Creditors; Who are they?

Taking charge of your Bankruptcy starts with identifying your creditors.  Not all debts are discharged in a Chapter 7 Bankruptcy, but for an allowed debt to be discharged it must be listed!  A great place to start is running your credit report.  Did you know that you are entitled to a free credit report every year - click the link below to learn more:

FREE CREDIT REPORT

I say that your credit report is a starting point - not every creditor is going to report to the credit bureaus so do not get caught in the trap of thinking that your report, no matter how current, is complete.

Those creditors that have a zero balance do not need to be listed, but otherwise you must list them all.  Below is just a sampling of the various types of creditors that you may have:

• Credit cards,
• Medical bills,
• Student loans,
• Car loans,
• Unpaid taxes,
• Unpaid tickets (traffic, parking, etc.),
• Overdue storage fees,
• Obligations under leases or contracts,
• Personal loans,
• Promissory loans,
• Lawsuit judgments,
• Debts arising from traffic accidents,
• Domestic support obligations (child and/or spousal support),
• Fines, penalties and restitution,
• Property taxes,
• Intoxicated driving debts,
• Condo, cooperative and Homeowners' Association fees, and
• Loans from a retirement plan.

Once you have identified all of your creditors make sure that you have a current address, account number and amount owed.  Frequently, the original creditor may transfer your account to a collection agency for follow-up.  If this is the case, then go ahead and collect the information on both entities keeping in mind that the account numbers, addresses and amounts may change.

I mentioned previously that not all of your debts are discharged in a Chapter 7 Bankruptcy.  For example, student loans and tax debts are not discharged unless you can prove that you are an exception to the rule.  Also, Domestic Support Obligations like child support and alimony are not dischargeable.  Additionally, debts owed to a spouse or child that were obtained through a divorce or separation are nondischargeable.  Also, fines that were imposed by a federal, state or local government are not discharged.  The list goes on - don't get discouraged, most folks considering Bankruptcy are dealing with overwhelming consumer debt such as credit cards and medical bills.

Interesting Facts

In 2010, in Virginia, approximately 23,949 Chapter 7 Bankruptcy Petitions were filed.

Approximately 85% of consumer filings were for Chapter 7.

The median average monthly income reported by all (nationwide) debtors was $2,872.

Chapter 7 cases were historically handled within approximately 150 days in Eastern VA.

 
The graphic to the left was obtained from the U.S. Trustee website and represents the number of Chapter 7 Petitions filed in Virginia for the period 1999 through 2009.  Note the significant drop in 2006 - the year following the revision to the Bankruptcy Code.

If Bankruptcy may be in your future, please give us a call today and make an appointment.  We'll take the time to listen to your situation and walk through the various options that may be available to you!  You will not know unless you call! 

 

(757) 410-9263

 

Chapter 7 Introduction

Personal Bankruptcy typically involves two types; a Chapter 7 Petition or a Chapter 13 Petition.  The Chapter 7 Petition is what most folks likely consider as "Bankruptcy".  The outcome of a Chapter 7 is to have your unsecured, non-priority, debt discharged.  Please understand that, typically, Student Loans, support payments and taxes are not dischargeable in bankruptcy. 

A Chapter 13 Bankruptcy filing tends to be much more complex than a Chapter 7 in that it involves a repayment plan.  In Eastern Virginia your repayment plan may consist of repaying a minimum of 1% of your unsecured debt up to 100%.  The length of the repayment plan will last between 36 and 60 months.  As with most things associated with the law, there are always exceptions, and this is another example.  We'll talk about the length of your repayment plan when we speak more in depth about Chapter 13's.  However, while there is a repayment plan it is (1) based on what you can afford to pay, and (2) includes several provisions that can prove helpful.  For example, with a Chapter 13 Petition you can handle any arrears that you may have, i.e., if you've missed any payments then you can make them up under the Chapter 13 Petition.

I will use the next several postings to talk about the various parts of a normal Chapter 7 Petition.  The topics will follow, hopefully, the following list:

1. Identifying your creditors;
2. Inventorying your property; real property versus personal property;
3. Student Loans;
4. Mandatory counseling classes;
5. The Means Test;
6. I'm a business owner, does that matter?

Additionally, as I develop these topics I may change the sequence or add topics that might be of interest to folks.  I'm going to keep these going during the holidays so make sure that you stay in touch.  Remember, there is help for what may seem like an insurmountable problem.  Don't get discouraged; instead, be proactive and take charge of your path to recovery. 

Wishing each of you the safest and happiest of holidays!  ... once the holiday madness passes, if you would like to talk, please, give us a call....(757) 410-9263!

Our First Date: What to expect!

Ok, so hopefully you have pulled your paperwork together and now you are ready to go out and find a Bankruptcy Attorney (see my earlier post about paperwork).  First, let me address a misconception about Attorneys.

Not all Attorneys charge a consultation fee.  Those that do, from my experience, are simply trying to weed out the serious from the 'just looking for free legal advice.'  Folks must understand that Attorneys primarily earn their living from applying their knowledge and experience.  When that is given away for free - you don't need the Attorney!  Therefore, a free consultation is intended to be used to meet the attorney and see if they are a good fit for the issues that you bring to them.  The free consultation is not intended to answer all your specific questions about how you should answer a traffic ticket, or how to file for divorce or bankruptcy.

Our trip towards filing a Bankruptcy Petition ( the formal document that will be filed with the United States District Court, Eastern District of Virginia, Norfolk Division) for you begins with a FREE consultation.  During that time we'll share - you providing some specifics about your situation and we'll try and provide some answers, such as:

• Are you married? and, will this be a joint or individual filing?
• Do you have a mortgage? How about car loan(s)? and, how about any other secured debt?
• Are you working? What income sources do you have?
• How many dependents do you have?

That is just a small sampling of what we'll discuss.  We really won't talk much about each of your debts and creditors, but will focus primarily on whether or not it appears if you would qualify for a Chapter 7 (Chapter 7 and Chapter 13 are two specific forms of personal Bankruptcy).  My intent with our initial meeting is for you to leave (1) with a solid understanding of what the Bankruptcy process consists of; (2) being comfortable with me as an individual and professional; (3) understanding the potential outcome of a Bankruptcy; and (4) what your next steps are.

Additionally, when you leave the office after our first meeting you will take with you a folder containing:

• A process flowchart of the overall steps included in filing,
• A personal property inventory worksheet,
• Information concerning required counseling (a pre and post filing counseling class is required of each filer - they can be taken online!) that must be completed,
• Our contact information and e-mail address,
• An informational brochure on filing Bankruptcy, and
• A clear understanding of our low fees!

The information that we provide will be applicable regardless of who you have assist you.  My goal when you leave the office is not what you might expect; I truly want you to (1) understand the process and how it applies to you, (2) realize that there is hope, and (3) appreciate that a Bankruptcy really can provide you (and your family) a fresh start.  Now I am human so yes I want your business - but, I want it because you feel comfortable with us and not because you were bowled over with a pushy sales pitch!

Confession Time:  I strive to always be prompt in returning my calls, courteous and respectful of others, professional in all my dealings and to place your interests above all others!  However, I am human, and when and if I mis-step, I am humble enough to apologize!  My personal ambition in life is to be of servitude to others before myself.

Before we meet, you must understand that I have an engineering background so be expecting to be wowed by my mastery of a White Board and and a handful of colored markers!  I'm working on getting some of these up on YouTube (another reason to Like us on Facebook!).

Be looking for my next blog where I will try and simplify the differences between a Chapter 7 Petition and a Chapter 13 Petition, and what determines which one you may file!

I need to file; What records do I need?

Now that you have decided that you both (1) need to file Bankruptcy, and (2) want to file, you probably want to start doing something productive towards that goal.  Therefore, go ahead and start gathering the following which you will need to provide to your Bankruptcy Attorney:

1. Last fiscal year's Federal and State Tax Returns and the associated W-2's.  If you don't have your returns then go to the IRS website and request a copy of your TAX Transcript.
2. Copies of your pay stubs for the last 6 months.  We do not count the month in which you plan to file, so if you're planning on filing in January, then December is month 1, November month 2, etc., up to #6.
3. Collect all of the bills that you are getting from your creditors.  The petition will list the creditors by Name, Address, Account Number and Amount.  A good way to capture the information is from the monthly statements or bills.
4. If you have a Whole Life Insurance Policy (meaning that it has cash value TODAY), then you will need to get a statement as to the current cash value of the policy.  If your insurance is through work, then typically it will be a Term Policy (meaning it simply provides a cash pay-out in the event of your death, but you cannot make a loan against its cash value).
5. If you own your home, you'll need a copy of a current mortgage statement.
6. If you have loans for your vehicles, go to the DMV website and obtain the VEHICLE Transcript for each vehicle (NOT your driver's transcript). 
7. If you have had any vehicles, homes or other property repossessed or liens placed against them then having the associated court documents handy will be helpful.

Organization is key!  To truly take advantage of the opportunities that Bankruptcy presents you means that you must take control of the process. Knowing what documents you have and where they are can go a long way towards simplifying the overall process and facilitating the discharge.  What I have found useful is a 1-2 inch 3-ring binder with dividers (Taxes; Pay Stubs; Bills; Car Info; House Info; Insurance; Questions for the Attorney; etc.).

Now that you are gathering together this information and providing some organization to it, it's time to get a better idea as to what is involved in this thing called Bankruptcy.  Before you actually meet or start interviewing prospective attorney's you'll want to have a better understanding of what the actual process is - we'll take the next several postings to talk about the process - what is actually involved in filing a Bankruptcy Petition.  Click over to my website and you'll see a comprehensive flowchart detailing the many steps involved.  Before we start peeling back what is involved in filing, there is one more bit of information that you need to know.

The next significant event after actually filing will be the Meeting of Creditors, or 341 Hearing.  We'll talk more about this later but for now just understand that it is a mandatory hearing at which you, and your spouse if they filed also, will be placed under oath and questioned by the Trustee.  This is not an interrogation, but primarily an informational hearing that the Trustee uses to clear up any outstanding issues and/or questions.  Right now, just know that you will need a Government issued photo ID card and your Social Security Card for identification purposes at the Hearing.  If you don't have your Social Security Card make sure that you tell your Attorney early on because there are alternatives!

Your Credit Score: So what if it drops!

Americans are probably more aware of their individual credit scores now than at any other time in history.  The entire concept of the credit score has more or less morphed into a type of larger than life indicator of financial health.  However, a great credit score actually indicates that you have debt - not that you don't have any!  So why is it that a family with no debt would have a lower credit score than a family with debt?

Keep in mind that the folks who use your credit score are those folks who want to add to your debt load so that they can benefit from the interest payments!

Given that bankruptcy is a means toward a new start - a fresh start - then the fact that your credit score may drop anywhere from 150 -200 points (based on a quick Internet search) may not be the problem we have all come to think.  A fresh start is not intended to put you in a position to get new credit driven debt - but to minimize your use of credit and allow you to live within your means - a cash only existence.

To take this thought further, let's assume that you already own your home (meaning you have a first and maybe even a second mortgage) and even a car loan.  It is very possible to keep all of these things even after filing bankruptcy (a Chapter 13 (more on that later) Bankruptcy will even allow you to catch up on missed payments).  Therefore, is it not fair to say that your credit score - whether high or low - is of less significance since you're not trying to qualify for credit?

Your credit score is important, but let's keep it in perspective!

Is Bankruptcy an option for me?

To start with let me dispel what I consider a myth.  The vast majority of folks that I have had the privilege to help did not get in their present financial position out of negligence, or what I would call irresponsible behavior. Most folks, like allot of Americans, have lived their daily lives being only one event away from a financial disaster.  For example,

• How many folks do you know that could afford to live on unemployment alone for 3-6 months?
• How many folks can afford to be out of work due to injury or illness for a month or longer? 
• If your spouse were to suddenly leave (no longer providing income) could you continue to live like you did last month?  and,
• Who didn't loose their life's savings in the real estate market recently?

Bankruptcy can be, and often is, the right strategy for an individual or family to follow.  I say strategically because when it is done properly and with the right intent it truly can provide you a fresh start.  However, it should never be the first option you think of as there are often many less intrusive options.

For example, depending on the type of debt, you may want to consider ...

• Credit Cards .............work with the card holder to reduce your interest payments.
• Mortgages .................work with your mortgage company to apply any missed payments to the end of the term of the mortgage.
• Medical Bills ..............contact the individual providers to work out payment plans.

The key to being able to work with a creditor is to contact them early on when you first anticipate that you might be in a pinch!  Communicate with them early and often is the best game plan.

One of the things that most folks do not understand is that often creditors will not work with you until you are already 3-4 months behind.  The thinking here can be as simple as this:  if you are current with your bills then what's the problem.  Companies use the fact that you are behind as the indicator of the problem - otherwise, from a business perspective, they would effectively be loosing money lowering your interest rates!  Welcome to capitalism at its finest!

If you've tried everything short of bankruptcy and you are starting to get calls or letters about...

• Court action,
• Warrant-In-Debts,
• Foreclosures,
• Suspension of service (basic utilities, etc.)

Then it is probably time to meet with someone to talk about the opportunities that Bankruptcy can provide.  Below, I include some real world examples of the benefits of filing.

What Bankruptcy can do for you ...

• Upon filing, immediately stop any type of debt related court action that is (1) already filed and scheduled for a hearing, or (2) being threatened by a creditor.
• Stop payroll garnishments.
• Stop foreclosure actions on your home.
• Stop repossession actions with respect to your car.
• Stop the phone from ringing off the hook.
• Stop the constant stream of mail from bill collectors.
• Keep the light and water on.
• and, if your car was recently repossessed, you may be able to get it back!

The bottom line is this, when your debt load gets to the point that you can't sleep at night, it is a constant stress factor between you and your spouse, or a whole host of other things ... make an appointment and speak with someone. 

Overwhelming debt can cost allot more than money;

what is it really costing you? 

Let's Get Started!

One of the things that I find rather frustrating about blogs is that quite often they just ramble on - while I appreciate that everyone has something to share, I often find myself pressed for time and am looking for specific answers or guidance.  Therefore, with the assistance of a great SEO company, Internet Highway, as this blog comes to life I want to give it some direction.

Speaking specifically to Bankruptcy and Family Law, when folks have to seek out an attorney it is most likely because they are in need of help, not because they have an overwhelming desire to bond with someone they pay by the hour!  (no jokes please)  Most folks, prior to actually making an appointment to speak with someone, likely do some Internet searching first.  Given that premise I undertake this blog for two reasons.

First, I want to introduce myself and allow folks to get a better understanding of who I am and, more importantly (at least it would be for me), is to better understand the kind of lawyer and person that I am!  Let me try and explain; my wife's favorite joke is "What is the difference between a lawyer and a catfish?"  (sorry, you aren't going to get the punch line out of me!) and, because we all know at least one lawyer joke, my intent is to differentiate myself from the reputation my profession has earned!

Secondly, and personally of greater significance, is to provide some help!  A blog in and of itself is not going to reach out and make your problems go away, but hopefully, it will at least convey to you, a friend or a family member, that there is someone out there that cares and can help!  When life reaches out and grabs us with overwhelming family problems, or the creditors calls are getting intrusive, is when we sit down at the computer and try to figure out what to do.  I want this blog to be the lifeline that you, or someone that you know, can hang onto.

Understanding that this is how I make my living - this is what puts food on the table - Yes, I would like your business.  However, I want you to understand that as an individual (with my many flaws, quirks and less that always perfect reactions) I practice my profession with the foremost thought to help!  In short, if I do not think that I can help you, or that you even need the services of an attorney, then I will tell you.  If I know, I'll likely point you in the right direction, either to another professional, or maybe to a site and show you how to do it yourself!

So, in the coming weeks and months I am going (OK, what I really mean is that I'm really going to try hard and do this) to post several times a week.  Since I call myself a Family Law and Bankruptcy attorney that will be the focus of my topics.  I don't intend to make this a totally self-help blog - meaning that I'm not going to teach in such detail that you don't need me!  (Remember, I did say that this is what puts food on my table).  What I will write about are things that get you thinking about what you can do or which direction you should head.  For example, "Is Bankruptcy right for me?", "What does it mean if I adopt my step-child?", "What does Chapter 13 mean?", "Can I stop this foreclosure?", or "Do I really need a will?".  If you need to talk to someone about what to do, then I hope that you will consider me your resource!

So, I hope you stumble across this site and take the time to read a posting or two.  If you find them provocative or helpful then take a sec and post a comment.  Maybe share them with a friend that might need a chance at a lifeline.  Seriously, help me help someone else!

Have a Tebow kinda day!
(stand up for what you believe in)

Number of Consumer Bankruptcy Cases Filed Drops

Consumer Bankruptcy filings declined through November, 2011 - down 5% from October.  This slide continues the year long trend in that filings are down 12% overall since last November.  While some may think that the long awaited recovery is gaining momentum, others, myself included, look at it somewhat differently.

 

 

It is my personal opinion that the number of filings are down for a myriad of reasons:

 

 

First, I believe that those folks who were pressured into filing Personal Bankruptcy, particularly, either Chapter 7 or Chapter 13, have already done so.  By pressured I mean by their creditors.  When creditors are actively pursuing collection on debts is when most folks are probably more likely to file.  For example, when a creditor initiates court action, like a warrant-in-debt (Virginia), Garnishments, and/or Foreclosures, etc., folks turn to Bankruptcy to stop the pursuit.  Once someone files a good faith bankruptcy an Automatic Stay comes into play effectively stopping a creditor's pursuit.

 

 

Second, with unemployment elevated anywhere between 8-15%, depending on your source, there are a considerable number of families out of work.  Loss of work invariably causes a reduction in assets.  By this I mean that when the income stream is disrupted we are more likely to have less assets or "things" for a creditor to try and take.  For example, when there is no paycheck a creditor may decide not to pursue the individual debts because they do not see any return.  It is a simple business decision to avoid the fees of trying to collect on a debt if the debt is noncollectable.

 

 

When someone does not have the personal assets to cover outstanding debts, then that person is ofter referred to as being judgement proof.  A creditor gains no benefit from obtaining a judgment if they are not able to collect on that judgment - i.e., judgment proof; and ...

 

 

Third, those folks who may be likely candidates for personal bankruptcy have simply decided that at the present time they will simply turn off the phones.  We've all been there with that late bill for a creditor who calls every minute of every day!  I would bet Mitt Romney's $10,000 that there are folks that have discontinued home phone service to avoid creditors - we all now have cell phones anyway, right!

 

 

So, unfortunately, I do not think that simply because the number of filings are down month to month is a positive sign that good times are coming.  The advice that I would offer is (1) get your financial house in order, now not later; (2) if you are questioning whether bankruptcy is right for you, strategically, then give us a call because dealing with the problem today means YOUR recovery happens sooner than later; and (3) remember that buying on credit is only spending tomorrows paycheck today!

 

 

Be Blessed and have a Tim Tebow kinda day!

(stand up for what you believe in!)

 

 

Kirk

How is my Credit Score Affected if I Miss a Payment? KDB Law Firm Credit and Bankruptcy Part Two

Financial crises usually don’t happen over night. If you are like many individuals, the financial difficulties you may be facing have crept on you slowly. Credit cards that once had 0% interest may have increased after a year, or maybe the number of credit cards you have has increased over time, and now you find it is hard to keep up with the minimum payments.  An unexpected illness or injury can strain your finances. Maybe you have lost your job or have recently gotten divorced. All of these things can add up to financial crisis, where suddenly you don’t know how to pay all your bills on time.

If you are in this situation, you are certainly not alone.  You may be wondering what happens to your credit score when you are no longer able to pay your bills on time. As we discussed in Part One, paying your bills on time (by paying a bit in advance) is the best thing you can do to improve your credit score. Conversely, not paying your bills on time will negatively affect your score, as 35% of a FICO score is your payment history. The most important factor to a potential lender is whether or not you will pay your bills in full and on time. The more recent your good (or bad) payment history, the more important it will be for your credit score.

According to http://credit.about.com/od/usingcreditcards/a/latecardpayment.htm,

“Four Things Happen When You Pay Late:

1. Your creditor will charge a late fee. Your next billing statement will include a fee for the late/missed payments. Late fees typically range from $15 to $35. You'll receive a late fee each month your payment is late.

2. Your interest rate could increase. Creditors don't just penalize you with a fee, they'll often increase your interest rate to the default rate. This is the highest interest rate charged by a creditor usually as a penalty. The higher interest rate increases your finance charges making it more expensive to carry a balance.

3. The credit bureaus are notified when your payment is more than 30-days late. An entry is added to your credit report and will stay for seven years.

4. Your credit score will drop. Because payment history makes up 35% of your credit score, late payments can have a significant effect on your score affecting your ability to get new credit in the future. “

However, it is important for us to note that not all late payments are the same. While thirty- and sixty-day late payments affect your credit score more in the months they occur, they affect your credit score less as time passes. Ninety-day late payments, on the other hand, are more harmful to your credit score, and can be just as much a hit to your score as a collection.

At this point, many of you may be asking if bankruptcy will hurt or help your credit score. That is a very good question, one we will discuss in Part Three (coming soon!) of our series on credit and bankruptcy. Be sure to visit http://www.KDBLawFirm.net/ for more information.  

Be safe and take care! ~Kirk Berkhimer, Your Virginia Beach Bankruptcy Attorney.

Follow me on Twitter @Norfolk_Lawyer for more credit and bankruptcy information!

How is My Credit Score Calculated? KDB Law Firm Credit and Bankruptcy Part One

Your credit score is an important number that determines your rate of interest on loans and credit cards. Do you ever wonder how your credit score is calculated? If you are like most people, your credit score is important to you, but it may also be a bit of a mystery.

Many of my clients have asked how their credit score is calculated. Let’s start with a little credit score 101.  The most common score used is the FICO score. The score, the 3-digit number, is calculated using several different inputs. The largest portion of the score is based on your payment history (35%); followed by your overall debt level, or amount you owe (30%); the actual length of your credit history (15%); the number of inquiries, also known as new credit, (10%); and closed out by your mix of credit (10%).  A detailed explanation of a FICO score breakdown can be found here: http://www.myfico.com/crediteducation/whatsinyourscore.aspx.

Based on this information alone, the most important thing you can do to improve your credit score is to pay your bills in advance! What is the reasoning here? Well, 35% of your FICO score is based on your payment history. Paying in advance ensures that your bills will be paid on time, because most companies do not post payments received on the day they receive them. Paying off your bills in advance of the due date ensures that your payment is posted in time and keeps your credit score healthy in the “Payment History” category of your FICO score.  Just keep this in mind- 35% of your score is simply paying on time! So post your payment in advance of the due date and you will help your credit score.

What happens when your financial situation becomes overwhelming to the point of NOT being able to pay your bills on time? To find out, read Part Two of our Credit and Bankruptcy Blog series. And be sure to check out our website http://www.KDBLawFirm.net for more information.

Be safe and take care! ~Kirk Berkhimer, Norfolk Bankruptcy Attorney.

Hey, Follow me on Twitter @Norfolk_Lawyer for timely updates and info!