Holiday Shopping and Debt

With Thanksgiving over, and everyone now sick of turkey, thoughts now turn to Christmas and Hanukkah. If your finances are tight, this can be the cause of a lot of stress and concern. The holidays are an expensive time of year, with the purchase of gifts, holiday parties, and travel. If you are in the midst of a bankruptcy, or considering one, there are a few things to keep in mind.

First of all, don't let it ruin your holidays! I always say financial problems are temporary, but the important moments in life are forever. You should still buy gifts if that is something you like to do, even if they must be modest gifts. It truly is the thought that counts. Gifts can be homemade, or an activity, or even a card with some kind words. The holidays really are not about money, as much as retailers would want you to believe otherwise. Don't get caught up with spending for the sake of spending.

If possible, you should avoid large credit card purchases during the holidays. Credit cards are the most common method for buying gifts. If you are in Chapter 13 bankruptcy, you should not be using credit cards. Hopefully, you will have money put aside in these circumstances. If you are planning to file a Chapter 7 bankruptcy, you should avoid large purchases of over $500, as this could cause your case filing to be delayed. Large purchases or cash advances leading up to bankruptcy could result in a creditor objecting to your filing as abusive. Keep your attorney informed to make sure there is no problem.

Holiday travel can also be tricky, as credit cards are often used in travel, especially with hotel rooms and air travel. Once again, you shouldn't completely put your life on hold because of financial difficulties. But, if you have to travel and incur significant credit card expenses, let your attorney know. Delaying your case filing is always an option if need be. Or, this may be the year to have friends and relatives come to you. Better days are ahead, you'll be able to travel again, even if you can't now.

If you feel overwhelmed by holiday shopping while facing a tight financial situation, sit down and write out a holiday budget. I always tell people it is easier to get a grasp of your finances when you actually write things out and look at them on paper. Figure out who you really need to buy gifts for, and who you really don't. Yes, buy your children and grand-children gifts. But, you probably don't need to buy gifts for your adult nephew or neighbor. When you come up with a budget, you will feel less overwhelmed. The holidays don't need to be synonymous with debt.

The holidays are a great time of year to reconnect with friends and family, and to be generous. They are also a very stressful time of year for many people. Don't let your holidays be ruined by your current situation. Hard times are temporary. Plan accordingly, and enjoy your holidays!

The Danger of Bankruptcy Petition Preparers

Bankruptcy petition preparers are non-attorneys who offer to organize and "prepare" your bankruptcy petition for very low fees. I say "prepare" because they often leave much to desire. These services may be provided locally, or exclusively through the internet. Despite the draw of potentially low fees and costs, these services should be avoided at all costs, and the reasons are numerous.

Bankruptcy petition preparers often advertise to help you prepare and file a Chapter 7 bankruptcy for as low as several hundred dollars. For individuals in financial distress, this can sound enticing. However, given the work they actually do (and more importantly, what they DON'T do) it is not even worth it. Bankruptcy is a complicated area of law that even most experienced general attorneys do not attempt to file.

These preparers are not attorneys, therefore they cannot file your case and paperwork, give you legal advice, or represent you in your hearings and meeting of creditors. These are major problems. They will only give some general advice about filing your petition and schedules, so this will leave you trying to determine how to actually file your case. You will still be required to pay all filing fees, arrange to take all of the classes, and make sure all deadlines are met. These non-attorneys will not help with any of these issues.

If your petition is filed incorrectly, all of your debts may not be discharged, and you may remain liable for some debts. If deadlines are missed, your case will need to be refiled. If your schedules are not complete, the Trustee or a creditor may object to your case. And if there is a lien or lawsuit against you, they will not file any motions to stop them. Once the bankruptcy petition preparer has taken your information and payment, their "help" will cease. People in this situation often end up hiring an attorney just to deal with these problems.

And the fact that you will give them your information to be "organized" is the greatest danger of all. A bankruptcy petition involves large amounts of sensitive information, including Social Security numbers, bank statements and account numbers, retirement information, and other important data. Many of these preparer companies are not even located in the United States. Could you even imagine taking the risk of sending your Social Security number to a call center overseas? It is as dangerous as it sounds. But, this is exactly what you will be doing. There are no amounts of low fees to make this worthwhile.

Bankruptcy attorneys are legally and ethically obligated to protect your personal and financial information. Protecting this data is an important part of my job. Not sending your personal information overseas to a faceless "preparer" should be your primary concern! You personal and financial information is just too important.

The Bankruptcy Code and the Bankruptcy Court have taken steps to regulate and control these petition preparers. They are required to disclose that they are not attorneys. They must detail the limits of their services. However, since anyone can be a bankruptcy petition preparer, and they are not overseen or regulated by state legal bar associations, it is likely they will often fall short of these requirements. Once you have paid your money, and given over your personal information to these preparers, there really isn't anything the court can do to protect you. The damage is already done.

If you have engaged with a bankruptcy petition preparer, but wish to discuss your case and get actual legal advice, contact us. I will be happy to discuss your situation and help you find a solution to your financial problems.

Be Thankful For What You Have

Thanksgiving is a great time for reflection. Sometimes, recent reflection brings some sadness and difficulty. I am especially attuned to this reality because many of my clients, perhaps even most, are going through some of the most difficult times of their lives. However, very few of their situations, from a purely financial standpoint, should be viewed as hopeless. There is always something for which to be hopeful. That should be the focus this time of year.

Financial difficulties can cause strains that bleed into other aspects of life. They can lead to arguments and disagreements. But, very few should be viewed as permanent and unchanging. Credit card debts and medical bills can be discharged. Lawsuits can be wiped away. Late mortgage and car payments can be made current. Yes, these are temporarily stressful and distressing events. But, the important thing is, they are TEMPORARY. It is not worth losing sight of the bigger events in life, the more important and lasting things.

Family relations should come before money, even when money strains these relations. Bills come and go, money comes and goes; family does not. 

Health unquestionably should come before finance in its importance to life. If your family is physically healthy, if not financially healthy at the moment, be thankful. The things I do to help people clean up their finances occur a lot more easily than fixing unhealthy bodies and minds. Be thankful for your health not just this time of year, but throughout the year.

Holidays can be made more stressful by financial concerns, but keep the holidays in perspective. Piling up the most Christmas gifts is a lot less important than piling up good memories. Don't lose perspective about what is important because of your present finances which, believe me, can clear up faster than you think.

So, while right now might not be perfect, be thankful for what you have. Most legal issues can be cleared up with only some minor inconvenience. Thankfulness transcends these temporary concerns.

Should I Stay of Should I Go?

Deciding on whether or not you should keep a home in bankruptcy

Bankruptcy provides the option of keeping your home or walking away from it, whether you are current on the payment, or months behind. Sometimes this is an easy decision. If you love your home and want to live there the rest of your life, and you are current on the payment... of course you will stay. If you are six months behind on a home that you only purchased to make your ex-husband happy... you can go. But, sometimes there are situations that fall between these two extremes that are not so clear cut.

The bankruptcy discharge can eliminate your personal obligation on your mortgage loan. The "mortgage" is your obligation to pay, while the "deed" lists who has ownership rights. By wiping out your personal obligation, you eliminate the possibility of the mortgage company suing you for any deficiencies and penalties. This is very important if your home is going up for sheriff sale auction. Homes often sell far below their normal value in a sheriff sale, and this can leave you with a huge deficiency on what is owed. Bankruptcy is a great way to get out from under this obligation.

At the same time, Chapter 13 bankruptcy can be used to catch up on arrears on your home when you have fallen behind on the payments. The arrears are caught up over three-to-five years, and paid without interest. This can even save a home on the brink of a sheriff sale. As long as you have the income to save it, you can catch up on large arrears.

The dilemma arises when you are somewhere in between these extremes. For instance, you may be 6 months behind on a house you like, but you were having difficulty making the payment to begin with. Or maybe your payment is current, but the home needs major repairs. Deciding whether or not you want to keep the home in these situations can be a difficult decision. Here are some things to consider:

• How much equity do you have in the home? If your home is "under water" (that is, you owe more than it is worth), you should consider surrendered more that if you have a lot of equity. If you have equity, you should be everything you can to salvage the home, even if you just want to resell it yourself (remember, sheriff auctions often fetch ridiculously low bids)
• Can you realistically afford the payment going forward? You have to think long and hard about whether making the monthly payment will be feasible over the coming decades. This can be a hard reality to face, but living in a less expensive home can make life a lot easier. You don't want to be "house poor".
• Do you have other living options? Have you considered moving back with your parents or a roommate? Do you have a good rental lined up? It is easier to walk away when your next move is planned.
• How much do you love your home? If you really love it, and you can afford it going forward, you should stay! Sometimes people fall behind their mortgage because of a temporary loss of income. Once you are earning again, you can often afford to keep your home in Chapter 13.
• Does the home need major repairs? If repairs for foundation or structural damage are too great to finance, it is often times to walk away.

Keeping their home is often a first priority for my clients. If you have the income to afford the payment, you can always keep it in bankruptcy. But, if you are questioning whether it is worthwhile, contact us to discuss your options.

Jewelry and Bankruptcy

A common concern for my clients is whether or not they will get to keep their property. Homes, cars, and retirement accounts are the primary concerns. To a lesser degree, but still of importance, is jewelry. Jewelry can have both significant sentimental and actual value. From engagement rings and wedding bands, to family heirlooms, jewelry can have significant importance.

The good news is, the federal bankruptcy exemption laws directly address jewelry. 11 U.S.C Section 522(d)(4) allows debtors to exempt $1,600.00 in value for jewelry. If the filing is joint, each spouse may use the $1,600.00. In addition, you can also use the bankruptcy "wildcard" exemption if the value of the jewelry exceeds $1,600.00. This amount can be anywhere between $1,250.00 and $12,100.00 more in exemptions depending on how much of the "homestead" exemption you use (this is discussed in other posts). Suffice it to say now, in most cases, jewelry is sufficiently protected.

How is the value of your jewelry determined? Fortunately, the value is NOT the purchase price. Instead, it is the much lower resale price of your jewelry. Jewelry quickly depreciates, and jewelry re-sellers and "cash for gold" buyers typically pay around 1/3 of the purchase price. This method of valuation makes it much more likely that the exemptions will be sufficient to protect your jewelry, especially with the "wildcard" exemptions included.

Some types of jewelry, however, may have a high resale value. Some antique  and luxury watches, such as Rolex or Breitling, may actually INCREASE in value over time. It will be important to discuss these circumstances with your lawyer, and possibly even receive an appraisal to determine the current value. This may also be the situation for some heirloom jewelry. Of course, these situations are rare.

It will also be important to discuss any possible inheritances of jewelry or heirlooms. If you are currently inheriting, or will soon inherit a large jewelry collection, or a particularly valuable piece, let your attorney know when listing your personal property. This will potentially be considered property of the bankruptcy, and will need to be exempted. You will also want to avoid any transfers of jewelry before filing, as the Court may view this as an attempt to hide assets from your creditors. Speak with your attorney before doing anything involving a transfer.

If the value of your jewelry is very large, and exceeds the bankruptcy exemptions, it is still possible to keep it through a Chapter 13 bankruptcy. This would allow you to keep the jewelry by paying your unsecured creditors dollar-for-dollar the unexempt value of your jewelry. Once again, this is a very rare situation, but it is always an option to discuss with your attorney.

Contact us if you have any questions about bankruptcy and protecting your assets. We will be happy to look at your situation in a free consultation.