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

Short Sales, Cancelled Debt, Taxes and Bankruptcy

The latest recession has spawned a whole industry of websites crowing about how to properly deal with too much debt.  For example, if your house is worth less than what you owe on your mortgage, perhaps a website will promise to negotiate a short sale–that is, the lender will accept less than the pay-off but will release the mortgage on the property.  Or, as another example, if you owe a lot in credit card debt, the website will promise to reduce your balances or “settle” the credit card accounts for less than what is owed.  Unfortunately, many of these websites or “programs” omit to tell you one very important detail:  tax implications!

When debt is cancelled or forgiven, the creditor must report the amount of debt cancelled or forgiven to the IRS through a Form 1099-C.  The amount of forgiven debt is then attributed to you as “income” for tax purposes.  This means that if you have a credit card or mortgage (more on this later) and $20,000.00 is cancelled or forgiven, then you will receive a Form 1099-C for that amount and it will also be reported to the IRS.  When you figure your taxes, basically, your income will increase by the amount of the forgiven debt.

So what does this really mean?  Potentially, if you are a single filer and, before you include the amount of cancelled debt, your adjusted gross income is $48,000.00, you will be obligated to pay $8,188.00 in taxes according to the 2010 tax tables.  But, if you had debt cancelled of $20,000.00, then, potentially, your adjusted gross income is $68,000.00.  This is because you add the $20,000.00 in cancelled debt to your income.  You would then be obligated to pay $13,188.00 in taxes–$5,000.00 more!!!  Of course, this is a simple example and for a lot of folks, cancelled debt may or may not make a big impact on their tax liability but nevertheless, the impact can be real and significant!

There are exclusions to the cancelled debt being included in your taxable income.  The exclusions are contained in the Internal Revenue Code under Title 26 of the United States Code at Section 108.  The biggest exclusion is (A) “the discharge occurs in a Title 11 case” which is bankruptcy.  If debt is discharged in bankruptcy, it is not attributed to you as income.  You may still receive a Form 1099-C but you can include another form with your tax return.  See here for a Form 982 and see here.

There is another major exclusion that is geneally applicable to consumer debtors.  If the cancellation of the debt occurs while the debtor/taxpayer is insolvent, then you may reduce the amount of the cancelled debt from your gross income.  See 28 U.S.C. § 108(a)(1)(B).  This may require substantial documentation of your insolvency.

Another major exclusion that is particuarly relevant to short sales is set forth under (a)(1)(E).  This provision states that if you have cancelled debt that stems from the a qualified principal residence, then the cancelled debt will not be included in your income for tax purposes.  So, if you negotiate a short sale for $50,000.00 less than what you owe on your home, under this provision of the tax code, the amount of the cancelled debt will not count towards your income for tax purposes.  HOWEVER–this provision expires at midnight on December 31, 2012!  If a mortgage creditor is negotiating with you for a short sale, be sure to include a cancellation of indebtedness in the negotiation.  If the cancellation comes after January 1, 2013, you could be facing a big tax liability if some other exclusion does not apply.

As you can see, negotiating debt issues can be a minefield just waiting to blow up in your face.  While bankruptcy may not always be the best option, it is certainly worth discussing your debt issues with me to explore your options.  Bottom line is there are not tax consequences when you file bankruptcy.  Bankruptcy is specifically exempted in the IRS code.

I am not a tax attorney and I refer all tax matters to my trust accountant Daniel Greene in Temecula.  This article originally appeared in part on the Bankruptcy Law Network.

Is Bankruptcy Your Best Investment for 2012???

Spend money, when you’re broke, to go broke?  Seems counter-intuitive, but it could be the best money you spend.

Fear, pride, uncertainty, stubbornness, distraction, and cash flow keep people from getting their financial life  in order with a bankruptcy filing.

As a means of regaining control of your life and your pocketbook, however, it may be the best move you can make.

Inaction, however unpleasant, is easy.  It’s familiar and tolerable.  Like it or not, it’s a safe choice.

You can’t get more hurt by doing nothing, right?  It’s the devil you know, as opposed to the devil you don’t.

But what if the alternative is getting out from under your bill problems and jump starting your financial life?  Clearly, in that case it becomes far more attractive to leap than to stand still.

So if you’re having bill problems and are on the fence, these ten reasons that filing bankruptcy now may help you make your decision.

1. The stress of bills you can’t pay, collection calls, and worry about garnishment can ruin your health.
2. Current law and depressed property values may allow the voiding of junior liens on  your home. If values increase in future, this opportunity may be unavailable.
3. No tax is generally generated by discharging debts in bankruptcy, not so, if you settle debts outside of bankruptcy.
4. You can keep more of your assets when exemptions are applied to investments with depressed current value.
5. The federal tax exclusion for cancellation of debt on foreclosures of principal residences expires in 2012, is limited in scope, and doesn’t deal with state taxes.
6. Your credit report doesn’t start healing until the debts are paid off or discharged in bankruptcy.
7. Relationships suffer in times of financial distress.  Save your marriage, ditch your debts.
8. Anonymity in numbers:  there have been lots of bankruptcy filings over the past several years.  Your decision to file now makes you one of a crowd of people with the same problem.
9. Wait to file until your income improves and the means test may require that you file a repayment plan.
10. You aren’t getting any younger:  chances are you are poorly prepared for retirement. Every dollar spent making minimum payments is a dollar you’re not saving for retirement.

For most of those buried in debt, neither inaction nor incremental solutions will solve the problem.  Many of the “reasons” that hold people back from the bankruptcy solution are based in myth and misunderstanding. Think through my list, follow the links to read more, and imagine a life free of dischargeable debts.  I often tell my clients it is time to come out of the cabin and face the daylight.

Call my office today and set up an appointment for your free consultation.  The financial return on a bankruptcy filing is eye popping.  The hour you spend with me may be the best investment you make for 2012.  Lorene Lynn Mies, A PLC 951-894-4791

This article was orginally published in the Bankruptcy Law Network by Cathy Moran.