Filing Bankruptcy? Now’s a Good Time to Learn About Budgeting

Over the last few years many Americans have been faced with filing bankruptcy as a last resort. For some of them, the reason they ended up in bankruptcy is because of not knowing how to budget their resources properly. Many people today live by the rule of buy it now and pay for it later and sometimes lean towards more of the buy it now part of the equation. It’s easy for a bankruptcy attorney to take a look at someone’s monthly income and give them a basic household budget. When filling out a bankruptcy petition, the bankruptcy attorney will have to decipher all of individual’s debts as well as all of their expenses. When sifting through this mess it becomes easily apparent of where all the lost money is going. Much of the time it’s plain old overspending. Although everyone wants to have a 60 inch LED big screen, it doesn’t mean that everyone can afford one. When going to a local electronics store, the salesman will offer an easy payment plan to send the person home with it. The problem is, the person is not considering other purchases and payments they have made in the past. It’s an emotional purchase and after a couple months go by it becomes apparent that it was probably unnecessary.

For a bankruptcy attorney calculating the income of an individual is very easy, especially for those that are getting a fixed wage, on Social Security or receiving unemployment benefits. It’s a set amount and all the attorney needs to do is to deduct the imperative basic living expenses from the equation leaving whatever is left over to decide what’s really necessary to keep. In America today, many young couples are living way beyond their means. They rely heavily on two incomes and if one of them goes away, everything falls apart quickly. Many American families will have two automobile payments and a mortgage. It is true, that you need to put a roof over your families head, but how extravagant does it have to be. Back in the 60s the average home was about 1000 square feet. Today, the average home in the United States is around 2400 ft.². Families are not any larger, but people say they “need” more space to live in. In 1960, the entire consumer debt and government debt for the United States was at $1 trillion. Today, the debt for the entire nation has surpassed $55 trillion and is still climbing. It’s no surprise that people, cities and businesses alike are all filing bankruptcy to stave off the creditors.

Arbitration Versus Litigation in Financial Fraud Cases

If you have suffered losses from securities fraud, there are several factors that help in determining which legal proceeding will best fit your claim:

· The amount of money you lost

· The amount of money you have to spend on legal proceedings

· If you were the only victim of fraud, or if other investors were also wronged by the same stockbroker or investment firm.

Arbitration is currently the most common option for individual investors proceeding against investment firms. This is used mostly for individual investors who did not lose large sums of money and do not have the funds to take on an extensive suit against the stockbroker. Arbitration often works against the investor. You should talk to an attorney specializing in stockbroker fraud before you choose this option.

Litigation against investment firms usually involves individuals joining together to file a class-action lawsuit. This option pools together resources in order to make a large case against the defendant.

Arbitration: An individual option

Arbitration is an alternative to litigation in which two parties at odds submit their claims to a panel of third-party arbitrators. These arbitrators review claims and execute a binding legal decision. Traditionally, the arbitration panel consists of one professional within the field of securities and two public arbitrators from outside of the securities field. These professionals are often attorneys, accountants or bankers, educators or judges. The U.S. Securities and Exchange Commission has recently established that an investor has the right to request an arbitration panel consisting of all public arbitrators, but this request must be made soon after the arbitration process begins.

Arbitration is meant to be a quicker and cheaper way to settle disputes compared to the traditional legal system. Proceedings are held in a conference room and involve months of preparation. The rules of arbitration are complex and strictly enforced, which often gives the benefit to large investment firms over the investor. Arbitration awards are only subject to court review in a limited number of situations. If you plan on settling a claim against a securities firm in arbitration, you should contact an attorney who specializes in stockbroker fraud as soon as you decide to take action.

Litigation: Power in Numbers

Most litigation that occurs in cases of stockbroker and other investment fraud transpires in the form of class action lawsuits. Class action suits unite the grievances of multiple investors into a centralized case against an investment firm or stockbroker.

Class action claims are often formed around fraudulent behaviors such as churning, unsuitability, or excessive trading. Any investor involved in a class action suit must have suffered financial loss during the class period-the time period during which the defendant company was reportedly participating in securities fraud.

A federal court determines if the filed grievance meets the requirements for a class action lawsuit. If so, a lead plaintiff is appointed by the court to represent all the members of the suit. Usually, the lead plaintiff has the largest financial interest in the court’s decision.

A class action lawsuit is a good option for victims of stockbroker or other investment fraud. The suit pulls together the resources of many in order to stand up to large investment firms.

Bankruptcy and Your Vehicle

The bill collectors are calling you and everyone you know, your wages are about to be garnished and you can barely pay the necessities. You know you need to file bankruptcy. So what is stopping you, the fear of losing your car, truck, or motorcycle?

In most cases when you file bankruptcy you can keep your vehicle. Of course, it is a little more complicated than just file bankruptcy don’t worry about your car. This article will explore several scenarios I have dealt with in the past dealing with bankruptcies and client’s vehicles. Motorcycles come with a caveat, here it is… Motorcycles are slightly different from other vehicles in that they can been classified as non necessity luxury items so contact your attorney to see what your specific options are regarding motorcycles.

Scenarios in a Chapter 7 Fresh Start Bankruptcy.

Scenario 1. You owe nothing on the car and it is not worth that much. You do not make enough money to cover even your basic needs, you have a car and you do not want to lose it. Chances are if you have a car in this situation you own it outright. Whether you can keep it or not will depend on the value of the car. In Washington, for example, the automobile exemption for an individual is $3450.00. Washington also allows a wildcard exemption of $3000.00. If your car is worth $4500.00 in its current condition, an individual could use the full motor vehicle exemption and then use $1050 of the wildcard. That will fully protect your car and still save $1950.00 of your wildcard. Your car is safe.

Scenario 2. You owe nothing on the car but it is worth more than the exemption value. This is the most complicated scenario in a chapter 7 bankruptcy and may be better dealt with in a chapter 13. Nevertheless, there are options in a chapter 7. Let’s say the car is worth $10,000.00. As discussed above, you can use the current vehicle exemption of $3450.00. You can then add to that the wild card exemption of $3000.00. That protects $6450.00 of value in the vehicle. meaning that you have $3550.00 unprotected. Now we have a couple of options.

You could:
1) Let the trustee take and sell the vehicle and use the proceeds to pay off some of your creditors. If you do this, the trustee will cut you a check for $6450.00 and use the $3450 that is unprotected to pay some of your creditors. You could then use this money to help get a new car or to buy a used car outright.
2) Try to work out a deal with the trustee to repay the unexempt equity. Trustees are usually willing to work out a reasonable payment plan to allow you to keep something like a vehicle. Common terms might be to pay back the equity in six equal installments, or to make a down payment with a monthly payment that ends in a larger payment when you get your tax refund. You need to be careful with this useful arraignment, if you default on your payments your discharge could be denied or revoked.
3) Try to get a new loan on the car after the bankruptcy is finished which would allow you to pay the equity to the trustee. You would then have a car payment to pay the newly incurred loan.

Scenario 3. You owe less on the car than what the car is worth. If you are looking to file a chapter 7 to obtain a fresh start and avoid making a chapter 13 trustee payment, you should be able to protect that car. Say the car is valued at $15000.00 and you still owe $12000.00. In this case you have $3000.00 in equity. Because the automobile exemption is worth more than the equity you have in the vehicle, your car will be protected. You will need to speak with your attorney about what to do during and after the case, but you will need to maintain your loan payment if you wish to keep the vehicle.

Scenario 4. You owe more on the car than it is worth. In this scenario you might owe, for example, $15000.00 on a car that is only worth $7000.00. You have several options under this scenario.

You could:
1) decide to let go of the car. Why pay more than double the value of anything? You could surrender the vehicle and then look to purchase a vehicle with better terms after the discharge;
2) You could continue to pay on the vehicle at the terms provided in the loan agreement;
3) We could seek a redemption loan whereby you get a new loan that is only up to the value of the car in its current condition. In this case you need to qualify for the new loan and there may be additional attorney’s fees but it could potentially save you a lot of money and keep you in a car that you love.

Scenario 5. Bonus Scenario! You have unexempt equity in your vehicle but you also have tax liens which attach to personal property. This one is a little tricky, but if you have no other equity in any other property and the amount of the tax lien is greater than the unexempt equity in your vehicle, the trustee is not likely to bother with you or your vehicle. The down side to this is that if they were to take and sell the car for the unexempt equity, they would then use that money to pay off or to pay down your tax lien. If the trustee leaves you and your vehicle alone, you are still going to have to find a way to deal with those taxes once your bankruptcy is done.

Scenarios in a Chapter 13 repayment plan bankruptcy:

Scenario 1. You owe nothing on your car and it is worth less than the exemptible amounts. Under this scenario, your vehicle would have no impact on your chapter 13 plan payment.

Scenario 2. You owe nothing on your car but it is worth more than the exemptible amounts. Under this scenario, we have to offer the unexempt value to the creditors in the form of your trustee payment. While this goes beyond the scope of this article, we can pay the unexempt value by way of the trustee payment over a period of time lasting as long as 60 months. This is a valuable tool if you have a car that is worth a lot of money and you cannot bear to part with it.

Scenario 3. You owe money on the car and you want to keep it. This scenario gets complicated depending on whether the loan on your car was taken out at the time that you bought the car. It also matters as to how long ago you bought the car. If you bought the car more than 910 days ago, we can cram down what you pay on the car based on its current value. So say that you owe $15000.00 on the car but it is only worth $7000.00, we can propose a plan that only pays that creditor back $7000.00 as a secured claim. We can also lower the interest payment on the car depending on the rate that the loan is for and depending on the jurisdiction. If you bought the car less than 910 days ago, we may still be able to lower the interest rate that you pay on the car, but the full dollar amount of the outstanding loan would have to be paid back as a secured creditor.

Scenario 4. You owe money on the car and you just do not want it any more. In this scenario a chapter 13 can also be a good option depending on what the rest of your financial situation looks like. We can propose a plan that surrenders the collateral. The lien holder will come and get the car. They then have to sell it and credit your account for the amount of the sale. In the chapter 13 they are then able to file an unsecured claim for the remaining balance. The benefit to you though is that you will end up paying less than you owed (possibly zero) and paying no further interest on the loan.

Conclusion: As you can see, there is no simple answer to what happens to a car in a bankruptcy. The good news though is that there are many options that allow you to keep your vehicle and still other options that will allow you to escape from a bad deal. If you find yourself in financial difficulty and the thought of losing your only car is stopping you from filing, call your local bankruptcy attorney to discuss which option might be best for you.

How To Find The Right Bankruptcy Attorney

At the height of the Great Recession in 2009, more than 1.4 million people filed for bankruptcy protection. As the American economy struggled to regain its footing, that number actually increased the following year. Nearly 1.6 million citizens filed for protection in federal courts in 2010, according to statistics released by the Administrative Office of U.S. Courts.

Though filings have declined of late, tens of millions of Americans are in constant danger of being overwhelmed by their debts. Not surprisingly, lawyers who work in this field are in high demand. In this article, we will discuss exactly what these legal professionals do and how they can save you from losing everything.

But before we begin, nobody wants to file for bankruptcy. Although it is quite common, filing is an incredibly unpleasant process. It is also a public admission of failure, which is why few Americans do it willingly.

Why Contact An Attorney?

Because the U.S. Bankruptcy Code is incredibly complicated, people that are considering filing for protection should call a qualified bankruptcy attorney. Yes, a person can represent himself in court, but it is seldom a good idea. Attorneys spend years studying the dense language of the U.S. tax code before they stand up in court. A neophyte cannot possibly compete. It is also important to note that if you make a single mistake on your petition or you file it incorrectly, your case could be summarily dismissed.

What To Look For In A Bankruptcy Attorney

For starters, the lawyer should be considerate enough to offer a free consultation. After all, you are filing for protection because you can’t pay your bills. Paying consultation fees on top of what you will be charged for your case really is a waste. Fortunately, most of the top attorneys in the field offer initial meetings for free. It is also best to speak with more than one legal professional before you make your decision.

The single most important consideration when searching for a bankruptcy attorney is experience. In other words, he or she should specialize in bankruptcy law. As we mentioned, the code that governs this area of legal practice is extremely complicated and an attorney who does not specialize in it may not be able to compete with those that do. It is also important to contact a professional in your area, since different states and regions may have different laws.

An experienced legal advisor should also be a great negotiator. Since most of these cases are settled, it is important to ask about a prospective lawyer’s success in negotiating favorable terms with specific examples.

Last but not least, it is important to consider the hourly rate. Because most of the cases take time, clients can end up owing a fortune if the lawyer charges a high rate. Therefore, it is always a good idea to ask for a rough cost estimate before you agree to anything. If you can afford the fee and the lawyer seems to know his or her stuff, you may have found your match.

Cram Down a Car Loan With Bankruptcy

Many individuals who are considering filing for bankruptcy are interested in what is known as a car loan cram down. What is a car loan cram down, how does it work, and when may it be utilized for you? Here, learn all about this interesting mechanism of bankruptcy proceedings.

A car loan cram down is utilized for individuals who currently have a car loan in which they owe more on the loan than the car is currently valued at. In other words, your car is worth less than your remaining debt on it, which is certainly not a good position for you to be in.

This happens to many people, as vehicles can depreciate quickly, and this is particularly the case when loans were made for long periods, and little or no money was put down, meaning the loan carried the full sale price of the car when you purchased it.

With an auto loan cram down, you can then reduce the remaining principle balance of your debt to the actual value of the car. In certain instances, this can potentially save you thousands of dollars. Since you owe more than the car is worth, only the actual value of the vehicle is secured by your lender. This means that, they would only receive the actual value if they resold the car, and therefore, the remainder above that value represents unsecured debt.

It’s important to note that the option to cram down your car is not available with all types of bankruptcy cases. Specifically, it is available for those filing chapter 13 bankruptcy. After you cram down your car, the newly reduced and remaining balance will be paid according to the payment plans you establish during your bankruptcy case.

It’s also important to note that cramming down your car has another benefit to you as well. It can be utilized at the same time to reduce your auto loan interest rate. Now, you owe less on the car, you don’t have more debt than the car is valued at, and the remaining balance which you have to pay will be paid at a lower interest rate.

As always, be sure to consult with an experienced legal professional who will be able to guide you through this process. To maximize the benefits of bankruptcy and successfully utilize mechanisms such as car loan cram downs, you need the experienced hands of an attorney who is intimately familiar with the bankruptcy process and all of the many regulations in place.