Debt Forgiveness, the 1099-C, and the associated tax implications.

 My Debt Was Forgiven, Now What?

Bankruptcy: What Are You Waiting For?

HAPPY GROUNDHOGS DAY!

Lately the same refrain keeps cropping up in my practice:  why did you wait so long?  I understand that very few people want to file bankruptcy, and I agree that the decision to file bankruptcy is an important one.  And while it is common to hear that bankruptcy should be a last resort, it is also true that you can wait too long.  So, in honor of Groundhog Day, while we wait to find out when spring will arrive, here are some problems that might crop up if you wait too long to file bankruptcy.

You exhaust your reserves.  This is probably the most common consequence of just hanging on too long, trying to avoid bankruptcy.  You are trying to keep up with mortgage payments or credit card payments after a job loss, illness, divorce, or the like, and you exhaust your savings, tap into your 401k or IRAs, incur taxes and penalties as a result, which makes the whole financial situation still worse.  You use up the resources that would make it easier to make a fresh start, and make it harder to recover financially.  It is easy, and probably natural, to just try to hang on and keep doing what you have always done.  It’s smarter to take an honest look at your situation and ask yourself whether you are going to be able to deal with your debt without some help.

You may lose control of assets that might otherwise be used to help you make a fresh start.  That is often the case when creditors sue you and obtain judgments against you.  A judgment becomes a lien against real property, which can be especially significant if you have investment property, or have inherited property, or, God forbid, you are holding title to family property to “keep it safe.”  The effect of a judgment on property depends on several factors, including where the property is located, whether you are entitled to claim it as exempt, and even what state you are in, but you shouldn’t wait until its a done deal to figure out what the effect will be.  At that point it may be too late.

Other issues can be decided in a law suit that will affect your ability to make a fresh start.  The amount of a debt may be determined to be higher than you anticipate, for example, by the addition of attorney fees and expenses.  Or, the court may enter a finding a fraud against you that will allow a debt to survive bankruptcy.  Other findings may also impact your fresh start as well, and if you are already in financial distress, you may find that it is prohibitively expensive to fight a lawsuit, or worse, several lawsuits.

Don’t wait until the bitter end to consider bankruptcy, and seek out competent legal advice about your bankruptcy options.   You might think that if you go see a bankruptcy lawyer that lawyer is automatically going to recommend bankruptcy, but that is not the case.  Most reputable bankruptcy lawyers are also knowledgeable about alternatives, and will advise you about those options, as well as tell you what may happen if you do nothing.  I regularly advise clients against filing bankruptcy (and sometimes that advice is because there is nothing left to protect).  You have nothing to lose, and quite a bit to gain by talking to someone as soon as you recognize that there is a problem, rather than waiting until you have no options.

Don’t wait ….. call today.  Lorene Lynn Mies at 951-894-4791

The Bankruptcy Evening – January 26, 2012 at The Temecula Public Library

Register by Phone or use our Contact Form.

Phone: 951.894.4791

On Thursday January 26, 2012 at 7:00 p.m. at the
Temecula Public Library on Pauba Road in Temecula.   Lorene will be presenting another  “Bankruptcy Evening”.  As always she will be covering the basics of bankruptcy, focusing on Chapter 7 and Chapter 13.   How each chapter works and the advantages of bankruptcy over debt settlement or debt consolidation programs.  assist you in keeping your home.  If you are facing foreclosure or have a second mortgage that is not supported by $1.00 in equity you don’t want to miss this evening.   This free educational seminar is packed with all the information you need to make an informed decision whether or not bankruptcy would be right for you and your family.  Bankruptcy may be the best investment you make in 2012.

Call today and reserve your space since space is limited.  951-894-4791

What will be covered:

• The Means Test
• Chapter 7 – Advantages and Disadvantages
• Chapter 13 – How to get rid of your second mortgage!
• Debt management and settlement programs
• Your Property – Do you get to keep your stuff!
• Credit rating after bankruptcy
• Short sale vs. foreclosure
• Bankruptcy and your employment
• Credit recovery after bankruptcy

Location:
Temecula Public Library

3060 Pauba Road
Temecula, CA 92591
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What attendees had to say after past Bankruptcy Evenings at the Embassy Suites:

Attendees were give a seminar evaluation sheet and asked to grade the evening 6 different criteria on a 1 to 5 scale from 1 being disagree to 5 being agree.

• “exceeded expectations, KM 5s on all criteria”
• “thank you, this meeting has already put me at ease, PM  5s on all criteria”
• “the new legislation was good information, KG  5s on all criteria”
• “very informative, MJ  5s on all criteria”
• “this was well worth the time spent to learn about chapter 7 / 13. Thank you for giving up your evening to educate us tonight, AC 5s on all criteria”

Come see and hear for yourself.

Preparing for Bankrutpcy… pre-planning is a necessity

When you are considering a trip, usually, you make substantial preparations in anticipation of   that trip.  You make travel arrangements; you make sure you have a place to stay; you make reservations for any activities in which you wish to participate.  You will often make significant plans and preparations for any “big” event.  Bankruptcy is no different.  It is a significant life event that demands some thought and preparation before you embark on it.

In talking with potential bankruptcy clients, it seems that a lot of them wait until the last minute before contacting a bankruptcy lawyer to find out how bankruptcy may help them.  While visiting a bankruptcy lawyer most likely does not rank high on most people’s “bucket list,” if you are struggling financially, it most likely makes sense to determine if and how bankruptcy can help you sooner rather than later.

So, how can “preparing” for bankruptcy help?  First, you will need to have the fees for the lawyer and for the court available.  For now, for a chapter 7 filing, just the filing fee is $306.00.  Additionally, before you file, you must complete a consumer credit counseling session and get the certification that must be filed with the court.  If you “fail to plan” for your bankruptcy filing by finding out what you need ahead of time, when your car is on the verge of getting repo’d, you may not have the time and/or money to retain a bankruptcy lawyer.

Second, you can carefully go over your income and expenses and see where the trouble lies.  Certainly a bankruptcy lawyer can help you identify the problem (with appropriate information) but you also need to know how you got into this financial mess.  Some problems are easy to identify–temporary loss of income; extraordinary medical bills; overspending for a bit, etc.  Bankruptcy can assist in overcoming those past problems but you need to be aware of the problem so that you can avoid it in the future.  Bankruptcy is designed to be a “fresh start.”  You can greatly assist in obtaining that “fresh start” by breaking or modifying some of the habits that perhaps got you here in the first place.

Third, make sure you know who you owe and how much.  Find out if there is any collateral associated with the debts and gather up loan documents.  Your lawyer will need this but, more importantly, you need to know your own financial picture.  Credit reports are freely available and can be a big help.  Also, if lawsuits or foreclosures have been filed against you, make sure you have that paperwork–all of it!  It is important!

Finally, change your mindset.  In dealing with individuals facing financial problems, it is often much more difficult instead of dealing with distressed businesses.  That is because a business looks at assets and liabilities and can make a rational decision as to whether keeping an asset is worth the corresponding liability.  Understandably, people are attached to their “things.”  But, after all, they are just “things” and you have to consider carefully whether retaining a “thing” is worth the potential stress and headache.  As an example, if you suffered a decrease in income and you have two relatively late model cars.  No one wants to give up one or two cars but sometimes it is better to surrender a vehicle or two in order to keep your house (if that is important to you).  There will be some emotional attachment to some “things” but it is imperative that you do this.  Determining what is important to you is important for your bankruptcy lawyer in setting achievable goals for your bankruptcy filing.

Finally, do some research.  There is a lot of information about bankruptcy that is freely available.  However, you should exercise extreme caution in considering the information.  Not that the information is inaccurate (some info may be outdated or simply inapplicable) but it takes an experienced profession to know what is appropriate and what is not.  But, by familiarizing yourself with some basic bankruptcy information, you will be in a better position to appreciate and assist your bankruptcy lawyer in setting realistic and achievable goals.

After all, the real goal of a bankruptcy filing is a “fresh start.”

Spending some time reading some of the articles in the educational center just to the right of this article then call the office and make an appointment for your free consultation.  Part of your preparation time is determining whether or not bankruptcy is the right option for you.  I have had many clients come in only discover that they didn’t really need to file bankruptcy and there was another alternative to their financial woes.  Education is the key.  Give me a call today at 951-894-4791.

Is Bankrutpcy the Best Way to Save Your Home?

LOAN MODIFICATION?  WORKOUTS?  OR BANKRUPTCY?  WHICH IS THE BEST WAY TO SAVE YOUR HOME?

A recent article, “The Homeownership Experience of Households in Bankruptcy” by Professor Sarah W. Carroll, of the University of Pennsylvania Law School and Wenli Li, of the Federal Reserve Bank of Philadelphia, provided the first in-depth analysis of the homeownership experience of homeowners in Chapter 13. Its conclusions mirror what most bankruptcy attorneys personal experience has been: Chapter 13 is one of the most effective ways to let you save your home.

The study followed homeowners who filed for Chapter 13 between 2001 and 2002 in New Castle County, Delaware, from the time of their filing to October 2007. (Since most Chapter 13 plans last five years, this was a fair trial period.) After analyzing the data, it found two important results:

First, the Chapter 13 filing was not always the solution: 27.9 percent of filers lost their houses in foreclosure despite filing for bankruptcy. This is typically a result of poor cashflow. If job loss, or illness continues and there is not enough money coming into the household, the house will be lost regardless of filing bankruptcy or not. Many of the homeowners in this group will end up converting their cases to one under Chapter 7, so that they can wipe out any personal liability for the mortgage(s), as well as most of their other debts.

However, when compared with homeowners who did not file, debtors who filed for bankruptcy were able to stay in their homes for, on average, 27.7 additional months, over two years. This figure includes those who ended up losing their homes.

So, if you’re behind on mortgage payments, consider a Chapter 13–it may let you stay in your home a lot longer than other options.

This article can be found here.

Please call my office today and see if bankruptcy is the right option for you.  If you have a second mortgage, HELOC, or a junior lien on your real property you may be able to lien strip that mortgage by filing bankruptcy.  Get rid of that mortgage that is dragging you down!  951-894-4791