not accurate, in fact bankruptcy often provides individuals with a "fresh start" and a new beginning with creditors.

Most individuals in need of filing bankruptcy probably had good credit at one point in time.  Often times at an initial consultation, potential clients will tell me how good their credit is, though often times they mean how good it was.  By the time people come to meet with a bankruptcy attorney, they are struggling with their debt and may have missed payments on existing debts.

Once a payment is missed on a credit card, mortgage, car loan, or even a student loan, credit ratings will begin to suffer.  Missed payments that are not quickly resolved with the creditor, will result in repeated negative reporting on your credit.  The negative reports on you credit remain on your credit report for seven years and can often times result in denial of credit especially for larger purchases like a home or car. 

In addition to negative reporting, lenders consider your debt to income ratio.  If debt is so high that it would appear income, though good, is insufficient to keep up with the existing debt or additional debt, creditors may deny credit.

When bankruptcy is used to eliminate debt, it will appear on a credit report.  In most instances, this may not result in the ding that most people expect.  While there is no guarantee that the filing will result in a boost in credit score, many experience the ability to obtain credit very shortly after bankruptcy.  The elimination of the debt and the cleaning up of a credit report can truly help people to move forward.

When some one's debt is so out of hand that judgments, garnishments and repossessions are marring their credit, a bankruptcy filing may be viewed as finally taking the responsible step necessary to begin anew.  Chapter 7 will eliminate most debts.  A payment plan in a chapter 13 will demonstrate responsibility and show creditors that a budget can be maintained.  Without overwhelming debt, people with all levels of income can experience the relief a of a fresh start.

Call Greenwald and Hammond today for more information on how we can assist you with overwhelming debt.

Submitted by:
Mindy Greenwald, Esq.

Bankruptcy Filing Numbers Are Down

According to a Colorado Division of Housing report, the number of case filings for November 2011 is 10.7% less than the cases filed in November 2010.  Not only that, but it’s the 10^th month in a row that this year’s monthly numbers have been lower than last year’s. 

Statistics rarely contain enough data do show the exact reasons behind their numbers.  We are often left to speculate on economic events that may be the cause.  In this case, at least on the surface, we can hope that many consumers have seen an improvement in their financial situation.  They have been able to get back on track without the need to file bankruptcy.  The reason for this improvement may be that the economy is beginning to show the turn around we’ve heard so much about.    

What can be frustrating is when we see statistics that clearly show an overall national or regional financial improvement, yet we don’t personally experience this progress.  For example, people who are still unemployed don’t feel relief when they read that the local unemployment rate is declining. 

It’s important to look at these trends and see them for what they are, trends.  Use them as a guideline to feel hopeful that times are turning around, at least on a big picture level.  But we still need to view our own personal situations on an individual level and decide the best course of action for ourselves.  If you’re still experiencing financial problems, causing you to fall behind on your monthly bills, keep your options open.  You may need to speak to a bankruptcy attorney in order to clearly understand if it’s something you should consider.  A free consultation allows you to get the information you need without putting a further burden on your wallet.

Call Greenwald & Hammond today to set up an appointment to speak directly with an attorney.  

Submitted by:

Kerry Hammond, Esq.

New Years Resolution - Get out of Debt and Start Saving

With 2012 quickly approaching, are you thinking it is time to start saving for the future?  Maybe you are finding it impossible to save for the future because your living paycheck-check-to-paycheck.  Maybe you have more bills than you can afford to pay, maybe you can afford to pay the minimum but must then use a credit card to get through the month.  How can you save for your future when you can barely afford the present?

  Many think that people with debt are just irresponsible with credit cards, of course this is the case in some circumstances.  However many individuals and businesses wind up in debt because of changed circumstances.  Medical debt resulting from a sick family member with inadequate medical insurance, additional costs due to the addition of a child or other dependent to the household, a job loss, wage cut or an employer unable to issue that "annual bonus", an increase in mortgage payments on that mortgage you were promised you would be able to refinance before the payments went up, or that house that cannot be sold for what you owe, loss of clientele due to the bad economy.  These are just a few examples of situations that get people in trouble.

While unmanageable debt can be the result of many situations, there are few solutions to getting out of debt.  Debt consolidation may work in very limited cases but individuals should be weary because debt consolidation companies are generally in business to make money.  If going this route you must seek out a non-profit who will honestly assess your situation and advise you as to whether consolidation will work for you. 

Debt settlement is another option.  If you have some cash on hand, creditors may be willing to take one-time lump-sum settlement offers, however withdrawing money from an IRA or 401K to settle debt is almost never a good idea.  Also most will not take an offer until you are missing payments.  Remember you will pay an early withdrawal penalty in addition to paying taxes for the early withdrawal.  If hiring an attorney or other "specialist" you will also be expected to pay a fee, often times as much as thirty percent of the amount you are forgiven.  You may also receive a form 1099 from the creditor resulting in the debt forgiven being reported to the IRS as income and now taxable as such.

Bankruptcy is not a last resort.  Many people will say it is, but many who are in debt over their heads, have taken a responsible step to eliminate the debt that is preventing them from saving for the future.  Bankruptcy for many is labelled an embarrassment, shameful, and even against their core beliefs.  While incurring debt with no intention of paying the debt is shameful and against my core values, and should be against every one's core values, bankruptcy was not instituted by the federal government to encourage people to irresponsibly charge up credit cards and incur debts.  The bankruptcy code has been in place because many people make mistakes, fall on hard times, and need a fresh start.  Without the help that bankruptcy provides many find no hope of ever finding their head above water.

Whether debt consolidation, settlement or bankruptcy is your best option, thought should be given to how soon you will be out of debt and when you can begin saving for your future.  Often with my clients, I discuss current budget and try to show instances where cutting back is possible.  Without focusing on how you spend your money, you may not realize how you can save your money.  It is important to come up with a strategy for saving for the future. 

If bankruptcy is a consideration or if you just want to know you options, Greenwald and Hammond offers free attorney consultations to assess your situation and give you the correct information you need to make a decision about getting out of debt for good.  Call our office to book your appointment today.

Submitted by:

Mindy Greenwald, Esq.

Don’t Be Afraid to Ask For Help

Before you let your bills pile up, take some time to set up a monthly budget.  Sometimes just knowing what you’re spending your money on can help you determine where you may need to cut back, or cut out.  If you’re going through a rough patch, remember to ask for help.

If you have an hourly job, one that doesn’t guarantee a set number of hours, you may find yourself short of money during the slow months.  This can quickly spiral out of control and cause you to fall so far behind that you can’t catch up.  When this happens, you need to prioritize your bills and come up with a plan that allows you a little wiggle room.  Consider contacting the people you owe: landlord, phone company, electric company.  Sometimes companies will work with you if you make the effort to let them know what you can afford to pay now and how you plan to catch up on the rest.  The bottom line is, it doesn’t hurt to ask.

Living off credit cards can be dangerous for many reasons.  We tend to spend more than we normally would because it’s so easy to swipe a piece of plastic and pay later.  Sometimes balances can get so high that we can only afford the minimum payment, a payment that will go mostly to interest charges and leave you with an ever growing balance.  In addition, miss one payment and you’re hit with a late fee that can be anywhere from $25-$40.  Before you start experiencing this, and before you start to damage your credit, give your credit card company a call to see if they can reduce your interest rate or put you in a card that has a lower rate.  Again, it doesn’t hurt to ask.  If you still have good credit, they may work with you to keep your business.

If you find that you still can’t make ends meet, you may want to seek legal help.  Consider speaking to a bankruptcy attorney to find out whether this may be an option for you.  Sometimes getting out from under credit card debt and living off of your wages, without having to pay all those minimum payments, is all that you need to get back on your feet.  You may find that bankruptcy isn’t an option for you, but it doesn’t hurt to ask.

Submitted by:

Kerry Hammond, Esq.

Be Wary of Low Fees for Bankruptcy

If you are one of the many people considering bankruptcy, you probably are worried about the cost of hiring an attorney to assist with your bankruptcy.  Many people skimp when hiring bankruptcy help.  This could be a costly mistake.  There are a surprising number of people out there looking to take advantage of individuals in need of bankruptcy assistance.

If you run a google search for bankruptcy attorneys you will find at the top of your search several attorneys who promise extremely low fees for bankruptcy.  Beware of such offers.  In many cases this could be a "bait and switch" tactic, though not permissible under rules governing attorneys.  The attorney will get you into their office and then nickel and dime you until you have paid significantly more than you expected.  Alternatively, you may pay a low fee to retain the office but be provided with sub-par services.  Many of these low-fee offices are considered "Bankruptcy Mills."  They take small fees and offer very little personal attention to your case.  In many instances you may never even meet an attorney prior to filing your case.

Even worse, your search may result in the discovery of a bankruptcy petition preparer.  While some petition preparers are charging appropriate fees for the service that they provide, many are taking advantage of individuals lack of familiarity with bankruptcy.  A petition preparer is only permitted to type up a bankruptcy petition, meaning they may type up your petition for you but you must provide all the information and select the proper exemptions where applicable.  Many petition prepares walk a fine line between paralegal and the unauthorized practice of law.  A preparer is not permitted to give any legal advice.  That means they cannot tell you if you qualify for chapter 7 or chapter 13.  They cannot tell you whether your vehicle or your home is exempt, they cannot educate you on the law and they cannot tell you the specific grounds for exemptions that you must state in your bankruptcy petition.  Be very wary of a preparer that offers to do anything more than type your petition.

Recently in Colorado several bankruptcy petition preparers have been ordered to return certain fees paid to them and have been heavily fined by the Bankruptcy Court for overcharging for the service of preparing a bankruptcy petition.  Others have been found to be collecting fees for services they are not allowed to provide.

When hiring an attorney or other bankruptcy assistance it is really important to remember the old adage "you get what you pay for."  A reputable attorney will have several years of bankruptcy experience and will charge a comparable fee to other bankruptcy attorneys.  Many reputable attorneys will offer lower fees when a case presented is clearly going to be less complicated and it is clear that the debtor has little or no resources to pay a full fee.  The choice to file for bankruptcy is an important legal decision and really should only be made after considering the advice of someone who understands the law and can spend the time to properly explain to you the law and how it will affect you.

Unfortunately, all too many times I have been sitting at chapter 7 creditor meetings and watched as a debtor with an inexperienced attorney or no attorney at all, painfully learns that they will be losing assets with values that far exceed the fees that my office charges.  In many of these cases, I could have prevented most if not all of the turnover prior to filing.  Once a case is filed, it is extremely hard to undo the filing especially when valuable assets are at stake.  In many cases paying for an attorney ahead of time can save lots of money in the long run.

In a previous post I discussed how fees are paid and mentioned that once you stop paying all unsecured creditors, there is usually some money available for a payment plan to an attorney.  I also mentioned here that many reputable attorneys will, on occasion offer a significantly lower fee under certain circumstances.

Our firm prides itself on the one-on-one time spent in each case.  This gives us the time to discover any issues that could result in problems when filing bankruptcy.  When you don't get to meet with an attorney or spend any significant time with an attorney until after you file, there is no way for you or the attorney to recognize the important issues that may need to be addressed prior to filing.

So if you are considering bankruptcy, do not let the idea of paying attorney's fees dissuade you from seeking real legal advice.  Do not let price dictate the attorney you choose.  If you shop around and you find that you had a favorite attorney that you felt the most comfortable with, but charged a little more, don't be afraid to ask if that attorney can slightly lower their fee.  They may not be able to match the lower fees offered elsewhere but remember that there is a reason you felt better with that attorney, you may have trusted that attorney or received more answers to your questions.  Remember that the attorney fee may be a small price to pay to get out from all or most of the debt you currently have!

If you or someone you know is considering bankruptcy, please contact Greenwald & Hammond today to discuss options and set up a free consultation.

Submitted by:

Mindy Greenwald 

How to Avoid Overspending During the Holidays

I am always reading articles telling me how to save money and spend less.  I think that if I read enough of them, the messages will be absorbed into my brain, changing my way of thinking.  As I read these articles, I’m not looking for ground breaking tips or new and innovative ideas.  I’m looking for reinforcement of the simple, easy steps that have been saving smart people money for years.  I recently came across an article entitled “6 Steps to Skirting Holiday Debt” and found that many of the tips spoke to me, so I thought I would pass them on (with my own personal spin, of course).

Take ALL Expenses Into Account

I have to admit, this one never occurred to me.  I always keep track of how much I spend on gifts for each person on my list, but rarely do I write down what I spend on the bottle of wine I take to the party, the new sweater I buy to wear to the party, or the quick lunch I get at the mall while shopping for gifts.  These things add up quickly, and greatly increase the amount of money you’re already spending for the holidays.  Make sure you track these items, and if need be, scale down on gifts to compensate.  Or better yet, avoid these extra categories as much as you can.  Wear a sweater you already own, and eat a snack before you leave the house so you don’t need to get a pretzel at the mall.

Shop Early

This one isn’t going to save you any money this year, but can help you plan for 2012.  Make your Christmas list early and then shop all year round.  You can really save a lot of money.  If Aunt Lucy collects porcelain poodles, you can keep an eye out for a sale earlier in the year rather than paying full price in December.  Take advantage of the after Christmas sales this year to stock up on gifts for next year.  At the very least, you should be buying wrapping paper, bows and gift tags at 75%-80% off at the after Christmas sales. 

Skip Restaurant Meals

Many of us love eating out, and when we get festive around the holidays it’s a lot of fun to go out for dinner with friends and co-workers.  It’s very easy for your bill to get out of hand at a restaurant.  By the time you get a drink, an appetizer, dinner, and dessert, you’ve spent a whole day’s pay no matter which restaurant you’ve chosen.  Consider getting a bite to eat at home and then meeting your friends out for a drink.  Or, eat a snack and then order an appetizer at the restaurant rather than a full meal.  Saving a few dollars at each meal can really add up.

Go Back to the Envelope System

I know several people who still cash their paychecks and split up their money, filling envelopes for each household expense.  You may not need to do this for every bill, but try doing it for holiday gifts.  If you go to the mall with an envelope for Aunt Lucy’s gift and it contains the $25 you plan to spend on her, you will be less tempted to pull out the credit card to overspend.  Better yet, leave the credit cards at home and it will be impossible.

Buy Fewer Gift Cards

We all have a hard-to-buy-for person on our list.  The ones that get us so frustrated that we end up getting them a gift card, sometimes to a store we’re not even sure they like.  Consider putting some more thought into a gift for these difficult people, or just break down and ask them what they’d like this year.  When we buy gift cards, the recipient knows exactly how much money we’ve spent on them.  If you’re like me, you buy a larger gift card than the amount you might spend on a gift, just so you don’t look cheap.  If you spend more time thinking of a gift, you can save yourself money.  You might even get that $50 porcelain poodle on sale for $25, yet still feel like you bought Aunt Lucy a $50 gift.

The common theme in all of these tips is to think before you act, and put some extra time into planning.  If you do that, it should be easy to save a little each holiday season.

Submitted by:
Kerry Hammond, Esq.

Don’t Bury Your Head in the Sand This Holiday Season

As the holidays approach, and we spend money we don’t have, it’s very easy to bury our heads in the sand and ignore our financial situation.  It’s much more fun to buy gifts and spend time with family than it is to open bills and try and budget minimum payments for credit cards.

What’s worse is that a lot of people know that once the holidays are over, something needs to be done to dig out of the hole they’re in.  If bankruptcy is something you feel could be in your future, the last thing you should do is wait until after the holidays.  Meeting with a bankruptcy attorney before the holidays can be more helpful than you might think. 

Here are four important reasons to take care of your finances before the holidays rather than after:

1.       Ease Your Mind to Enjoy Friends and Family

Rather than forcing you to think about bad things instead of good, consulting with an attorney about your finances can actually free your mind of the stress you’re already feeling.  Finding out that there is a light at the end of the tunnel can go a long way to helping you enjoy this festive season.  Sitting down with an attorney for a free consultation can give you a game plan on how to tackle your debt after the holidays.  

2.       End Harassing Creditor Calls

At Greenwald & Hammond, we don’t require full payment to begin working on your case.  In a lot of instances, clients only have a few hundred dollars to put down to retain our firm.  This is enough to get things going and allow us to field those harassing creditor calls for you.  With all creditor calls coming to our office, you are no longer worried that your holiday dinner will be interrupted by an unwanted bill collector.

3.       Start Off the New Year on the Right Foot

There are a lot of things that need to be taken into account when you file bankruptcy.  An attorney can guide you on the dos and don’ts involved in preparing to file, which will help you round out the year successfully. 

4.       Protect Your Tax Refund

Early next year is tax refund season.  It’s very important to talk to your attorney about possible tax refunds that are owed to you and to get advice on whether or not this may delay your filing.  In many cases, you can keep your tax refund and use it wisely, perhaps by paying the rest of your attorney fees in order to get your case filed.

This year, make your new year’s resolution early and vow to take the first step to freedom from debt, so that you can be free to have a wonderful holiday.

Submitted by:

Kerry Hammond, Esq.

Bankruptcy and Businesses

When you hear a business is bankrupt, your first thought is that it is finished.  As many may know, though, filing bankruptcy may not mean the end for a business.  Many large businesses use chapter 11 bankruptcy to restructure the debt of their business.  For many small businesses chapter 11 may not be a viable option as associated costs can be very high.

If a business files chapter 7, the business must be liquidated to pay creditors, and therefore the business will cease to exist.  What many people do not realize is that a business does not get a discharge.  That means that if a business files bankruptcy and tries to continue to operate, creditors may continue to seek payment of debts from the business. 

When an individual owns or operates a small business the individual is often liable for the debt incurred by the business.  In most cases, small business owners are asked to personally guarantee leases and business loans.  If the business fails, the individual remains liable for the debt.  As a result the individual may need to file a bankruptcy as a result of their failed or struggling business.

When an individual business owner files bankruptcy the individual is relieved of the business debt.  That does not mean that the business is relieved of the debt.  There are many factors to consider when filing a bankruptcy that is a result of a failed or struggling business.  The ownership interest in the business may be an asset in an individuals bankruptcy, however it may have so little value that it cannot be liquidated.  This is often true of personal service businesses. 

There are strategies that can be used to keep your business operating through and beyond a bankruptcy.  It is important to involve an attorney if you are a business owner filing bankruptcy.  At Greenwald & Hammond we work closely with business owners to determine how a chapter 7 or chapter 13 bankruptcy will affect the business and what consequences the bankruptcy will have on the debtor as well as the business. 

Submitted by:

Mindy Greenwald, Esq.

Think Twice Before You Cash Out That 401k

This issue comes up a lot in my initial consultations with clients.  More often than not, by the time someone comes to see me, their finances are completely out of control and they are sinking fast.  I can’t tell you how sad it makes me when I hear that someone took money out of their 401k, thinking it would get them out of debt, only to find that they still need to file for bankruptcy.  In these cases, that money is gone and the debt it went to pay would most likely have been discharged in their bankruptcy.

There are those times, however, when someone comes in to meet with me because they are treading water and know that they can’t stay afloat for much longer.  These people haven’t yet touched their retirement money, and I can help them determine whether it’s a smart move or not.  Together we can come up with a game plan that helps keep this hard earned retirement money safe for its intended purpose, retirement.

When you file for bankruptcy, there are categories of exemptions and dollar amounts associated with each category.  These dollar amounts represent the value in each category of property that is, in essence, safe from the bankruptcy trustee and your creditors.   Your 401k, or other qualified retirement account, is 100% exempt and safe from your creditors.  Keep in mind that you still have to include it on your petition, but once you do that you then take your deduction for the entire value.

The fact that this asset is 100% exempt makes it very important to keep it safe.  If you only owe $5,000 to Mastercard and you decide to take out a 401k loan to pay it off, and then pay yourself back with interest, that’s one thing.  But if you owe a large amount of credit card debt and are being sued for a card with a $5,000 balance, and you decide to take out that same 401k loan, it’s not as simple.  Paying the one creditor is a short term fix, but the creditors to whom you owe the rest of the money can just as easily get to the point where they are also suing you.  In this situation, it’s a snowball effect and can easily get out of hand.  You could end up draining your entire retirement account and be left with nothing but more debt that you couldn’t cover.

If you’re thinking of pulling money out of a retirement account, it’s important that you speak with an attorney before you do it.  Find out if it’s really the right thing to do before you cross the point of no return.  At Greenwald & Hammond, we offer a free consultation and can discuss keeping your exempt assets safe from your creditors.

Submitted by:
Kerry Hammond, Esq.

Timing Your Bankruptcy Filing During Tax Season

Many factors go into determining the best time to file your bankruptcy.  As the year comes to an end and a new year approaches, one thing to keep in mind is that in Colorado, there is no exemption for tax refunds.  This is something to consider when determining when is the best time to submit your bankruptcy petition to the court.

While Colorado exemption statutes may be generous as applied to certain assets, the state has no bankruptcy exemption for tax refunds or for cash (although cash attributed to income or social security may have exemptions available).  With that in mind, an individual preparing for bankruptcy needs to weigh the pros and cons of filing when a tax refund is expected.

To make this concept more clear, as the year goes on, a wage earner typically pays federal income taxes through wages that are withheld from pay. At the start of the next year, the wage earner must file a tax return.  A refund becomes available if the individual paid more taxes than required under the tax code.  If a debtor files bankruptcy in Colorado, the bankruptcy trustee is going to look to see how much has been paid in as federal withholding, if the amount appears to be significant or in excess of what the debtor should owe in taxes, then the trustee will request a copy of the debtor's tax return and may intercept or request turnover of the tax refund and use the refund to pay creditors.  It is important to keep in mind that the failure to provide copies of tax returns or turnover tax refunds when requested can result in the revocation of a discharge.

The big question is whether one should wait until a tax refund check is received and spent before filing or should the bankruptcy be filed at the risk of losing the potential tax refund.  When a substantial amount of money is expected, it would seem wise to wait until the refund is received and spent before filing, however keep in mind that the money should only be used for reasonably necessary expenses. 

If an individual decides to wait for the refund they must then use the money wisely.  Many debtors have medical and dental needs that they have been putting off because money has been so tight, it would be appropriate to use the tax refund for such needs.  It is also justifiable to use the money to pay a bankruptcy attorney and the bankruptcy filing fee.  Some other acceptable uses for the refund are basic living expenses like mortgage payments, moving expenses, groceries, clothing, household repairs and car repairs.  It is wise to consult with your attorney when you are unsure about whether an expense is reasonable.

There are many pitfalls to avoid when spending the tax refund prior to filing bankruptcy.  While it might be tempting to pay a debt owed to a family member or close friend, it could be detrimental to that friend or family member since the trustee may try to recover any money paid to friends or family within the year prior to filing a bankruptcy.  Another mistake people make is giving away the money to a family member, this may be considered a fraudulent transfer of assets and can cause problems for the individual on the receiving end.   It is important to avoid using the money for the purchase of luxury items.

While in many cases waiting to receive a tax refund may benefit the debtor, there are a few instances where it may not be beneficial.  If a debtor is being garnished and the amount that will be garnished by the time the refund is received is close to or exceeds the amount of the refund then waiting will not be beneficial.  If the debtor is facing a foreclosure sale and is hoping to stop the sale, then time is of the essence and the refund may be lost.  If a debtor is involved in litigation and costs are mounting, foregoing the tax refund may result in less of a loss in the long run for a debtor. 

Every case is unique and debtors should be encouraged to discuss the pros and cons with their attorney before filing their case.  The bankruptcy attorneys at Greenwald & Hammond are experienced, knowledgeable and willing to spend the time to discuss whether to file a bankruptcy before or after receipt of a tax refund. If you are considering filing bankruptcy, don't wait to speak to an attorney, get the answers and advice that can prevent you from making common mistakes that individuals make.  Call Greenwald & Hammond for a free consultation to discuss your unique circumstances.

Submitted by:
Mindy Greenwald, Esq.

If I File For Bankruptcy, Will I Ever Be Able to Buy a Home?

We hear this question from a lot of people that come to Greenwald & Hammond for bankruptcy advice.  The quick answer is yes, you will eventually be able to buy a home.  How long you need to wait isn’t as clear cut of an answer, as there are a few factors involved. 

In many cases, a bankruptcy isn’t the only thing negatively reflected on your credit report.  If you have a foreclosure, short sale, or deed in lieu on your credit as well, this can affect the timeframe you may be required to wait before you can be a homeowner again. 

In addition, anyone who has ever purchased a home, or looked into purchasing a home, knows that there are a number of different types of loans out there that can get you into your dream home.  Each type of lender has their own guidelines for lending post bankruptcy, foreclosure, and short sale.

In order to simplify, I have compiled information from many sources and below you will see an estimate of the amount of time you may have to wait to buy again, from a few of the most common lending sources.  These numbers are meant to be used as a guideline and each lender will have their own additional restrictions, but it’s a starting point.

Conventional:

• 7 years from the date of foreclosure sale
• 4-7 years from the date of completion of Short Sale or Deed in Lieu
• 4 years from the date of discharge in a Chapter 7 Bankruptcy 
• 2 years from the date of discharge in a Chapter 13 Bankruptcy

FHA:

• 3 years from the date of foreclosure sale
• 3 years from the date of completion of Short Sale or Deed in Lieu
• 2 years from the date of discharge in a Chapter 7 Bankruptcy
• 2 years from the date of discharge in a Chapter 13 Bankruptcy

                               

VA:

• 2 years from the date of foreclosure sale
• 2 years from the date of completion of Short Sale or Deed in Lieu (additional restrictions apply if the Short Sale was also a VA loan)
• 2 years from the date of discharge in a Chapter 7 Bankruptcy
• 1-2 years from the date of discharge in a Chapter 13 Bankruptcy

Keep in mind that these guidelines don’t take into account things like income and credit score.  You will still need to work on rebuilding your credit and be able to show valid income before any lender will approve your loan.  If you’re not sure whether you should file for bankruptcy, or allow your home to go into foreclosure, it’s a good idea to get some legal advice.  At Greenwald and Hammond, we offer a free consultation to give you the guidance you need.

Submitted by:

KerryHammond, Esq.

Cutting Back by Avoiding Instant Gratification

As a bankruptcy attorney I look at many clients' budgets and am always a little surprised when people with good incomes cannot tell me where their excess income is spent.  When a client is preparing for bankruptcy I ask that the client fill out a form indicating their income and withholding and a form indicating their expenses.  A surprising number of individuals are unable to state with specificity their monthly income or their monthly expenses.  In some instances, it would appear there is disposable income available and when I suggest that they should be doing fine and actually have extra money left over every month they stare at me in absolute disbelief because they don't.  

When I am confronted with a family that would appear to have sufficient income but are struggling I don't always have to look too hard to find where they have gone wrong.  I have seen bank statements with countless itunes charges, I have seen cable bills that exceed my monthly car payment and Wal Mart or Target charges that would make you think they bought the entire store.

We live in a time of instant gratification and excess.  I remember wanting to own a copy of Madonna's "Material Girl" but I had to wait until my allowance and decide if I should buy the Madonna album or save the money for the fringed boots that I so badly wanted.  Today, if I want Madonna's (or Lady GaGa's) latest I can tap a button on my phone, type in my itunes password and own a copy.  I do not open my wallet and I don't have to think, I mean it is only 99 cents.  Unfortunately it all adds up!  One app here, one song there, and before you know it you have spent a fortune.  Now throw in an entire family with smart phones and "on Demand" cable and you will find it really does add up.

Can we go back and teach ourselves and our children that we do not have to have the latest and greatest right now?  If you can find the strength to do it, it will save you lots of money over time.  When a client files chapter 7 bankruptcy, the court and the trustee may not care all that much about the debtor's budget but I care and try to help clients find a way to get by and avoid future problems.  If a client files for chapter 13 bankruptcy, the trustee will be concerned with the debtor's budget and the debtor will be expected to show that they have done some "belt tightening" and that their monthly expenses are reasonable and necessary for their well being.  That should not scare anyone away from filing bankruptcy after all it is a good lesson in discipline.

If you are spending more than you are earning, take time to figure out whether some of the excess is necessary.  Remind yourself that you do not need everything now.  Try to live with just a little less.  Hold off on purchasing new items, whether it be music on itunes, a pair of shoes at Nordstrom, or one less movie on demand.  Allow yourself an indulgence on a special occasion rather than every time you see something you want. 

If your budget is so tight that necessary living expenses exceed your current income then you may need additional help.  Do not let such a situation go too far before seeking help.  Avoid wage garnishments, repossessions and foreclosures by acting early and speaking with an attorney at Greenwald & Hammond to discuss your options in a free consultation.

Submitted by:
Mindy Greenwald, Esq.

Bankruptcy Has Never Really Been For Deadbeats

Many people have it in their heads that filing bankruptcy is for deadbeats.  We all know who I’m talking about, the ones who don’t want to work and who rack up credit card debt on frivolous purchases.  I think some of us want to believe that myth, mostly because that doesn’t describe us.  And if that doesn’t describe us, then we will never be in a position to need to file bankruptcy, right?  Wrong.

I’m sure those people are out there, some of us may even know one or two, by they’re not the majority of people that come in to speak to an attorney at Greenwald & Hammond.  Our “typical” consultation is with middle class people who have fallen on hard times.  There are many reasons for these hard times, but I find that they fall into one of three categories: loss of income, unexpected medical bills or home loan modification that never happened.  Sometimes it can be all three.

Not many middle class Americans can take the kind of income hit caused by the loss of a job or a drastic pay cut.  This can cause a snowball effect; less income leads to less money to pay bills, which leads to putting more on credit cards, which leads to higher minimum payments that can’t always be met.

Similarly, an unexpected medical emergency can cause you or your spouse to be out of work for a period of time (or permanently) and leave you with a large amount of out-of-pocket bills that your insurance didn’t cover.  This can put you back to the above paragraph of reduced income, which causes the same snowball effect.

Trying for a loan modification is a discussion for another time, but in essence you need to be delinquent on your house payments to even be considered for a loan modification.  If they deny you, you are back where you started as far as your mortgage payment each month, but you are also faced with arrears for all of the months you went behind.   This commonly leads to a foreclosure when you can't pay.  In theory you should have been saving those payments in a separate account just in case, but rarely do I see anyone who has done this.  Sometimes it’s because that money needs to be used elsewhere, and sometimes it’s just because you think you’re a shoe in for that loan modification and will never need to come up with those back payments.

Nothing that I’ve described here has anything to do with being a deadbeat.  Rather, these are things that can, and do, happen to the best of us.  Don’t let the stigma you’ve put on bankruptcy stop you from seeking out help with your finances.  Bankruptcy may not be the answer to your problems, but you won’t know until you ask.

Greenwald & Hammond offers a free consultation so that you don’t need to pay upfront to find out if bankruptcy is even an option for you.  Contact our office for more information.

Submitted by:

Kerry Hammond, Esq.