In this blog post, we will discuss one choice that you should avoid (credit repair companies) and one choice to consider (filing for bankruptcy).
Credit Repair Companies
While some credit repair companies are legitimate businesses, many of them offer false guarantees and use shady practices to gain business. They end up taking more of your hard-earned money from you rather than helping you toward financial freedom. They offer services to repair your credit score while not actually being able to provide the credit improvement they promise.
]]> Companies offering an overnight solution, if they do anything at all, often use fraudulent tactics to gain business. For instance a company might create a new identity - and thus, a new credit score - by requesting an Employer ID Number. These companies often provide poor or incorrect advice, such as telling clients to dispute all information regardless of legitimacy or suggesting clients should not contact the credit reporting agencies directly.Credit repair scammers offer promises like, "we can erase your bad credit - 100% guaranteed," when in fact there is no quick fix to remove accurate, negative information from a credit report. It takes a concerted effort, a repayment plan and time to improve a poor credit situation.
Bankruptcy
This is one of the many reasons why filing for Chapter 7 or Chapter 13 bankruptcy may be the best choice for you. Chapter 7 bankruptcy ("fresh start" bankruptcy) allows individuals to liquidate their assets and discharge most of their debts, while Chapter 13 bankruptcy helps individuals pay back creditors through 3-5 year repayment plans.
While bankruptcy can stay on a credit report for a number of years, its impact on your credit can be much more positive than the impact of months, even years, of unpaid bills. Unlike credit report scams, bankruptcy is viewed as a legal, valid way for individuals to find financial relief.
Credit can be rebuilt after bankruptcy. An experienced bankruptcy attorney can provide advice on important financial decisions and help be a guide on the path to financial stability.
Source: Federal Trade Commission, "Facts for Consumers: Credit Repair," Oct. 2008.
]]>Some business owners continue to build debts and refuse to file bankruptcy because it feels like failure to them. Yet, filing for bankruptcy does not have to mean failure. In fact, it could give you the building blocks you need to continue your business or start anew.
]]> Personal Liability for Business DebtsDepending on the type of business you own and the contracts you have signed, you may need to file both business and personal bankruptcy.
This is especially true for sole proprietorships, where business owners are legally on the hook for their business debts. Even some partnerships and LLCs involve agreements that pass liability on to partners and owners. For example, an owner may have signed a personal guarantee in order to obtain a loan for a business.
In these cases, the business bankruptcy may clear the business of debts, but because the business owner is personally liable for the debts, the owner will also need to face the creditors him or herself.
This is where personal bankruptcy comes in. By filing for both business and personal bankruptcy, you are allowing yourself to take positive steps toward a better financial future. Even if you need to close the doors to your business, you will not also face significant personal debt. Through a Chapter 7 bankruptcy or Chapter 13 bankruptcy, you will be able to evaluate your financial situation, discharge debts and start on the road toward financial recovery.
Source: The Wall Street Journal, "The Double Whammy of Bankruptcies," Simona Covel, Sept. 28, 2009.
]]>Yet, that is no reason to fear bankruptcy. An experienced Texas bankruptcy lawyer can explain the legal concepts to you and help you on the road to financial recovery.
One of the questions clients often have during Chapter 7 bankruptcy or Chapter 13 bankruptcy is: What is the difference between secured and unsecured debt? This difference matters because certain debts can be discharged during bankruptcy while others cannot.
]]> What is secured debt?A secured debt is a debt that includes collateral. For example, a mortgage is a secured debt because the bank is allowed to seize your home (the "collateral") if you default on the debt. Car loans are also secured debt.
What is unsecured debt?
Collateral is not attached to unsecured debt. Generally, creditors charge higher interest rates on unsecured debt because there is a higher risk to the creditor. Examples of unsecured debt include credit cards and medical debts.
Chapter 7 bankruptcy
Most unsecured debts are dischargeable during Chapter 7 bankruptcy (exceptions include student loans and child support). Secured debts, on the other hand, are non-dischargeable. This means they cannot be released during bankruptcy. However, debtors can exempt a portion of their secured debts, often including a home and a car, from liquidation during bankruptcy.
Chapter 13 bankruptcy
In Chapter 13 bankruptcy, debtors must repay secured creditors through a Chapter 13 repayment plan. They are allowed to keep the secured property that is part of the repayment plan. If you are able to stick to your Chapter 13 repayment plan, most of your unsecured debts can be discharged at the end of the bankruptcy plan.
]]>Yet, while the implications may seem daunting, the reality is much different:
First, bankruptcy is common. Over 1.4 million Americans filed for bankruptcy in 2011 alone.
Second, bankruptcy does not lead to financial ruin. Instead, it can provide relief from financial crisis. It can be the beginning of a more positive, financially secure future.
Third, a recent Texas A & M study found that more than four out of every five bankruptcy filings is the result of an adverse event that was outside of the filer's control, such as job loss or a significant medical event. In fact, more than one-half of U.S. bankruptcies involved medical debt over $5,000.
]]> Lenders understand these points. Most lenders know that bankruptcy by itself does not reflect an individual's ability to handle personal finances. In fact, many financial institutions find those who file bankruptcy to be a lower risk than the general public because bankruptcy protection is not available for several years after filing for the first time.Applying for Credit After Bankruptcy
Chapter 7 bankruptcies allow lenders to start over financially, and applying for the right credit cards after bankruptcy can help you rebuild your credit. This means applying for a credit card, paying back your credit card debt in full every month and making all monthly payments on time.
Some credit card companies offer specific approaches for individuals who are working to rebuild credit. For example, many companies have low annual fees, easy ways to track expenses, and protection from overdrafts. Many companies also require a fairly low security deposit to obtain a secured card.
There are many other options for building credit and becoming financially secure after bankruptcy. Speak with an experienced bankruptcy lawyer to learn more.
Source: Fox Business, "Best Credit Cards After Bankruptcy," Curtis Arnold, Apr. 9, 2012.
]]>Many people fear that filing for bankruptcy will not only make their lives more difficult during an already difficult time, but will also lead to more challenges in the future. What they do not realize is that bankruptcy can offer a fresh financial start - a positive change.
]]> Bankruptcy Before or After Divorce?If you decide to file for Chapter 7 or Chapter 13 bankruptcy, should you file before or after your divorce? The answer: it depends on a number of factors.
If you file for bankruptcy before divorce, you and your spouse can file together. This means you will only have to pay one bankruptcy filing fee. After divorce, you must file separately. However, filing bankruptcy before divorce also means that both of your incomes will be combined in determining whether you are eligible for Chapter 7 bankruptcy (through the Chapter 7 means test).
Waiting to file for bankruptcy until after your divorce raises one other significant issue. If the debts you jointly hold with your ex-spouse are discharged during bankruptcy and your ex-spouse does not file for bankruptcy, he or she may still be liable for those debts.
Bankruptcy During Divorce
If you file for bankruptcy during your divorce, you will not be able to divide property until after the bankruptcy proceedings are complete. This is due to an "automatic stay," which puts certain lawsuits against a debtor on hold during bankruptcy. This is important because property division includes dividing debts. Since those debts may be discharged during bankruptcy, property division could be much simpler after the bankruptcy.
If you are considering divorce and bankruptcy, an attorney experienced in both family law and bankruptcy law can help you take the right steps toward a fresh start.
]]>In a Chapter 11 bankruptcy, a debtor may continue to run the business during the bankruptcy. The debtor must negotiate a reorganization plan with creditors and file that plan with the court. Generally, a Chapter 11 plan provides for the repayment of loans over an extended period. The plan must list all of the claims against the debtor, how each debt will be paid and how the business will carry out the reorganization plan.
]]> Under its Chapter 11 reorganization plan, American Airlines plans to cut 13,000 jobs, but also to focus on growth. For example, the company has recently ordered nearly one thousand new mid-range aircraft. It is also enhancing five hubs to improve service and business.Meanwhile, American has attempted to negotiate with labor unions for certain cuts related to pilots, ground workers and flight attendants. American Airlines would like to reduce its labor costs, which, according to American, are millions of dollars more than those of Delta or United Airlines.
Negotiations have been relatively unsuccessful, causing American Airlines to request court authority to break its union contracts. Under U.S. bankruptcy law, companies may break union contracts if those contracts have prevented the companies' success.
Solutions for Businesses in Debt
Businesses struggling with debt often choose to file Chapter 7 or Chapter 11 bankruptcy. If your business is considering bankruptcy for debt relief, a bankruptcy attorney can help you decide which option is right for you.
Chapter 11 bankruptcy allows a business to continue to operate during the bankruptcy and can help a business reemerge from bankruptcy as a healthy, profitable company. However, it can be more expensive and time-consuming than Chapter 7 bankruptcy. In a Chapter 7 bankruptcy, the business must sell non-exempt assets to pay back creditors. It emerges from bankruptcy debt free, but may need to close up shop.
American Airlines' situation is unique as it is a large corporation dealing with unions and billions of dollars in debt. However, in this economy, its financial distress is not unique. Chapter 11 can offer hope to businesses facing significant debt that would prefer not to shut their doors.
Source: USA Today, "AMR's American Airlines Wants to Emerge From Bankruptcy Quickly," David Koenig, Mar. 26, 2012.
]]>Yet, waiting to file for bankruptcy is sometimes the worst decision someone could make. Countless people choose to cash out their retirements, abandon their homes - even hide assets from creditors - before they file for bankruptcy. They do not realize that, had they filed for bankruptcy earlier, they may have been able to keep their retirement income, their home and their good character.
]]> Here are a few things you should NOT do when struggling with debt:If you are financially strapped, the best thing you can do is speak with a bankruptcy attorney about your options. You may find that you have little to fear from bankruptcy and a new, more positive financial future to celebrate.
]]>Is Income Tax Debt Dischargeable?
The general rule is that income taxes are not dischargeable. However, there is an exception. Your IRS tax debt is dischargeable in bankruptcy if:
You can discharge tax debt that falls under the exception through an adversarial proceeding in Chapter 7 bankruptcy or through filing for Chapter 13 bankruptcy. If this tax debt is discharged, you must notify the IRS or the IRS may claim that it was never discharged.
]]> What About Non-Dischargeable Tax Debt?Tax debt that does not fall under the exception above is considered non-dischargeable. For example, if you did not file your tax return, you will not be able to discharge any tax debts from that return.
Filing for Chapter 13 bankruptcy is often the best route to take when you have substantial tax debt. Through a Chapter 13 bankruptcy Wage-Earner's Plan, you may be able to pay back your non-dischargeable tax debt with zero interest. This can save thousands of dollars a year in interest.
You may also enter into an "offer in compromise" with the IRS. If the IRS agrees to an offer in compromise, you will be able to pay less than you owe on your tax debt.
]]>For a first offense allegation, you face a range of punishment (if no person was injured and no child was involved) of up to 180 days confinement in a county jail, and up to a $2,000 fine or both. For a second offense, it is a Class A misdemeanor which carries with it a range of punishement of up to 365 days in county jail, up to a $4,000 fine, or both...plus many enhanced surcharges.
A third offense is considered and charged as a Felony. In addition to potential exposure to confinement in the Texas Department of Correctional Facilities, also a fine of up to $10,000.
It is imperitive to fight each charge with diligence as it is very easy for an arresting officer to make an arrest. It is much more difficult for the State of Texas to obtain a DWI conviction as they must prove each and every element BEYOND A REAS0NABLE DOUBT which is the highest burden of proof in our system of jurisprudence. As a citizen accused of Driving While Intoxicated, you are presumed to be innocent and have nothing to prove. The State holds the burden of proof, and the jury will be instructed that they are not allowed to use your election not to testify as evidence of your guilt should you so choose. Your attorney can cross examine the State's witnesses, including but not limited to the arresting officer. You are also afforded the opportunity to put on your own evidence and own witnesses should you so choose in your defense...although you are not required to do so in order to be found "Not Guilty" because you are presumed to be innocent under the Texas Code of Criminal Procedure.
If you have been accused or arrested in Texas, it is important to consult and hire and be represented by an experienced DWI lawyer. Please contact one of our experienced lawyers today for a free initial consultation in the Plano, Texas office at Pelley Law Office, L.L.P. to learn your rights and defenses at 555 Republic Drive, Ste. 101; Plano, Texas 75074 or call 972-608-0335.
]]>Many people believe that they are not eligible to seek protection under Chapter 7, but will be forced to file a Chapter 13. To the contrary, since the law changed in 2005 the percentage of cases that we have filed under Chapter 7 versus Chapter 13 really has not changed that much. Most people who need to file a Chapter 7 are still eligible to file that Chapter, however sometimes we recommend that someone who is eligible for a Chapter 7 to file a Chapter 13 for a few different reasons.
First, a family that is behind on their mortgage and facing foreclosure can file a Chapter 13 to give them 5 years to catch up on the arrears. Also, a Chapter 13 can help someone get their car back or avoid repossession. In Chapter 13, as long as the debtor passes the Means Test like they would in a Chapter 7, then they should pay back nothing to their credit card debt unsecured creditors. For an initial consultation for free with an experienced Dallas bankruptcy attorney, please contact us for an appointment at Pelley Law Office, L.L.P. 100 Crescent Court, 7th Floor Dallas, Texas 75201 214-799-6441.
]]>Marriages, personal relationships, your health and general happiness can be effected by a debt problem. Filing for protection under Chapter 7 or Chapter 13 can help take the first step towards fixing many areas in your life.
Many couples find that a great deal of their arguments stem from debt and money problems. Often times, even if a divorce is imminent, it is still better for the couple to file beforehand for several reasons. First, if both people need to file then if they can get along until the bankruptcy is over they can hire only one attorney. Divorced couples have to file two separate cases. Secondly, often times a bigger household size is more beneficial to debtors who are having a difficult time passing the Means Test.
Chapter 13 is more appropriate than Chapter 7 in several situations. First, if someone is behind on their house and wants to keep it then Chapter 13 can help them get caught up. Second, if there is an outstanding IRS obligation, then Chapter 13 can eliminate any interest and penalties that the IRS would otherwise charge the debtor. Of course, Chapter 13 is also for debtors who simply make too much money to pass the Means Test.
]]>When debt collector behavior has crossed the line into harassment, you may think that you have no options, but in fact, there are several options to stop creditor harassment.
]]> First, it is illegal for debt collectors to harass you with excessive phone calls or to use profanity or offensive language when contacting you about a debt. This type of conduct violates the Fair Debt Collections Practices Act (FDCPA), a federal law designed to protect you from unfair or offensive debt collection tactics. If a debt collector engages in this type of behavior, you have the right to file a complaint with the Federal Trade Commission. You also have the option to contact an attorney, as you may be entitled to recover damages for the debt collector's violation of the FDCPA.Secondly, you have the right to ask debt collectors to stop contacting you about the debt. Under the FDCPA, you can request a debt collector to stop calling you or to communicate with you only in writing. Keep in mind that this will not stop the creditors from filing a lawsuit to collect the debt. Once you have requested debt collectors to stop calling you, they can only contact you to inform you of a specific action, such as a lawsuit, that the creditor intends to take.
Lastly, you have the option of filing bankruptcy. Bankruptcy temporarily stops debt collectors' attempts to collect on debts, including stopping all debt collection lawsuits. Bankruptcy gives you time to restructure your debt (through Chapter 13 bankruptcy), and in some cases, relieves your obligation to pay certain debts (through Chapter 7 bankruptcy).
If you are facing creditor harassment or are considering bankruptcy, it is important to consult with a bankruptcy attorney. An experienced attorney can stop the phone calls, help you explore your debt relief options and recommend a solution based on your circumstances.
]]>Drinking and driving on football game days is a common issue in Texas and nationwide. According to a study conducted by the New England Journal of Medicine, 45 percent of people who drink at a football game or while watching a football game at a party drive themselves home.
While not everyone who drinks and drives is caught, officers are watching out for Dallas drunk driving on game nights. And with a new campaign launched by the Texas Department of Transportation (TXDOT), the risk of being pulled over and charged with DWI is even greater.
]]> TXDOT Know When to Pass CampaignTo combat game day drinking and driving, TXDOT has rolled out a new educational campaign called "Know When to Pass." The campaign, aimed at students, features a truck that will visit college campuses statewide. In the truck, there is a living room depicting a football-watching party with cutouts of Texas football players taking the partygoers' keys. Carol Rawson of TXDOT said the truck's purpose is to increase awareness of the dangers of game day drinking and driving while encouraging Texans to use a designated driver if they choose to drink on game day.
Defending Against Game Day DWI Charges
Of course, many people do not know they are too intoxicated to drive when they leave the football game. Or they think they will be able to drive a few miles safely. For most people charged with DWI after a football game, this is their first DWI and may even be the first time they are facing the criminal justice system. It is not only frustrating, but also frightening. DWI defendants worry about their futures, their driver's licenses and their reputation.
That is where an experienced DWI defense lawyer comes in. An attorney can advise you of your rights and aggressively fight on your behalf.
Source: KYTX, "A Plea for Texas Football Fans to Drive Sober on Game Days," Courtney Friedman, Nov. 22, 2011.
]]>The juvenile confessed to the crimes, but later sought to have his confession suppressed on the basis that he was never read his Miranda rights. he argued that because he was effectively in police custody when he incriminated himself, he was entitled to Miranda protections. The North Carolina Supreme Court held that it could not consider the boy's age or special education status in determining whether he was in custody, and because he was not in custody, he was not entitled to Miranda warnings.
The U.S. Supreme Court held that courts should consider the age of a juvenile in deciding whether or not he or she is in custody for Miranda purposes. Miranda protection only extends to interrogations that are made when a suspect is in custody. If someone is not in custody, but are interrogated then no Miranda protection is required. Similarly, if someone is in custody but is not interrogated, then Miranda warnings are not necessary. If Miranda warnings are violated, then any evidence obtained as a result of that violation in a criminal defense case should not be admissible since it should be found to be the fruit of a poisonous tree.
]]>For many, there was no other choice but to try to use their credit cards to get by while trying to replace the former income in order to make ends meet. Tragically, many families were faced with the decision of whether or not to put food on the table or use their credit cards. Many depleted their life long savings that they worked hard to acquire. Also, many cashed out on their 401k and now face a substantial income tax obligation to the IRS.
For many people in a situation where they have a large amount of credit card debt, the best answer is bankruptcy. There are other options, but they have many pitfalls. For example, if someone who has a lot of credit card debt does an accomodation with their creditors (debt settlement plan) then they are probably not aware that they will be taxed on the forgiven portion of that debt. In other words, if someone owed $40,000 worth of credit card debt and they were able to settle with the creditors for $10,000 then the forgiven $30,000 would be included in their gross income and could result in substantial IRS tax debt.
However, filing for protection under either Chapter 7 or Chapter 13 of the Bankruptcy Code will allow most debtors to discharge their unsecured debts and there is no taxable event. Also, filing bankruptcy usually allows someone to rehabilitate their credit much more quickly than if they did a debt consolidation or debt settlement plan.
The bottom line is filing for protection under the Bankruptcy Code helps individuals get relief from pre-existing debt and obtain a fresh financial start.
]]>