Will You Put Anyone In a Bankruptcy?

 

Will You Put Anyone in a Bankruptcy?

 

No.  Contrary to how some attorneys practice, I will not put just anyone in a bankruptcy, and I am judicious about who I accept as clients.  When I am considering whether to help a client file for bankruptcy, I consider the following factors:

• Whether the debtor is financially stable if the debt is removed.  To put this another way, if the debtor doesn’t have the bills hanging around his or her neck, can he or she afford the cost of living.  My rationale is that if the debtor cannot afford the cost of living, I am not using the protection of bankruptcy to the fullest extent.  I want to time the bankruptcy so I maximize the amount of debt owed, and I want to really be able to give the debtor a fresh start.  In addition, if the debtor is still living on credit at the time of filing and afterwards, then the debtor could be cited for bankruptcy fraud (incurring debt while planning to file for bankruptcy), and the debtor will be barred from filing for bankruptcy for the next seven years. 
• Whether the debtor has an income that fluctuates wildly.
• Whether the debtor is serious enough to go through with the bankruptcy proceedings to the point of reaching a discharge.
• Whether the debtor has stopped living off of credit.
• Whether the debtor is truthful about his or her assets to me.
• The amount of debt owed to the amount of creditors versus the debtor’s income.
• The amount of debt that is non-dischargeable (such as tax debt, student loans, and domestic support obligations).

When considering to hire an attorney to help you file for bankruptcy, it’s a good idea to make sure the attorney is looking out for your best interest.  I invite you to come into the Gordon Law Group and meet with me to discuss your debt-relief options.

Reaffirming Your Debt

Reaffirming Your Debt

 

When a client makes the decision to file for bankruptcy, one of the decisions that must be made is whether to reaffirm his debt.  It is a common misunderstanding that debtors can keep certain debts “out of the bankruptcy.”  This is not true.  Every asset and every debt needs to be listed in a debtor’s petition, but there are decisions about whether the debtor wants to “keep” the asset or debt.  For example, if a debtor has filed for bankruptcy, and he wants to keep his house but not his car, then he would need to reaffirm the house mortgages but surrender the car note.  These decisions are marked on the petition and linked both to the asset in question and the debt.  Once a debtor decides to reaffirm a debt, then the debtor and corresponding creditor must submit a reaffirmation agreement to the court.  This generally involves listing the income and expenses, as listed on the bankruptcy petition, and listing the current income and expenses, as the debtor finds them to be while in the bankruptcy.  It is not uncommon for a debtor’s circumstances to change with respect to income and expenses once the bankruptcy has been filed.  The key is that the debtor’s income is greater than the expenses by at least the amount of the monthly payment for the reaffirmed debt. 

 

The benefit of a reaffirmation agreement is that it rewards a debtor for staying current on certain payments and prevents the debtor from being thrown into chaos by losing housing and transportation (the two debts generally reaffirmed).  Remember that the goal of bankruptcy is to help give citizens a fresh start, and so the reaffirmation agreements help the debtors have a foothold for moving forward.  One wrinkle that has been developing over the past few months is that some lending institutions are no longer offering to enter into a reaffirmation agreement.  This puts the debtor in a precarious position.  Generally, the lending institution wants to modify the loan agreement, but if the lending institution is not interested in either of those, then the debtor will not be able to reaffirm that debt.

 

Returning to the house and car example, because the debtor chose to surrender the car, then the creditor will be notified that the debtor is surrendering the car.  The creditor will generally work out a “drop point” for an asset like a car, and the debtor can leave the asset there.  Obviously, any debt left from the sale of the surrender of the asset will be discharged in the bankruptcy.