St. Louis Bankruptcy Attorney Insight: Credit Card Debt

By Frank Ledbetter

St. Louis Bankruptcy Attorney - St. Louis, MO

 

Any time people become unable to pay their minimum monthly credit card payments on time, they may be influenced to use one credit card to help make payments on a different credit card in a frantic attempt to keep current on their charges. Sadly, paying credit cards using other credit cards may result in very quickly escalating debt.

 

I’m usually surprised at the large quantity of credit lines people can obtain on their credit cards. 

Usually when folks “max out” their credit cards they will have gotten themselves into an unsustainable debt situation where sometimes making the minimum monthly payments will leave them without the funds to pay for food, rent and additional necessities. When this occurs, individual bankruptcy could be the most suitable choice.

 

Most folks desire to pay their creditors entirely and on time, however I’ve noticed too many folks that get in above their heads by taking on just as much financial debt as the credit card issuers can give them. I’ve realized that the credit card issuers frequently give folks a lot more credit than they will be able to handle.

 

Credit card debt will rarely go away by itself. Even when a credit card provider writes off charges on an account, they'll most likely sell it off to another company who will then possess the right to collect on the balance.

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St. Louis Bankruptcy Attorney Insight: Debt Relief Options

By Frank Ledbetter

St. Louis Bankruptcy Attorney - St. Louis, MO

If you’re struggling with debts, you want to be very careful before you sell or give away things you own before consulting with a bankruptcy attorney, particularly if you transfer those things for less than fair market value.

 

If you file Chapter 7 bankruptcy or Chapter 13 bankruptcy, you will need to disclose on your bankruptcy documents any things you owned which you sold or gave away during the two years prior to the filing of your case.

Further, in Missouri, if the sale or gift of the asset was within the last four years, the bankruptcy trustee may be able to void the transfer if it appears that the sale or gift was done to shield the asset from creditors.

If someone files bankruptcy in Missouri within four years of selling or giving away an asset, that asset may be subject to being recovered by the bankruptcy trustee and sold with the proceeds to be paid to the client’s creditors.

Sometimes, people get the notion that they may transfer an asset which might have more equity than the client would be allowed to have in the asset.  For example, they may think they may transfer a car with over $3,000 in equity to a friend or relative and that way prevent the trustee’s liquidation of the asset.

However, such a transfer would likely not allow the protection of the asset if done within the four years prior to the filing of bankruptcy.

Selling assets for fair market value may be permissible shortly before filing a bankruptcy in order to obtain money to pay living expenses, but it is always advisable to consult with a bankruptcy attorney before selling or giving away assets if  the person might need to file bankruptcy.

For additional information, be sure to check out:

YouTube Channel:

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Blog:

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Website:

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St. Louis Bankruptcy Lawyer: Debt Discharge Denials

 St. Louis Bankruptcy Lawyer: Discharge Denials

One important thing to be aware of if you’re struggling with debts is that if you incur debt after you first plan to file bankruptcy, that debt may not be dischargeable if you later file bankruptcy.   Bankruptcy was designed to give financial relief to those who incurred debt which they had planned to repay but due to illness, job layoffs, work hour reductions, other pay cuts, debt escalation due to accrued interest and other factors are no longer able to repay creditors on time. 

 

Someone thinking about filing Chapter 7 bankruptcy or Chapter 13 bankruptcy should not borrow money or use credit cards once they have made the decision to file bankruptcy unless it is a secured loan such as a car loan or a mortgage loan which the person plans to repay.  If you incur debt shortly before you file your  Chapter 7 bankruptcy or Chapter 13 bankruptcy case, particularly if the balance is several thousands of dollars of debt, the creditor may file a proceeding to deny discharge of that specific debt. 

 

An issue can exist if a creditor pursues denial of discharge of the debt .  Success depends on when the person first consulted with a bankruptcy attorney or bankruptcy lawyer about filing bankruptcy.  

 

Once a person decides to file bankruptcy he or she should stop using credit cards and not otherwise incur debt unless it is a car loan or mortgage loan which the person plans to repay and will be able to repay. 

St. Louis Bankruptcy Attorney: Bankruptcy a Last Resort

 

“St. Louis Bankruptcy Attorney: Bankruptcy as a Last Resort?”

 

Sometimes people have the notion that filing bankruptcy is their last resort.  Unfortunately, this type of thinking can lead people to take out payday loans, take 401(k) distributions, and pay one credit card with other credit card, all of which may lead to very undesirable results.  Also, people sometimes get many months behind on credit card payments before considering bankruptcy because they believe bankruptcy must be their last resort.

 

What many people don’t realize is that getting several months behind on multiple credit cards may devastating effects on their credit score.  By comparison, clients may actually see an increase in their credit score within one year of filing bankruptcy.

  

Sometimes people have the notion that they must be behind on credit card payments to file bankruptcy.  Bankrputcy lawyers know that this idea is quite untrue. 

 

The reality is that with decreased income or increased debt, people often get to the point where they just can’t repay all their creditors on time.  People who hit that financial wall, owe it to themselves to learn more about Chapter 7 bankruptcy and Chapter 13 bankruptcy and to learn if bankruptcy is the best debt relief option under their circumstances. St. Louis. 

 

 

St. Louis Bankruptcy Attorney: Insider Repayment

 

Often, individuals who are struggling financially and falling behind on their bills, repay a family member, a friend, or a business associate they owe money to.  This may create a big problem if the individuals file bankruptcy shortly after making that repayment. 

 

The Bankruptcy Code was created by the U.S. Congress with the intent of stopping and discouraging individuals who file bankruptcy from paying back individuals they have a close relationship with such as a relative, friend, or business associate at the expense of other creditors.

 

If such insider repayment is made within 365 days prior to the filing of the bankruptcy, then the bankruptcy trustee has the legal authority and duty to the creditors to recover funds from the friend, relative, or business associate who has received the debt repayment within the twelve months prior to the filing of the client’s bankruptcy.

 

In a Chapter 13 bankruptcy case, the client must either repay over the life of the Chapter 13 Plan to unsecured creditors the amount equal to what was repaid to the family member, friend or business associate or subject the relative, friend or business associate to being forced to pay to the Trustee  the sum paid by the client within the 1 year prior to case filing.

 

In a Chapter 7 bankruptcy case, the insider paid back by the client within the 1 year before filing, may need to immediately return to the Chapter 7 Trustee, the amount of money paid by the client within the year prior to bankruptcy filing or subject the “insider creditor” to being sued by The Trustee to recover those funds.

 

For example, let us imagine that a client who is deciding to file bankruptcy with a bankruptcy attorney repays a friend, relative, or business partner $10,000.00 owed to that person on May 1, 2012. The client would then be required to wait until May 1, 2013 to file a Chapter 7 bankruptcy in which the insider creditor would not have to give back the $10,000 for distribution to creditors.

 

If you're suffering financially, before you give money to pay back a friend, relative or business associate, then you may want to consider filing for bankruptcy relief and schedule a consultation with a bankruptcy lawyer.

Chapter 13 Bankruptcy, Chapter 7 or Debt Settlement

Based on what I have witnessed recently, I would strongly encourage anyone thinking about entering into a debt settlement program to think about filing for bankruptcy first.

Bankruptcy will not be the best option for a few people, but for most people dealing with a debt problem, bankruptcy will be the best option.

Why? Because with many debt settlement programs, particularly those that don’t offer debt settlement overseen by an attorney, the debt settlement company may take thousands of dollars of fees before any funds paid by the client would be set aside for a settlement with the creditors. 

Even at that point it may take years to settle some debts in a non-attorney backed debt settlement program.  I’ve seen clients before they come to see me pay thousands of dollars to non-attorney backed debt settlement programs without having any of their debts paid.  

Now, one thing you might not have thought of is that not everyone qualifies for relief under Chapter 7 bankruptcy, and high income Chapter 13 bankruptcy clients might have to repay 100% of credit card debts in their Chapter 13 bankruptcy.  

Attorney-backed debt settlement for a single person with no dependents with  a six figure income and $10,000 in credit card debt would likely  be preferable to bankruptcy, whereas a single person with no dependents, $35,000 per year in income and $10,000 in credit card debt would likely be better off filing bankruptcy.

I do offer debt settlement services as alternative to bankruptcy for those for whom it is appropriate.  But I am careful not to recommend debt settlement for those who are better off filing for bankruptcy relief and vice versa.   

If you had a medical condition, you would probably want to explore the different types of treatment available for your condition and obtain the advice of a medical professional before choosing your treatment.  The same principles apply if you are dealing with a debt problem; you owe it to yourself to explore the different debt relief options so that you may choose the option which is best for you.

St. Louis Bankruptcy Attorney Tips: Debt Relief and School Loans

 

Many Americans are painfully aware of how much college tuition rates have skyrocketed in recent years.  Tuition rates continue to increase to a degree far in excess of the inflation rate.  

 

A professional degree such as a law degree, medical degree, or dental degree is often still an excellent investment.  Other degrees, however, are sometimes not a good investment.  The job markets are flooded with college graduates and some high paying jobs such as sales jobs may require no college degree.

 

Also, many small business people succeed very well without a college degree.  My advice for those contemplating incurring student loan debt is to carefully evaluate the expected return on investment before signing for student loan debt.

 

Why? Since October 17, 2005 no student loan debt may be discharged in bankruptcy unless the client shows he or she would suffer “undue hardship” if not granted a discharge of the student loan debt. The bankruptcy client would need to file a separate proceeding within the bankruptcy case to have any chance at discharging the debt. 

 

The courts have generally determined that the Undue Hardship Test is not met unless the person has developed a disability after the student loan debt was incurred which completely prevents the client from practicing the trade or profession the client took out the student loans to prepare for or the client is of advanced age, that is beyond the normal retirement age, and owes a substantial amount of student loan debt.

 

A Chapter 7 client of mine a few years ago was able to discharge over $100,000 in student loan debt taken out for a professional degree program she had entered after she had retired from her first career while in her mid-50s.  This client was able to meet the undue hardship test although she wasn’t disabled and to obtain a discharge of her student loan debt, but she was over 65 years old, owed over $100,000 in student loan debt, and had been unable to obtain professional licensure related to the educational program she had taken out the student loan debt for.

 

I see many clients who took out student loan debt, which I would not have encouraged them to take acquire, who won't be able to discharge these debts in bankruptcy even though they can’t reasonably afford to repay them.  Education is great, but there are often less expensive alternatives than the most highly ranked program a person is able to attend. 

 

As a St. Louis bankruptcy attorney who has had clients saddled with enormous student loan debts, I would advise you to choose an economical option for obtaining necessary education, and be very careful about signing for student loan debt because it’s very unlikely you would be able to discharge any student loan debts in bankruptcy. 

Bankruptcy Attorney Tips: Releasing Second Mortgages

 

A few years after the bursting of the so-called real estate bubble many Americans now find themselves owing more on their first mortgage than their house is now worth.

 

Quite a few homeowners also are saddled with a second and sometimes third mortgage in addition to their primary mortgage.

 

Many people don’t realize it, but it is possible to remove the lien of a second mortgage holder in a Chapter 13 bankruptcy under the following circumstances:  the client owes at least one penny more on the first mortgage than the real estate is worth at the time the case is filed.

 

The client must obtain a certified appraisal for the real estate in order to file the proceeding within the bankruptcy case to strip the lien of the junior mortgage lender.

 

The process to avoid a junior mortgage lien also is available for a third mortgage.  If a client has three mortgages on the client’s property and the client owes more on the first mortgage than what the property is worth, then both the second and third mortgages may be avoided.

 

Now, if the client has three mortgages and the client’s property is worth more than the balance on the first mortgage but less than the sums of the balances on the first and second mortgages, then the third mortgage still may be avoided but not the second mortgage.  

 

Once the lien of the junior mortgage holder is avoided, the debt becomes classified as unsecured debt, which means for most clients the junior mortgage debt will not need to be repaid in the Chapter 13 bankruptcy, and this debt will finally be cancelled forever upon completion of the Chapter 13 bankruptcy.

Chapter 7 and 13 Bankruptcy: Bankrputcy Attorney Needs?

What should you bring when you go to see a bankruptcy attorney or bankruptcy lawyer?

When you have your initial consultation with your bankruptcy attorney you should bring copies of your paycheck stubs and, if married, your spouse’s paycheck stubs for the previous six calendar months.  You will also need the last two years’ tax returns, if self-    employed, profit and loss statements for the previous six calendar months, and bank statements for the last three months.  Also review your recent utility bills because the bankruptcy attorney will ask you about various monthly expenses.  It is also helpful to     bring a current mortgage statement if you have a  mortgage.
 

 

 

Chapter 7 and 13 Bankruptcy: What Money Can You Keep?

Filing for Bankruptcy: Can You Keep Money Paid During Chapter 7 or Chapter 13 Bankruptcy?

If you have a lawsuit against someone or otherwise have a claim against someone such as a personal injury claim, breach of contract claim, or medical malpractice claim, if you file

Chapter 7 bankruptcy

, the Chapter 7 trustee may be able to keep any compensation you receive in the future for such a claim with the money to be distributed to your creditors.   In a

Chapter 13 bankruptcy

case, if the claim is settled during the bankruptcy, then the monies paid for the claim must be turned over to the Chapter 13 trustee for distribution to the creditors.

 

 

Taxes & Filing for Bankruptcy

“Does Filing Tax Returns Relate to Filing for Bankruptcy?”

You must have filed all tax returns you were supposed to file for the last 4 years before the filing of the Chapter 7 bankruptcy case.  For a Chapter 13 case, you should file all tax returns which were required to be filed for the past 4 years.  However, in the case of an emergency filing of a Chapter 13 case, such as to halt a foreclosure sale, you may file the bankruptcy first.  Then, quickly file any required tax returns so the bankruptcy case may be confirmed.

 

Listing Creditors When Filing for Bankruptcy

“Must I List All My Creditors if I File for Bankruptcy?”

When you file for bankruptcy you are required to list all of your creditors on the the bankruptcy schedule.  This includes debts you owe to family members and friends and debts that you wish to repay such as mortgage loans and vehicle loans.  Once ais completed and a discharge order achieved, you may repay a discharged debt bankruptcy if you choose to.

 

Bankruptcy: Do I List Recent Income?

Must I List All Recent Income if I File for Bankruptcy?

When filing for bankruptcy, you are required to list all household income for the current year in which you file bankruptcy and for the two years before filing.  Plus, you are required to list all household gross income specifically for the six calendar months prior to the case filing.  Social Security income and unemployment compensation must be listed on the bankruptcy paperwork, but they do not count as part of the household income for determining eligibility to file Chapter 7 or for deciding how much if any money must be repaid to unsecured creditors in a Chapter 13 case.

 

Bankruptcy: Disclose All My Accounts?

“Must I Disclose All My Bank Accounts if I File Bankruptcy?”

 

When you file for bankruptcy, you have to declare all of your assets including any and all bank accounts with your name including bank accounts of minor children and accounts of your parent(s) which your name has been put on as well.  Clients occasionally ask if they must list a bank account if there is a zero balance at the time of filing.  Of course, the answer is yes- any bank account with your name on it must be listed in the bankruptcy filing.

 

Does My Income Qualify for Chapter 7?

 

 

“Is My Income Low Enough to Qualify for Chapter 7?”

The majority of us have income low enough to qualify for Chapter 7 bankruptcy.  If your income is below the median income of the average monthly gross income for the six months prior to case filing, then you would probably have income low enough to qualify for Chapter 7 bankruptcy.  If your income is above the median, means test calculations can be performed to decide if you qualify for Chapter 7 bankruptcy. As of September 2011 the household mean incomes for Missouri range is $3,278 per month gross income for a household of one, $4,260 for a household of two, $4,884 for a household of three, $5,819 for a household of four,  and $6,444 per month gross income for a household of five.  

 

Eliminate Second Mortgage in Chapter 13?

“Can I Eliminate My Second Mortgage in a Chapter 13?”

If you owe more on your first mortgage than the property is valued at when you file, a proceeding might be filed in a Chapter 13 bankruptcy case to remove the lien of the second mortgage holder.  When the you finish the Chapter 13 bankruptcy, the second mortgage debt would be removed, meaning discharged permanently.

Frank Ledbetter and is a bankruptcy attorney or, if you prefer, a bankruptcy lawyer specializing in Chapter 7, Chapter 13, and debt relief primarily in the St. Louis, MO and surrounding areas. 

He has identified 13 questions all my clients should ask when considering filing for Chapter 7 or Chapter 13 bankruptcy and is sharing his responses in this blog.

 

What Assets Can I Keep in Chapter 7?

“What Assets Can I Keep in a Chapter 7?”

In Chapter 7 bankruptcy cases, clients can typically keep all of their assets.  However, if you have more equity in an asset than what is allowed*, the Chapter 7 trustee can take the asset and sell it to get funds for distribution to the creditors.  In such cases, you might want to file for Chapter 13 case instead.  This is because in a Chapter 13 bankruptcy case, the trustee cannot take any of your assets.  

*In Chapter 7 a client may have as much as $15,000.00 in equity, or, the value of the house may be as high as $15,000.00 more than the total of mortgage loans owed against the property in order for the client to retain the house.  As to motor vehicles, a client may have up to $3,000.00 in equity in the vehicle. A client may keep up to $3,000.00 in household goods, furnishings, and clothing in a Chapter 7 bankruptcy.  A wedding ring with no more than $1500 in value may be kept and also up to $500 in other jewelry may be kept.  A client may keep up to $3000 in tools which are used in the client’s primary business.  Up to $150,000 in whole life insurance policy may be retained.  Many of these values double if a married couple files jointly.  A mobile home, which is on real estate not owned by the client may be kept if there isn’t more than $10,000 of equity. Typically, a client may keep all the value of a qualified retirement plan such as a 401k regardless of how much is in the retirement plan.

Chapter 7 Bankruptcy: Keep Tax Refund?

 

 

“Will I be Able to Keep My Tax Refund if I File a Chapter 7?”

When filing Chapter 7 bankruptcy, talk with a bankruptcy attorney about keeping your next tax refund.  In some cases, if you don’t discuss with a bankruptcy lawyer about the tax refund issue you may have to give up your next tax refund to the Chapter 7 trustee, who will give the refund amount to the creditors.  Also, you might be able to apply enough exemptions to your tax refund which will allow you to keep it.  Or, the bankruptcy attorney may tell you to wait a few months before you file the bankruptcy case.  Regardless, if you think you will get a tax refund within the next year, you should have a bankruptcy attorney engage in careful pre-bankruptcy planning to stop unnecessary loss of your tax refund.