Published Thursday, March 18, 2010 @ 6:08 pm

As many people facing significant financial hurdles already know: compulsive spending, like smoking, can often be a difficult habit to overcome. And like chain smoking, spending sprees can have devastating consequences, literally causing people just like you to “shop ‘til you drop”—sacrificing not only cash, but sometimes the ability to keep other possessions, relationships, and even, a healthy financial, emotional and physical future.

Addressing compulsive spending by taking a personal financial audit—admitting you have a problem, creating realistic expectations, using a budget and avoiding temptation—can end your string of endless debt-making and put you back on course for a better tomorrow.

But what if part of your compulsive spending habits relates directly to your other bad habits, like smoking? For some people, these types of small daily purchases on items such as cigarettes can lead to addiction, health concerns, and big financial problems.

If you are a smoker, you’re probably more than aware that smoking is hazardous to your health (according the Surgeon General facts the average smoker started at age 15 and smoked daily by age 18; the average smoker loses more than 13 years off of his life; smoking causes hundreds of thousands of preventable deaths in the US each year; one in five deaths is smoking related).

But what you may not understand is that small daily purchases on vices like cigarettes are hazardous to your wealth.  With the average name brand selling for $ 8.35 a pack, the federal cigarette tax accounts for $ 1.01 of the cost. Each state then adds its own tax.  That’s over $ 8.35 a day to engage in what may be  a relaxing habit, but also humanity’s most respiration-unfriendly vice.

And while it may be easy to dismiss $8 a day for something you enjoy, looking at it from a wider perspective shows the true cost of your daily puff.  Say you smoke only one pack of cigarettes a day…it costs you:

One Day – $8.00
One Week – $42.00
One Month – $168.00
Smoking one pack of cigarettes a day will cost you nearly $3000 per year.

Think for a moment about what you can do with that money. Put it in a savings account for unexpected expenses such as car troubles, medical bills, or even money to get by for several months when facing an unexpected job loss. Heck, that’s even a good down payment for a vehicle; after five years you could even put money down on a new home; and in 18 years, kicking cigarettes to the curb could save you hundreds of thousands of dollars: a pretty penny if you’re also saving for your kid’s college tuition.

And what if you smoke more than two packs, and have a spouse that does the same?  Is that a reason to stop paying for other bills: credit cards, car payments, even a mortgage? In short, are you blowing your financial future like so many smoke rings?

Imagine a couple who are spending almost$ 1,000 on cigarettes each month. Not hard to do if each smoke two packs a day ($8 X 4 packs X 30 days = $ 960 a month). That’s a pretty penny literally “up in smoke” as you attempt to avoid creditors, get payment extensions, or qualify for protections under current bankruptcy laws.

So, to avoid any headaches, hassles or hardships the best rule of thumb is, if you are going to get your financial house in order, or even file for bankruptcy, get your bad spending and personal habits in check.  In short, don’t let your future go up in smoke: The bankruptcy experts at the Law Offices of John T. Orcutt offer a totally FREE debt consultation and now, more than ever, it’s time to take them up on their offer. Just call toll free to 1-800-899-1414, or during the off hours, you can make your own appointment right online at www.billsbills.com. Simply click on the yellow “FREE Consultation Now” button and let these experts smoke out your next best financial steps.

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Published Tuesday, March 2, 2010 @ 10:09 am

Developed to slow the rate of Chapter 7 bankruptcy filings, the Means Test helps determine whether or not someone qualifies to file Chapter 7, and in a Chapter 13 bankruptcy, to what extent you might be able to pay back some of your creditors. It’s become a very frustrating part of the bankruptcy process because it implies, “Hey, you just don’t want to pay your bills.”  Not only that, it also subjects filers to additional frustration, confusion and widens the gap between citizens and the law in place to protect them.

However, there are ways to overcome the restrictions and complications of the Means Test.  Of course, this is where the insight of an experienced bankruptcy attorney is especially beneficial, as it can take some time and expert handling.

Called “special circumstances,” a judge may grant you permission to file Chapter 7 in spite of failing the Means Test. (Failing, in this context, indicates that you have some ability to pay and that you would have to file under Chapter 13 and pay your monthly disposable income to your unsecured creditors through a Chapter 13 plan.)  If you are a member of the Armed Forces and a call to duty dramatically alters your income and there is no reasonable alternative money source, the results of the Means Test can be rendered non-applicable.

You can also be granted a special circumstance for a sudden, serious illness that will take you out of your job or further damage the economic viability of your family.  Job loss, in some cases, can lead to ability to file under the “special circumstance” exception to means test applicability.  However, the job loss would have to be sudden, proven legitimate (you can’t be found to have provoked it) and the income from that particular job itself would most likely have to had been the reason you failed the test.

There are other ways the results of the Means Test can be put aside. However, it is very important for you to understand that these are actual, legal strategies, not encouraged methods by which to circumvent the court. That’s called fraud, and you’ll be nailed for it.

The means test uses an average of your income over the six months prior to filing your case.  That being said, you have the ability to time your bankruptcy filing according to a period in time when your income will be at its lowest. If you know bankruptcy is on the horizon but can sustain a few months without employment, you can file down the road to ensure your last six months of income fall below the state median, which is a major factor in the Means Test.

Additionally, expert bankruptcy attorneys can advise you on a number of ways that you can reduce the amount you will have to pay through a Chapter 13 plan.  This is what bankruptcy professionals call “means test planning.”  Need health insurance? Purchasing a plan for you and your family before your bankruptcy is a good way to add expenses and reduce income. The code allows you to deduct what you pay for health insurance. The same applies for disability insurance.  Been wanting to put away more for retirement?  You can increase your 401(k) or 403(b) contributions through your employer and take the contributions as a deduction against your six-month average income in the means test.

You may not realize it, and in fact, they may be a reason for your having to file, but your rising mortgage and car payment may contribute to your passing the means test. Or, if you are expecting an increase in any of the interest rates on those loans, considering waiting until they kick-in to file.

The term “household” does not mean family. It means, quite literally, how many your “house holds.”  This means relatives, children who have moved back in after the backpacking trip around Europe and even that weird guy that rents the storage loft in the garage. And since the reform act in 2005 bases the median incomes for the means test on “household” and not family, the size of your household can have a serious impact in your favor.  The more people who live in a house, the higher the threshold of income required to qualify for the means test.

It can be scary thing, the means test. It literally changed the benefits of bankruptcy for thousands and thousands of Americans. If you are worried about it or just have additional questions, don’t hesitate to contact us.  We have helped over 40,000 North Carolina families through the process of bankruptcy and our attorneys know the means test inside and out.  Call The Law Offices of John T. Orcutt to schedule your FREE consultation at 1-800-899-1414.

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Published Sunday, February 28, 2010 @ 9:26 pm

Bankruptcy is one of the most important decisions you may ever have to make. It’s not a decision to take lightly, and our office understands that you and your family have a lot of questions. While many of the same laws apply to many cases, rarely is your financial situation the same as another person’s. We all have different reasons for needing to rely on the bankruptcy code and just about every reason is as justifiable as the next.

To assist you in the most direct and non-invasive method possible, we have created three communication vehicles by which you can begin to explore why bankruptcy may be your best way out from under an impending financial crisis.

1. First, you can arrange a face-to-face meeting with us. Our practice serves North Carolina residents in 30 of our 100 counties and we have offices in Raleigh, Durham, Wilson and Fayetteville.

We structure these meetings to be confidential and without obligation. That means you are not encouraged to file bankruptcy or beholden to us in any way. We feel that because financial stress can be such a difficult matter with which to cope, it is best for us to be there for people who have questions. Maybe you’re worried about a collection agency. Or your bank isn’t returning calls about a mortgage modification. Whatever the nature of your debt question, a one-on-one meeting in one of our four offices can help you get it answered.

And best of all, there is no charge for this meeting. The introduction of money to a meeting such as this would only apply undue pressure and in many cases, add to your debt load. That is not what we want.

if you feel a personal meeting is for you, call us at 1.800.899.1414.

2. Another way to get things started or to ask questions is over the phone. If you can’t make it to one of our offices or only have time on your lunch break, maybe a phone call is the best way.

We understand that those in serious debt often develop a mistrust of those who want to help, especially given the ubiquity of shady “credit doctors” and debt settlement programs. Too many people have lost a lot of money to these bogus outfits. Please understand, we’re here to help you get out of debt using the strength of federal bankruptcy law. If you don’t believe us, take a look at our client testimonials at http://www.billsbills.com/testimonials.php. Talk to us in person or over the phone. We’ve helped thousands of families get through the very same financial challenges you’re going through right now.

3. Lastly, you can reach us via the Web. Our site, www.billsbills.com, has an easy form, available here, that you can fill out for us to call you. If you choose too, you can add some basic information about your situation, which will help us get some questions answered before we speak and thus, help you make a decision quickly about the best way to proceed. It won’t take more than five minutes to complete.

Again, we know that making the decision to file for bankruptcy is a serious one that deserves a lot of research. Our goal is to help you clearly understand the nature of your debt and how it can best be settled. If you can think of some additional ways to engage us or have suggestions for us, please let us know.

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Published Friday, February 26, 2010 @ 7:15 am

For most bankruptcy bound individuals, a discharge of all individual debts is considered the Holy Grail of any bankruptcy filing, yielding a permanent injunction that prevents creditors from collecting on debts. However, any good discussion of debt dischargeability also tackles the primary exceptions to look out for when considering any bankruptcy filing.

Exceptions to the power of a bankruptcy discharge, include:

Certain Tax Obligations
Withholding taxes are not dischargeable in bankruptcy, although you may be able to use a Chapter 13 case to pay these over time (notwithstanding any accrued penalties and interest).  Similarly, sales taxes are not dischargeable, but again, Chapter 13 can establish a payment plan for lessening the load and paying this out over the long haul.

The question of whether your income tax can be discharged ultimately depends on how old the tax debt is and when you filed the tax return.  In order to be dischargeable, your tax debt for the tax year in question must meet the following conditions: the due date for filing your tax return is at least three years ago; your tax return was filed at least two years ago; the tax assessment is at least 240 days old; your tax return was not fraudulent; and you are not guilty of tax evasion.

For example, in a 2009 bankruptcy filing:

• Taxes from 2006-2008 are not dischargeable;
• Taxes from 2004 and before are eligible for review; and
• Taxes from 2005 are potentially dischargeable if the return was filed by the debtor on or before April 15, 2006. If the return was filed under an extension, then the 2005 taxes are not eligible for the following review unless the debtor files after October 15, 2009.

Fraud and Certain Credit Usages Before Filing
Fraud is a valid creditor objection to a bankruptcy discharge. To find fraud, a creditor must prove: (1) a statement made under false pretenses; (2) a material fact; (3) designed to deceive the creditor; (4) that does in fact deceive the creditor; (5) the creditor reasonably relies on the statement; and (6) the creditor suffers actual damages resulting from the reliance.

The general rule here is this: if you’re considering bankruptcy it’s best to avoid maxing out (or in some cases simply using) consumer credit, credit cards, or loans. Bankruptcy law now demands that bankruptcy bound debtors like you do not take cash advances or purchase luxury items on credit 90-days prior to your filing bankruptcy. If you do purchase large or luxury items through these means, creditors may challenge you (and these discharging these debts) in Court if they believe that you have acted in bad faith in using credit excessively.

Domestic Obligations
Alimony, child support and spousal maintenance debts are not dischargeable in either Chapter 7 or Chapter 13 bankruptcy. Additionally, the first prong of bankruptcy, the automatic stay, does not act to stop most collection efforts for these claims. An exception to this exception comes in the second type of domestic asset splitting known as equitable distribution. While equitable distribution—a dividing of martial property as a result of dissolution of the marriage—is no longer dischargeable in a Chapter 7 bankruptcy, the same is not true in Chapter 13. Chapter 13 bankruptcy, in what is called as its “super discharge,” can aid a former spouse having trouble paying their bills to eliminate this type of burden. These issues are complex, and it is important that you speak with a bankruptcy expert if you have these types of issues.

Student Loans
In an effort to protect the education lending industry, and allow student loan money for almost anyone who wants it, Congress has made virtually every advance in connection with education non-dischargeable in bankruptcy. To that end, these loans are non-dischargeable “unless excepting such debt from discharge…would impose an undue hardship on the debtor.” While the definition of “undue hardship” is ultimately to the discretion of your bankruptcy judge, if precedent is any “judge,” this is a high hurdle to surmount. As a result, if you’re considering a bankruptcy filing simply to discharge a large student loan bill, don’t lose hope, it may just be best to wait: the tide appears to be turning in Congress to loosen this exemption as the costs of education skyrocket and more and more Americans face insurmountable educational tabs.

Because of the complexities of bankruptcy law, a qualified bankruptcy attorney is a necessary tool in your financial toolbox to help you conquer your creditors and face your fiscal  fears, yielding the right kinds of debt relief—at a low cost— for a viable and secure future.  The bankruptcy experts at the Law Offices of John T. Orcutt offer a totally FREE debt consultation and now, more than ever, it’s time to take them up on their offer. Just call toll free to 1-800-899-1414, or during the off hours, you can make your own appointment right online at www.billsbills.com. Simply click on the yellow “FREE Consultation Now” button.

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Published Friday, February 12, 2010 @ 5:44 pm

The Making Home Affordable program was designed to be the savior of the crashing real estate economy. People nationwide were taking solace in the President’s effort to save our homes and lead us through the worst economic situation our country has faced in almost 100 years. Hundreds of thousands of homeowners facing foreclosure due to the bubble bursting on a plague of poorly schemed sub-prime mortgages rejoiced in what seemed to be a cooperative effort on the part of the a supportive new Washington administration and the Wall Street.

Unfortunately, the program has landed far from expectations. The foreclosure rate has seen only minor blips in decline and it has become difficult to hear government officials even address the existence of the program, unless to defend it. Additional programs have been introduced to support it but larger menu items are being devoured by the House and Senate and the status of homeowners has been given a backseat. Meanwhile, the numbers of properties in foreclosure and pre-foreclosure continue to grow.

Accepted into the trial HAMP modification program for six months, Bert Carvajal of south Florida was eventually denied full participation in the President’s program. He was also deemed ineligible for any assistance from his lender, JPMorgan Chase. His situation is no different than that of most Americans in trouble with their mortgage. His construction management income was sapped by a declining housing market and he simply fell behind on the payments that keep a roof over his family. He is now behind on property taxes too, so he owes his bank and the county.

Mr. Carvajal’s best option may be to soon file bankruptcy. In Chapter 13, he can catch up on the missed mortgage payments, and pay back the property taxes over a period of up to 5 years.

Jag Bhangu was also recently denied a mortgage modification because he still has equity in his home. However, that doesn’t mean he can afford to pay for it. And, given his position as a mortgage consultant, one would think the bank would by sympathetic to his situation of lost income. In the last couple of years, his income dropped 70 percent from where it was when he was approved for the loan.

Bhangu was granted a trial modification under Obama’s plan for nine months but then declined for permanent adjustment. He continues to speak with people at CitiGroup about another modification but he is not hopeful that it will happen.

If you’re getting the runaround from your mortgage lender, talk to a bankruptcy attorney today to discuss how a Chapter 13 can help you and your family hold on to your most precious asset- your home. Call today. In North Carolina, contact the Law Offices of John T. Orcutt for a free initial debt consultation. 1-800-899-1414. Or visit www.billsbills.com and fill out our debt questionnaire. With offices in Raleigh, Durham, Wilson and Fayetteville, help is just a phone call away.

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Published Tuesday, February 2, 2010 @ 3:29 pm

It’s almost February and ‘tis the season for thinking about tax time—even more so if you find yourself considering the benefits of bankruptcy. So, if you believe bankruptcy is the right option to help you start fresh in 2010, in addition to trying to get your 2009 taxes filed in a timely manner, and wondering whether you can discharge any income tax debt in your bankruptcy filing, you may also be thinking about how you can protect your precious tax refund from creditor claims.

But, just in time to file (for taxes and/or bankruptcy), here are some timely tips for protecting your tax refund:

Alter Your Exemptions
If you’re expecting a larger tax refund in the same year you plan to file for bankruptcy, your first best step is to alter your tax exemptions and allowances in the months prior to a bankruptcy filing. Increasing your exemptions now means you’ll receive more money in your paycheck to use throughout the year and less money in the form of a lump sum tax return. In addition to the benefit of being able to apply that money to necessities throughout the year, that’ll be less money available for creditors to seize at the time of any necessary bankruptcy filing.

Apply for Advanced Earned Income
If you receive what’s known as an “earned income” tax credit you can also head off some bankruptcy issues by providing your employer with a W-5.  This special tax form allows you to receive your earned income credit on a monthly, weekly or quarterly basis. And like the tax refund, this process disburses this money directly to you, keeping your money out of government coffers and potentially out the hands of awaiting creditors.

Know Your Refund
While some can’t wait to file, many people time their bankruptcy for a time following the potential for receiving a non-exempt, but sizeable, sum.  As such, when considering your bankruptcy, it’s important to determine what your refund will be. Depending on whether you’re receiving a generous refund, you may consider holding off on your bankruptcy filing until you have had an opportunity to use the refund on your family’s necessities—spending the money on food, clothing, medical co-pays, car repairs, etc., keeping all receipts as you spend.  In the alternative, if you are planning to file for bankruptcy, do not use your tax refund to pay back relatives or friends, large sums of unsecured debt to any one unsecured creditor, or purchase luxury items, all of which could cause a problem with your bankruptcy filing in terms of creditor claims.

Know the Rules for the State You’re In
Your own state’s laws could mean your refund is partially or fully exempt from creditor claims. As a result, it is essential that you consult with a qualified bankruptcy attorney to review your individual bankruptcy situation in and around tax time. This consultation can assure you’ve attempted to protected your precious tax refund from every imaginable angle.

If you are considering bankruptcy, knowing a qualified bankruptcy attorney can also help you with additional tax decisions, yielding the right kinds of support, information and insights—at a low cost— for a financially viable and secure future.  The bankruptcy experts at the Law Offices of John T. Orcutt offer a totally FREE debt consultation and now, more than ever, it’s time to take them up on their offer. Just call toll free to 1-800-899-1414, or during the off hours, you can make your own appointment right online at http://www.billsbills.com. Simply click on the yellow “FREE Consultation Now” button.

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Published Tuesday, February 2, 2010 @ 2:30 pm

Many of our clients automatically assume they will lose their rental property if they file for bankruptcy. Isn’t that the whole idea of bankruptcy? That you give up everything you have, with a few exceptions, in exchange for getting the debt collectors off your back?

Well, no. Many factors come in to play in determining whether or not you will be forced to sell your rental property, including whether you file chapter 7 or chapter 13, how much money you owe on the property and how much income you receive from it.

Let’s start with chapter 7. If you file chapter 7, you get an exemption for the equity in your primary residence – how much depends on the state you live in – but rental property doesn’t qualify for the standard residence exemption. Therefore, you will only be able to protect the property from sale if you can cover it under your available wildcard exemption. The North Carolina wildcard exemption is $5,000.00 per filer- not much. However, your state may have additional protections if you own the property jointly with your spouse. In North Carolina, if you own the property jointly with your spouse, the property is only subject to claims of joint creditors. If all of your debt is in the name of one spouse or the other, the property may be protected- regardless of the amount of equity. Talk to a experienced bankruptcy attorney, who can examine how you hold title and if you have any joint debt.

But what if you don’t have any equity in the house, or minimal equity? What if, for example, the house is worth $100,000 and you owe $120,000, or even $99,000? The trustee’s job is to determine whether or not there is money for your creditors, not to take away everything that belongs to you. He will determine the property’s worth, then subtract the projected sales costs, selling it and paying taxes on the proceeds. If it’s not worth the trustee’s time and effort, it’s unlikely that he will try to sell it.

With Chapter 13, there are additional caveats and concerns. In general, you should be able to keep your rental property in a Chapter 13 filing. In fact, since the rental property is not your primary residence, you might be eligible for cramdown under chapter 13 – meaning that if you owe more than the property is worth, the bankruptcy judge is able to alter the terms of the mortgage to reflect the property’s current value rather than the amount you originally agreed to pay for it. This could lower your monthly mortgage payments, as well as the long term amount you have to pay to the bank for the property. Cramdown isn’t allowed on primary residences, but it is allowed on other secured debts, including rental property.

Do note, however, that rental property can, under certain circumstances, cost you money. The trustee in a Chapter 13 case will look at all the costs associated with the property – your mortgage payments, plus taxes, insurance, upkeep and repairs. If these costs outweigh the income the property brings in, the trustee may object to your plan on the basis that the money you’re spending on the property should be distributed to your unsecured creditors. In such a case, surrendering the property may be your best option. However, this is a very fact-sensitive issue and depends on how your jurisdiction interprets very complex provisions of the bankruptcy code. Only an experienced bankruptcy attorney can advise you on your specific situation. Bottom line- if you’re deeply in debt, talk to a bankruptcy attorney and get the real facts. In North Carolina, call the Law Offices of John T. Orcutt. Convenient office locations in Raleigh, Durham, Wilson and Fayetteville. Call today: 1-800-899-1414 or visit www.billsbills.com for more information.

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Published Monday, February 1, 2010 @ 4:46 pm

You may have read on the blog, or elsewhere, that many are calling our current economy a “middle class recession.” This is because the numbers are way up on bankruptcies filed by those who make more than $60,000 per year, up 6.9 percent from 2008. Bankruptcies on the whole are up 36.5 percent from this time last year.

So why does it matter how much money a person makes when filing bankruptcy? Well, because bankruptcy is often considered an escape route for the financially unreliable or worse yet, “something poor people do.” It’s just not true.

Today, bankruptcies are increasing among people in the real estate profession, namely developers and agents. When the housing bubble dissolved, so did the incomes for a lot of American families.

There are different types, or “chapters” of bankruptcy for a reason. Basically, some versions are better suited to different situations. Chapter 7, for example, is typically filed by those who may have lost a job or for some reason may not have regular source of income. It wipes out all debts, but also mandates a person dispose of their “non-exempt assets” as a way to repay creditors to whatever extent possible. If you have equity in property beyond available exemption limitations, you may have a “non-exempt asset”.  Many states’ exemptions, as well as the federal exemptions, provide some measure of protection for everything from your home to retirement accounts. It is not often the case that a family has assets beyond what available exemptions can protect.  Even if available exemptions do not cover all of a person’s property, Chapter 13 provides a way to pay the equity above available exemptions to unsecured creditors, so that a person may keep his property, if he can afford to do so.

For those who are still earning a living or at least have a source of money, Chapter 13 creates a three- to five-year payment plan. Your plan payment will largely consist of secured debt, like your car and mortgage payments. Because the plan payment can include your attorney fees, Chapter 13 is an attractive option if you do not have enough up-front money for Chapter 7 attorney fees.

Maybe you’re giving some thought to a debt-settlement firm instead of bankruptcy. Sure, it’s natural for you to want to negotiate your way out of debt. Unfortunately, many of these companies position themselves as an alternative to bankruptcy that will save your credit. More often, however, these debt settlement companies end up doing far more damage to your credit than if you had simply filed for bankruptcy from the start. Remember, just because you’re in a “debt-settlement” program, your creditors will continue to report your missed payments to the credit bureaus. A bankruptcy, while causing an initial hit to your credit score, will stop the negative reporting and allow you to rebuild your credit score faster.

Bankruptcy is an organized, legal process with pre-defined results. Debt settlement firms function under very little regulation and ask for payments before all the debts are settled, therefore the incentive to settle the debt is not as strong as if they were paid based on results or after everything is taken care of.  Thus, your “debt settlement” is by no means guaranteed.

And one more point on debt settlement agencies: the IRS considers forgiven debt as taxable income. In contrast, debt erased as part of a bankruptcy is not taxable.

Another important point about bankruptcy has to do with timing. It’s key that you don’t file too early or wait too long. Start by simply adding up what you owe and making a simple estimate on what it would take to pay it off yourself. If the discrepancy seems impossible to make up, or would force you to sacrifice your family’s needs just to make a dent in your debt load, then consult an experienced consumer bankruptcy attorney.

On the other hand, don’t wait until the car has been repossessed or the foreclosure notices start arriving. Use your head, remain calm, and speak with an attorney. The bankruptcy concept itself is fairly straightforward.  The process however, requires a good deal of legal expertise.  Engage it wisely.  Take time to understand the basics of filing.

From the Law Offices of John T. Orcutt.  Helping families through bankruptcy since 1995. Call today to set up a free initial debt consultation in one of our 4 convenient office locations. Raleigh, Durham, Fayetteville and Wilson.

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Published Monday, February 1, 2010 @ 10:48 am

The decision to file for bankruptcy is never an easy one, especially where married couples are involved. Spouses must settle issues of dishonesty, mistrust, and frustration–and that’s even before any of the complex steps of collecting necessary documents and filing papers.

But the story for insolvent couples does have a caveat: joint bankruptcy protection. Married debtors can file their cases jointly with one trustee, one filing fee, and one total case. Debtors can bring to the table their joint debts as well as debts they hold only in their name. To be a joint case, the debtors need only be legally married.  And they must be a man and a woman.

Sounds simple right?

Well, for thousands of individuals living in America today, the latter designation raises difficult questions—especially in the growing number of states that recognize same-sex marriage or its legal equivalent (“civil unions”). Yet, as the constitutionality of laws and amendments forbidding marriage equality continue to be litigated across the country, same-sex debtors seeking bankruptcy relief  face even tougher challenges.

Because it is generally accepted that the Defense of Marriage Act (“DOMA”) would preclude the filing of a joint bankruptcy petition by a same sex married couple, these folks face two very different options: (1) make two separate bankruptcy filings, or (2) pursue the right to seek bankruptcy relief as would an opposite-sex married couple. 

While the second option would be a precedent-setting endeavor, fulfilling the true meaning of marriage equality, in reality pursuing this groundbreaking goal is largely antithetical to the larger motivations of most bankruptcy bound individuals, gay or straight: getting out of debt.

In practice, a married same-sex couple will need, more than their heterosexual counterparts, the assistance of a qualified bankruptcy attorney to pull together all of their required financial information;  ensure that it is complete and their disclosures accurate; and research and prepare a case that anticipates a variety of motions attacking the joint filing. Regardless of what “party-in-interest” files the case (as defined by the Bankruptcy Code and common law), the filing will likely be challenged, even before a judge reaches such substantive issues as income, assets, liabilities, and creditors.

In this case, like others for same-sex couples seeking right-giving precedents, while the Bankruptcy Code provides one standard, constitutional arguments will inevitably reveal others that need to be briefed and raised.  Same-sex couples must expect that any decision in their favor will be appealed, perhaps more than once to a US District Court, a Bankruptcy Appellate Panel, a Circuit Court of Appeals, or maybe even the Supreme Court of the United States.  For debtors, this type legal wrangling adds ,ore time, more fees and inevitably more stress to what is undoubtedly an already nerve-racking situation.

As a result, for a married same-sex couple facing the need to file bankruptcy, the next steps can mark a tough decision: file singly or fight the system; seek your family’s financial security or a denigrated group’s fundamental rights; moving forward for your family or moving your family forward.  In the end, changing the current state of the law will take either an act of Congress or one or more very brave and very patient married same-sex couples who find themselves drowning in debt and who–in spite of these debts—also feel empowered to fight the good fight.

The state of marriage equality is not yet where it should be in the United States, and this seriously affects the legal rights of same-sex families.  But until the law changes, same-sex couples need expertise in the handling of their cases.

If you live in North Carolina where same-sex marriage is not legal, but are still considering bankruptcy, the bankruptcy experts at the Law Offices of John T. Orcutt offer a totally FREE debt consultation and now, more than ever, it’s time to take them up on their offer. Just call toll free to 1-800-899-1414, or during the off hours, you can make your own appointment right online at www.billsbills.com. Simply click on the yellow “FREE Consultation Now” button.

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Published Monday, January 25, 2010 @ 6:33 pm

It’s tax season. Which means that for most people, it’s time to realize just how much we give to Uncle Sam every year. For some, the prospect of a refund provides a glimmer of hope that some new money is coming in soon to pay off debts.

Just a quick little note on your tax dollars before we get into the meat of this post: it is actually better to owe just a little bit of money after filing because that means that you have used more of our your own money throughout the year instead of giving it all to the government. Sure, a nice windfall come April is a nice thing. But keep in mind that it’s your money—you’re just getting it later. And, when it comes to investing, “money now” is always better than “money later.”

Because it’s tax season, we thought it important to discuss how taxes and personal bankruptcy can relate to one another. It is possible to use bankruptcy as a way to get rid of large, outstanding tax obligations but it’s not as easy as discharging a few grand in credit card debt.

Chapter 13 bankruptcy in most cases requires you to pay back what’s owed within your monthly payment plan and Chapter 7 rarely allows for the complete expulsion of your tax debts. (If you’re not sure of the differences between Chapters 13 and 7, simply do a search on our blog for each.)

There are, however, some precedents set for removing tax obligations as part of a bankruptcy. Although we encourage you to understand that it is a complicated process and the results are not always what you may be hoping for.

(Understand this post is only scratching the surface. Only in person can we provide a full breakdown of taxes and bankruptcy.)

One reason tax debt and bankruptcy tend to get tangled is that past due taxes can fall into all three categories of debt type: Dischargeable, Nondischargebale priority debts, and Nondischargeable priority debts.

Provided you filed your taxes on time, legally and provide no evidence of tax evasion other than legitimately being unable to pay, you can discharge tax debt in Chapter 7 and 13. Still, what’s owed must be more than three years late and assessed more than 240 days before you file. That means that you were officially declared late and in debt that many days before you filed. This ensures the IRS that you are not declaring just to get rid of a recent tax debt.

BUT (you knew there was one), that 240 day window starts only after the last extension expires, not when the original debt was assessed. Other impediments to that three year time-frame include a 90-day addition if a previous bankruptcy case of yours was still open while you were assessed the tax debt; the addition of any time the IRS was prevented from collecting as a result of a court ordered due process hearing plus an additional 90 days; and any time that a debt assistance professional formally asked the IRS to temporarily halt collection efforts.

Basically, any effort you make to delay the collection of tax debt, even if perfectly legal, counts against your ability to discharge tax debt in a bankruptcy.

The key to bankruptcy and taxes, like all things in life really, is to be completely honest and upfront. Any attempt to hide or even coyly plead ignorance will be considered an attempt to obscure or defraud the court and even worse, the IRS. Not being able to pay your taxes, especially after a mid-year job loss, is a common thing. Don’t make it worse.

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Published Monday, January 25, 2010 @ 8:41 am

Part of understanding bankruptcy is knowing who the professionals are that you will meet and deal with along the way. From your attorney to even your creditors, it helps provide a solid foundation of comfort to actually understand the role of those who are playing a role in your financial future.

One of those individuals is the case Trustee, the most prominent member of the bankruptcy process. And, the involvement you have with the case trustee depends on which chapter of bankruptcy you are filing.

As you may know, the 2 main “chapters” are 7 and 13. Well over 95% of all bankruptcy cases filed are filed under Chapter 7 or Chapter 13.

Let’s start by talking about the Chapter 7 trustee.

In every district in the country, there are 1 or more attorneys who have been appointed to act as a Chapter 7 Trustee. These Trustees are also sometimes called panel Trustees. When you file a Chapter 7 bankruptcy, one of these panel Trustees is assigned to your case.

The best way to think of this person is as an intermediary between you and the Court, an attorney whose job it is to make sure you have told the truth, the truth and nothing but the truth, to make sure that you have disclosed everything you are legally obligated to disclose, and to find and sell any ‘assets above exemptions’.

Fortunately, in our experience, in about 98% of Chapter 7 cases filed, there are no ‘assets above exemptions’ to sell. What does this mean for you? Just that if you file Chapter 7, there is very little chance you will lose any property you don’t want to lose.

As long as you have told the truth, disclosed everything, cooperate, and have no assets that cannot be protected by available ‘exemptions’, your contact with the Trustee should be a positive one.

However, the best approach is to assume that the Trustee assigned to your case is not your friend, so that you stay cautious and alert.

In most cases, you are first introduced to the trustee at your 341 meeting, also known as the “Meeting of Creditors”. Technically speaking, this meeting is held to provide your creditor an opportunity (in most cases, one last opportunity) to ask you questions. However, most of the time, none of the creditors show up, and then, it’s just you, your attorney and the Trustee. At this meeting the Trustee will ask you questions necessary to get to know you and your case better and necessary for the Trustee to carry out his or her duties. (There a number of posts here on the blog about this meeting. Take a look.)

Let’s say you are unlucky enough that your case falls in the approximately 2% of cases with more assets than can be protected. In this case, it is important that you understand that it is the Trustee’s duty to sell or dispose of those assets ‘above exemptions’, and to then distribute the proceeds to your creditors. Basically, anything not considered exempt property must be seized and sold by the trustee.

The type and amount of exemptions are, for the most part, set by the law of the State where you live. There are exceptions. Being set by State law, exemptions vary greatly. However, since in 98% of bankruptcy cases filed, there are no assets not covered by available exemptions, the exemptions statutes are, for the most part, fairly generous. However, make no assumptions in this regard. Always, always seek the help of an experienced, full time bankruptcy attorney. Such an attorney will be an expert in what exemptions are available in your State and how best to apply them. Such an attorney will also be able to tell you what is not protected.

The Chapter 7 Trustee is also responsible for tracking down any gifts you made just before filing, whether or not they were made in an attempt to hide assets or not. For example, if your nephew got a few thousand from you for his birthday the week before you filed bankruptcy, rest assured that your Trustee will be looking to get this money back. And, it’s not even safe to pay back relatives or friends prior to filing. These people are generally considered “insiders”, and, subject to certain exceptions, paying back insiders during the 12 months before filing bankruptcy is a “no no”, which will result in your Trustee being forced to try to get the money back.

Chapter 7 trustees are paid by a commission based on the amount of money they recover, so it stands to reason they’ll work hard to find and sell what property they can.

Now, let’s talk about Chapter 13.

The Chapter 13 Trustee, aka the Standing Trustee, is also first introduced to you at the 341 meeting. However, their role is more about ensuring your income is sufficient to pay your monthly Chapter 13 plan payment and that your proposed Chapter 13 plan is properly calculated. Assuming all goes well, it is then this Trustee’s job to collect from you your plan payment and to distribute it to your creditors.

Like the Panel Trustee, the Standing Trustee is paid a commission. However, unlike a Chapter 7 Trustee, the Chapter 13 Trustee gets his commission not from what he takes and sells, but rather out of the money you send in each month. Chapter 13 Trustees do not sell things. That’s just not his job.

The best way to think of your Chapter 13 Trustee is as the Chief Financial Officer in charge of your Chapter 13 plan. He runs the business of your Chapter 13 case. He figures out what is needed, and then accounts for and distributes the money you send in each month.

Your relationship with your Chapter 13 Trustee will be vastly different than the one you would have with a Chapter 7 Trustee. Chapter 7 Trustees live, for lack of a better way of saying it, for what they can “kill and eat”. Chapter 13 Trustee do not. Chapter 13 Trustees live off a percentage of what you send in each month. The Chapter 13 Trustee only succeeds in getting paid, if you succeed in making your payments. Therefore, as a general rule, Chapter 13 Trustees, at least those who recognize, so to speak, which “side their bread is buttered”, will go everything in their power to help you make a go of it in Chapter 13.

In most cases, as long as you make your required Chapter 13 plan payment, you can think of the Chapter 13 Trustee as more of a friend than adversary. He or she still has to do the job, but doing the job includes doing the best that can be done to make sure you do yours and that you get the full benefit of bankruptcy, all the way to the desired “discharge”.

If all of this is confusing and scary, we understand. Bankruptcy law is complicated and complex, to say the least. Need an expert? In North Carolina, there are many, good, experienced bankruptcy attorneys.

One is the Law Offices of John T. Orcutt, serving 30 counties in middle and eastern North Carolina. John Orcutt offers a Free initial consultation at 4 different locations: Raleigh, Durham, Fayetteville and Wilson. Call toll free to 1-800-899-1414 or visit his website for tons of info on bankruptcy: www.billsbillsb.com .

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Published Monday, January 18, 2010 @ 6:43 pm

Is there any way to lower your car payments in bankruptcy? The answer, which may surprise you, is maybe. While Congress recently rejected attempts to pass a law that would allow bankruptcy judges to ‘cramdown’ mortgages, there do exist some limited possibilities for revising auto loans.

Basically, debtors who owe more than their car is worth – and who doesn’t, especially if you bought it new? – may be eligible to eliminate the portion of the debt that exceeds the value. In a Chapter 13 bankruptcy, the debt would be divided into ’secured’ debt (the value of the car) and ‘unsecured’ debt (the excess money on the loan), and the car loan would be revised to repay only the secured portion.

However, this option is generally only available for people whose car loans originated more than 910 days before they declared bankruptcy. Some courts have allowed, in limited form, for the portion of a car loan that was ‘rolled over’ from a previous car loan, to be treated as unsecured debt even in a more recently originated loan. However, note that a recent decision by the US Court of Appeals for the Fourth Circuit – whose jurisdiction includes North Carolina – has determined that this portion of a car loan is included as secured.

On the other hand, some attorneys report that some lenders are willing to renegotiate the loan, even if it originated in the last 910 days. While the law doesn’t require them to renegotiate, it doesn’t prevent them from doing so either. It’s at least worth asking, before you take up your other options.

If your loan originated less than 910 days ago, and your lender refuses to renegotiate, what are your other options as you go through bankruptcy? You can simply surrender the car. Lenders don’t like this option, but if you’re filing bankruptcy, they have no choice. They will take back the car and then sell it at auction. The difference between what you owe and what they sell it for will be entered against you as a deficiency balance. However, even in a Chapter 13, there is little chance the creditor will receive any return on its deficiency balance.

You can also reaffirm the loan. In this case, you agree to continue making the payments on the car even after you file for bankruptcy. Note carefully, though, if you choose this option and then default on the loan, you will be responsible for the deficiency balance, and the lender can sue you for it. Reaffirming your car loan has some advantages though: you get to keep your car, which means you don’t have to look for a new car loan with a recent bankruptcy on your record. Making these payments on time is also a good way to rebuild your credit – just make sure the lender is reporting them to the credit agencies.

As always, remember that the best way to negotiate this maze is with the help of a good bankruptcy attorney.

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Published Thursday, January 14, 2010 @ 9:30 am

More than 1.4 million Americans filed for bankruptcy in 2009; surprisingly, a large number of filers were over the age of 65. Senior citizens were traditionally less likely to file bankruptcy for a number of reasons. Until recently, for example, senior citizens held less credit card debt than younger people. They have less time to repair their credit rating after a bankruptcy as well, and may feel that the perceived harmful effects of bankruptcy will haunt them forever. Considering that many myths about bankruptcy are deep-rooted, older Americans may be more likely to hold strong feelings associating bankruptcy with shame and failure.

Nonetheless, bankruptcies among the plus 65 set continue to grow. Between 1991 and 2007, bankruptcy filings among Americans 65 and older went up 125 percent; for those between ages 75 and 84 they increased an astonishing 433 percent. The recession that began at the end of 2007 has hit seniors particularly hard. The crash of the stock market meant that many seniors wound up having far less money to see them through retirement than they had hoped. While younger workers have a couple of decades to rebuild their portfolios and 401k accounts, older Americans, who need to use that money now, do not. Furthermore, many older Americans live on a fixed income – social security payments or pension payments – and they have few options to increase that income. With a national unemployment rate hovering around 10%, jobs are difficult to find for anyone. Given that many companies have a bias – legal or not – against hiring older workers, senior citizens often find it difficult to get work.

While seniors once had a reputation for eschewing credit cards and paying with cash, in recent years, credit card companies have been aggressively marketing to senior citizens. Most doctors and pharmacies now take credit cards for prescriptions and co-pays; many strapped seniors have no choice but to put those purchases on credit. The average senior now has slightly more credit cards debt than his or her younger counterparts.

The good news is that bankruptcy offers seniors the same protections it offers all Americans: a chance to keep your home. Freedom from the incessant calls of creditors. If you’re on a fixed income, chances are good that you will qualify for a Chapter 7 bankruptcy, which will simply discharge your unsecured debt.

Why waste your golden years worrying about credit card debt? See a bankruptcy attorney today, and determine the best course for you, to bring you to financial freedom.

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Published Thursday, January 7, 2010 @ 12:27 pm

Are you putting off declaring bankruptcy because you’re afraid you’ll never be able to rent an apartment again? Have you heard horror stories from friends or relatives about how they got turned down for a rental because of their bad credit? Relax. Having a bankruptcy on your credit report won’t prevent you from finding a great place to live.

It’s true that some places – particularly apartment complexes – do check your credit, and do accept or deny your application based on the results. If you have your heart set on living in a place like this, do yourself a favor: call them up beforehand, and ask what their requirements are. Be specific. Ask if they refuse to rent to anyone with a bankruptcy on their record. Find out your credit scores in advance, and ask the apartment manager if your scores sound like they’re in the right range. If not, you’ve just saved yourself the $40-50 application fee. If the manager says, “well, they’re a little low,” offer to bring documentation showing your reliability: pay stubs from work, bank statements, savings accounts, rental history, letters of recommendation. Some apartment complexes will rent to people with lower credit for an additional deposit.

Remember, too, not every apartment owner will check credit. Many individual owners don’t do a credit check. Even those who do are likely to listen to your story about what happened, and why you declared bankruptcy. Be brief but honest; most importantly, explain how your situation has changed. Make sure they understand that the bankruptcy means you owe less (or no) money now, and are therefore better placed to make the rental payments. Again, bring documents to support your story. You can also point out that since a person can’t declare bankruptcy for another seven years, you are actually, in some ways, a better risk than someone who hasn’t declared bankruptcy – if you stop making payments, they could take you to court and you wouldn’t be able to discharge those debts. Be careful with this argument though: although it’s both true and valid, some landlords might consider the fact that you’re bringing up the possibility of not paying rent as a bad sign.

Another suggestion is to look for places to rent that are less strict. Some rentals will advertise: no credit check required. Check out apartments that are offering specials: one month free if you rent by June 1st, for example, or no deposit required. Generally, this indicates a place with low occupancy, and owners who can’t afford to be quite as picky.

Finally, once you get established in a new apartment, do everything you can to maintain the path to financial stability you started by declaring bankruptcy. Take steps to rebuild your credit. Begin to establish a nest egg so that you have some savings in case of emergencies. Most importantly, pay your rent on time every month. If you need to rent another place in the future, having a solid record of making monthly payments could be invaluable.

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Published Tuesday, January 5, 2010 @ 8:35 am

Last month, the Supreme Court heard arguments in an interesting case about bankruptcy attorneys and free speech. The new bankruptcy law passed in 2005 contains a provision that prohibits bankruptcy attorneys from advising their clients to take on new debt before filing bankruptcy. In United States vs Milavetz, a 73-year old attorney from Minnesota is challenging that law.

The plaintiffs argue that the case represents a clear violation of attorney’s freedom of speech. Constitutional lawyers think this argument has merit: how can it be legal to interfere with a lawyer’s ability to advise his clients? There are legitimate reasons that people thinking about filing bankruptcy might need to take on new debt. In those cases, an attorney’s in a difficult position: does he violate federal law or does he fail in his ethical responsibility to his client?

For example, a debtor who is about to file for Chapter 13 bankruptcy might benefit by refinancing his mortgage, securing a lower rate before he files – in this case, since he’ll be paying less on his mortgage, there will actually be more money to contribute to his Chapter 13 plan. Or the debtor facing bankruptcy might purchase a new, reliable car to insure that he or she can get to work on time. What about an emergency medical situation? There are many situations in which taking on debt might actually be the responsible thing to do – but attorneys are prohibited from pointing these things out.

In oral arguments in the Supreme Court case, the government didn’t deny that there may indeed be circumstances in which someone about to file for bankruptcy could or should take on new debt. The law states that it’s prohibited to advise someone “to incur more debt in contemplation of such a person filing” for bankruptcy. The government argued that, in this case, ‘in contemplation of’ actually means ‘actions taken with an intent to abuse the protections of the bankruptcy system’. The restriction is not, they argue, against lawyers giving appropriate advice; it applies only to helping clients run up huge new debts that will never be repaid.

Really? That’s what ‘in contemplation of’ means? Wouldn’t most people – even most lawyers – read ‘in contemplation of (filing bankruptcy)’ as ’someone who’s thinking about filing bankruptcy’?

Also, it’s important to remember that running up debts you have no intention of paying is illegal: it’s civil fraud for sure, and maybe even criminal theft. All lawyers are already prohibited from advising their clients to do something illegal! Many lawyers feel that the provision was inserted into the bankruptcy bill as part of a whole host of punitive measures against consumers filing bankruptcy and their lawyers.

Of course, this is a very small part of bankruptcy law and doesn’t affect most of the interactions between attorney and client. An experienced bankruptcy attorney is able to give their clients the best advice even if, when it comes to the area of additional debt, they have to be creative about it. Some lawyers, for example, will set out the law in detail for their clients, without actually saying ‘this is what you should do.’ Still, it’s not right – and shouldn’t be legal – for the government to interfere with the attorney-client relationship like this.

Will the Supreme Court overturn the provision? Many observers think so. Others suggest that the court will decide that the provision only prohibits advice that was already illegal. Obviously, we all have to wait and see until the Court announces their decision this spring.

Need to consider filing bankruptcy. In North Carolina, keep the Law Offices of John T. Orcutt in mind. They offer a totally FREE initial consultation out of 4 different offices: Raleigh, Durham, Fayetteville and Wilson. Just call toll free to 1-800-899-1414 or check out their website at www.billsbills.com .

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Published Monday, January 4, 2010 @ 12:08 pm

In states like North Carolina—composed largely of rural areas dotted with farmland and abutting the ripe fishing grounds of the Atlantic—Chapter 12 bankruptcy can be exceptionally helpful to working farming and fishing families who might otherwise be bankruptcy bound.

In part one of the four-part series, entitled Chapter 12 Bankruptcy, we introduced the concept of Chapter 12, provided a brief overview of the special rights related to this protection, and shared who (or in some cases, “what”) qualifies as a family farm or family fisherman under the Bankruptcy Code. In this section, we’ll discuss how a Chapter 12 bankruptcy works, from initial petition filing to debt repayment planning.

If you qualify under the Bankruptcy Code’s broad definitions of a “family fisherman” or “family farmer,” a Chapter 12 case begins by filing a petition with the bankruptcy court where you live or the location of the “principal place of business” for your corporation or partnership. A qualifying husband and wife “family farmer” or “commercial family fisherman” may file. Unless the court orders otherwise, the petition includes a statement of your assets and liabilities; current income and expenditures; current business contracts and leases; and a general statement of your financial affairs.  In order to satisfy all of these petition requirements, you’ll need to gather a list of all creditors and the amounts and nature of their claims; the source, amount, and frequency of your income; a list of all of your property; and a detailed list of your monthly farming/fishing expenses, as well as living expenses, including food, shelter, utilities, transportation, feed, fertilizer, etc. In order to completely evaluate your household’s financial position, married individuals must gather this information for each spouse regardless of whether they are filing a joint petition, separate individual petitions, or even if only one spouse is filing.

Upon filing for Chapter 12, you must pay a filing fee and a miscellaneous administrative fee with the clerk of court. With the court’s permission, and with specific deadlines, these fees may be paid in installments. Failure to pay these fees may result in dismissal of your case.

Filing the petition under Chapter 12 provides an automatic stay that stops most collection actions against you or your property. Under the automatic stay protection (a protection that exists under all forms of bankruptcy), any creditors—public or private—are not allowed to call you or send you collection letters. During the proceeding, they cannot continue any legal action against you, foreclose on your home, or repossess your car and other assets. And–even if a garnishment order has been issued–the automatic stay stops garnishment of your wages. Additionally, a Chapter 12 filing has the added benefit of protecting co-debtors (those liable with the debtor) from eager creditors seeking collection of consumer debts incurred by a personal, family, or household purpose.

When you file for Chapter 12 bankruptcy, an impartial trustee is appointed to evaluate the case and serve as an agent, for collecting your payments and making distributions to your creditors. Following your filing, the Chapter 12 trustee will hold a “meeting of creditors” at which you will discuss your financial affairs and the proposed terms of your repayment plan. From this meeting, parties typically resolve problems and repayment schedules. Afterwards, you, your trustee, and interested creditors attend a hearing confirming your personal Chapter 12 repayment plan.

Whether your bankruptcy is simple or complex, you’ll need an expert attorney to navigate the waters. Contact the experienced attorneys at The Law Offices of John T. Orcutt. Please note that while the Law Offices of John T. Orcutt does not file under Chapter 12, our office can evaluate your personal financial situation and refer your case to an experienced Chapter 12 practitioner if needed. Call us today: 1-800-899-1414.

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Published Friday, January 1, 2010 @ 3:07 pm

To supposedly keep bankruptcy filings from getting out of hand the federal government passed the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, more commonly known as the Bankruptcy Abuse Reform Act (or BARF). BARF was supposed to help keep people that truly do not need to, from filing?

Unfortunately, BARF was passed upon the assumption that a lot of people were abusing the bankruptcy system. It was only more unfortunate that this assumption was thereafter proved to be totally incorrect.

Fortunately, BARF, as written, although adding lots of ‘red tape’ to the system, did not, for the most part, make unobtainable the kind of help that only filing bankruptcy can provide…given proper planning “pre-filing”.

BARF did erect substantial obstacles to filing, and these must be dealt with.

The biggest obstacle arose from the implementation of what is known as the “Means Test”. The idea was to filter out those people who would want to file bankruptcy, but who could really afford to keep paying.

As it turns out, most of the people who need to file really can’t afford to keep paying. Still, however, the Means Test does remain a substantial obstacle to filing. And to make things worse, this test is extremely complicated to understand and absolutely full of landmines for the unaware.

For example, a high income in the last 6 months could make it too expensive to file, especially if you don’t even have that income anymore. In this case, waiting to file for a number of months could be critical.

And, that’s where a good bankruptcy attorney comes in.

There are many ways to work around this ill-conceived test, but only a seasoned bankruptcy will know what they are and how to successfully apply them.

If you are thinking of trying to circumvent the Means Test on your own, beware. Even mediocre bankruptcy attorneys screw this up, and tactics gone too far will either make it impossible to file or leave you with a bankruptcy plan payment you cannot afford, or worse, result in your case getting dismissed out of court.

If you believe you need to file bankruptcy, you most definitely want to be in the hands of a good bankruptcy attorney. A good bankruptcy attorney will know what to do, but also how far is too far.

If you want a bomb defused, you want an expert at defusing bombs. It’s exactly the same in terms of defusing the “Means Test”. You want an expert. Your financial life is riding on it.

The Law Offices of John T. Orcutt give you access to 7 good bankruptcy attorneys, with an 8th in training.

Need to make sure you get the help you need. Attorney John Orcutt offers a totally FREE initial consultation, and has offices located in Raleigh, Durham, Fayetteville and Wilson, North Carolina.

Just call toll free to 1-800-899-1414 during normal business hours, or visit their website at www.billsbills.com

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Published Wednesday, December 23, 2009 @ 5:49 pm

Even in these tough economic times, everyone wants their family and friends to have a nice holiday—full of fun, frivolity and festive giving. And, even if you find yourself among the millions considering bankruptcy in the New Year, you may believe, now more than ever, that it’s open [holiday] season to shop for pricey presents using problem credit cards. In fact, many Americans do charge up expensive tabs in the months preceding the Christmas season when anticipating a bankruptcy—hoping to secure some great gifts prior to wiping away these same debts, along with many others, in January or February.

However, it’s never been more important to avoid a holiday spending binge when seeking this fresh financial start. While prudence alone should speak to some of the reasons to avoid abusing bankruptcy for seasonal gains, the Bankruptcy Code itself addresses the issue of this type of credit card debt as well. Section 523(a)(2) exempts from discharge, any debt that was obtained if an individual made material and false representations about his financial condition (i.e. lies on the credit application). Section 523(a)(2)(C) provides that:

1. consumer debts owed to a single creditor and aggregating more than $500 for luxury goods or services (luxury goods defined as goods or services reasonably not necessary for the support or maintenance of the debtor or a dependent of the debtor) incurred by an individual debtor on or within 90 days before the order for relief under this title are presumed to be nondischargeable; and

2. cash advances aggregating more than $750 that are extensions of consumer credit under an open end credit plan obtained by an individual debtor on or within 70 days before the order for relief under this title, are presumed to be nondischargeable;

Section 523(a)(2)(a) excepts from discharge money, property or services incurred by false pretenses, a false representation, or actual fraud (i.e. incurring debt that you knew or should have known that you would not be able to repay).

In layman’s terms, this translates into a stern warning against unnecessary, binge spending in the months leading up to your bankruptcy. As a result, if you do decide to charge up hundreds or thousands of dollars in charges in November or December and then try to discharge that debt in January or February, credit card lenders have three viable arguments they can use to object to discharging your debt in a bankruptcy case. This type of “discharge litigation” not only risks hefty exemptions from your debt relief, but it is also costly to defend, adding more expensive fuel to the insolvency fire.

What can be even more expensive is how these holiday spending sprees can create potential delays in your bankruptcy filing. Often, a bankruptcy attorney will advise clients in the New Year who reveal large Christmas credit card statements, to wait four to six months at a minimum before filing for bankruptcy—during which time you must continue to make regular payments on your new, larger holiday balances.

If you are already in debt, credit card or otherwise, or facing a loss of income, it’s essential to fight the urge to use plastic to purchase that big screen television, new game console, latest toy or anything else you can’t afford. And, if you’re bankruptcy bound, but must spend during this holiday season, as an alternative to credit, try carrying cash, checks or debit cards. As a result of using the money you actually have, you may make more thoughtful purchases and spend less this season, and, in the end, spend less time digging yourself out of post-holiday season debt and its inevitable barriers to bankruptcy.

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Published Saturday, December 19, 2009 @ 10:10 am

Back in 2005, credit card companies were convinced – or at least tried hard to convince everyone else – that there was a bankruptcy crisis in the United States. Bankruptcy rates had doubled since 1980, they pointed out. ‘Shopaholics’ were charging everything under the sun and then declaring bankruptcy, forcing the credit card companies to eat their debt. They then had no choice but to pass these expenses on to consumers in the form of higher fees and interest rates.

In 2005, the major banks spent tens of millions of dollars lobbying Congress to make it harder for consumers to declare bankruptcy. Despite protests from lawyers, judges and law professors working in the system, Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act. Insiders pointed out that the law was essentially written by the credit card companies; a single law professor and four credit industry lobbyists actually wrote the legislation.

Nearly everyone agrees that the laws made filing for bankruptcy more burdensome for debtors. Perhaps the most pernicious element, and the one the credit card companies fought hardest for, is the means test. The means test looks at your prior six months of income to determine whether you qualify for Chapter 7 bankruptcy. If your income is too high, you may need to increase certain expenses which qualify as deductions (much like tax deductions). If your income is still too high, you may need to file for Chapter 13 bankruptcy, which offers the same relief as a Chapter 7, but requires a payment plan. The Chapter 13 payment plan can last anywhere from 15 months to 5 years, depending on your particular jurisdiction.

A boon for the credit card companies and consumers who pay their debts, right? Well, certainly the credit card companies did well for a while– their profits rose thirty percent between 2005 and 2007. However, the decline in interest rates and fees they promised would accompany this never happened – in fact, interest rates and fees increased over this period. Things got so bad that Congress finally passed another bill last May, this one regulating industry practices: they set limits on credit card fees and interest rates and will require lenders to be transparent in their communications, starting in July of 2010.

More importantly, recent studies suggest that the new bankruptcy law may have contributed to the rise in foreclosures – costing the banks billions of dollars – and to the housing crisis in general. Now that many consumers mistakenly believed that bankruptcy was not an option, in many cases they simply walked away from their homes instead of declaring bankruptcy and continuing to make their mortgage payments. Feeling that they couldn’t make both their mortgage and credit card payments, they may have opted to make neither. As foreclosure rates rose, slumping housing prices feel even further. Neighborhoods with a number of foreclosures went into deep decline. Banks lost money, the country slid into recession.

Does this mean that the bankruptcy law caused all of this? No, of course not. Many factors contributed to the recession, included the derivatives trading on Wall Street, the government trying to finance two wars without raising taxes, etc. However, it is clear that the idea that banks would pass on savings to consumers was unrealistic. It’s also clear that removing consumer options resulted in financial decisions that ultimately hurt the banks as well as consumers. (Other studies argue that stringent bankruptcy laws discourage risk and entrepreneurship; it’s no accident that many countries in the EU are loosening their bankruptcy laws during this recession.) The obvious conclusion is that Congress, and not the banks, should write laws. And that they should listen to the experts – in this case, the lawyers and judges involved in bankruptcy proceedings – instead of lobbyists with an agenda.

The good thing is that, in many jurisdictions, judges have construed the new law in favor of debtors. The means test is not bullet proof, and Chapter 7 is still a viable option for most consumers. And with the rising tide of delinquent mortgages, Chapter 13 bankruptcy remains the best way to save your family’s home. Contact a bankruptcy attorney today and get the truth about bankruptcy. And visit http://www.billsbills.com/truth_bankruptcy_book.php for more of the truth.

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Published Sunday, December 13, 2009 @ 8:01 am

If you’re considering a Chapter 7 bankruptcy, chances are you’ve already heard about the Means Test—the test that determines whether or not you qualify for a Chapter 7.

If you make less than the median income for your state, you don’t even have to worry about the means test!  (To find out what your state’s median income is, you can go to http://www.justice.gov/ust/eo/bapcpa/20091101/bci_data/median_income_table.htm).

If you make more than your state’s median income you may still be able to pass the means test by deducting certain expenses from your gross income.  You’re going to want to talk to a qualified bankruptcy attorney about this one, though—the means test is notoriously complicated!  Your attorney has the knowledge and experience to determine what amounts of your income have to be applied to the means test as well as what expenses may be deducted.

Like a tax return, the means test involves calculating your income and from that income, deducting your qualified expenses.  Like a good accountant, a good bankruptcy attorney can help you maximize your deductions!  With your attorney’s help, you’ll be able to deduct the allowable amounts for living expenses like groceries, clothing, housekeeping supplies and housing expenses to include rent, property tax, home maintenance, HOA dues, and utilities.  You’ll also be able to deduct certain amounts for transportation expenses like your car note, vehicle insurance, gas, and registration fees and other necessary expenses like taxes, health care and health insurance, childcare, and court-ordered payments like child support.  Finally, you’ll be able to deduct some of your debt payments: your mortgage, your home equity loan, and past due amounts on your mortgage or car note.

If your surplus income—the amount that’s left over after you subtract your deductions from your income—is not enough to repay a significant amount of your debts over the course of five years, you’ll probably qualify for a Chapter 7 bankruptcy.

See if you will pass the Means Test and qualify for Chapter 7 bankruptcy by contacting one of the qualified, experienced bankruptcy attorneys at the Law Offices of John T. Orcutt.  You can even schedule your appointment online at www.billsbills.com or you can call us at 1-800-899-1414.

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Published Wednesday, December 2, 2009 @ 2:52 pm

Have you avoided filing bankruptcy because you’re afraid you’ll lose your home, your automobile, your personal property? You don’t have to be afraid! Bankruptcy laws protect you from becoming homeless, without a car, household goods, your jewelry, or the tools you need to do your job.

When you file a Chapter 7 bankruptcy you are allowed to protect—or, exempt—some or all of your property from being taken away from you. In fact, in lots of cases, bankruptcy exemptions allow you to keep everything you own!

If you’ve lived in North Carolina for at least two years, you can exempt up to $35,000 of the value of your home. What this means is that if you have a home worth $200,000 with a mortgage balance of $165,000, the $18,500 of equity you have in your home is protected! As long as you can keep up with your mortgage payments you can keep your home. Even if you have more than $35,000.00 in equity, you can still protect your property by paying out the value of the non-exempt equity over the course of a Chapter 13 plan. This allows you to discharge your debts AND keep your home.

Similarly, if there is no equity in your car, you will not lose your car! Are you “upside down” on your car loan? Well, as long as you keep making your car payments, you will not lose your car!

But what if you have more than $3,500 equity in your car? What if you have a car worth $4000 that you own outright? Again, in a Chapter 13, you can pay out the difference–$500 in this case—and keep your car!

What else is exempt? Your bankruptcy attorney will help you find all the exemptions you’re entitled to, but here are some of the things you get to keep in a bankruptcy:

• Your furniture, clothes, appliances, books, and other household goods up to a total value of $5,000 for you and an additional $1,000 for each of your dependents. (Up to $4000 total for your dependents.)
• Your other property, up to a total value of $3,500.
• Your professional books and the tools you use for your work or trade, up to $2,000 in total value.
• Your life insurance plan
• Your wheelchair, other mobility aids, your hearing aid, and any other medical equipment prescribed by your doctor
• Your IRA or Roth account
• Your burial plots

What’s not exempt? Anything you’ve purchased in the 90 days before filing bankruptcy. Keep this in mind as you prepare for your bankruptcy filing. We want you keep what you own! Call the Law Offices of John T. Orcutt at 1-800-899-1414 or visit www.billsbills.com.

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Published Sunday, November 29, 2009 @ 2:48 pm

Americans young and old, hit hard by the recent economic meltdown, are turning to any available income, accounts, or other resources to pay down today’s mounting mortgage debt, crushing credit card rates and high health care costs. One such resource—liquidating a registered retirement account like a 401(k)—might appear to be a quick and easy fix to pay down looming expenses or even to avoid filing for bankruptcy.

In reality however, it’s better to “stay away” from 401(k)s, leaving these and other retirement accounts untouched and intact in times of financial distress—even for those bankruptcy bound.

Why, you ask?

Retirement Accounts Like Your 401(k) Are Exempt From Bankruptcy
First and foremost, it’s important to understand that your 401k is safe—even in bankruptcy. Assuming your registered retirement accounts, such as IRAs, 401(k)s, and pension plans, have not been used to secure loans, they’re considered protected assets. And recent amendments to the Bankruptcy Code have made these exemptions available in all states. In the alternative, cashing out a 401(k) automatically means losing your hard-earned savings, higher taxes, and potential delays in any bankruptcy filing.

Cashing Out a 401(k) Means Paying [More] Out In the Long Run
Using retirement savings to pay creditors can create new debt in the form of income taxes and early withdrawal penalties. In fact, considerably higher taxes are the norm if you cash in valuable retirement assets like your 401(k). This heavily taxed income also cannot be discharged in bankruptcy for years and may prevent other qualifying deductions. As a result, this expensive option creates even more economic troubles for families struggling with already weighty debts and considering the benefits of bankruptcy.

401(k) Liquidation May Provide a Substantial Burden to a Productive Bankruptcy
In terms of burdening your bankruptcy proceedings, liquidating your 401k to pay creditors could mean significant delays in productive bankruptcy results. Any cashed out 401(k) funds will be counted as income and considered when evaluating your economic status pending bankruptcy. Therefore, any withdrawals from 401(k)s should be disclosed to your bankruptcy attorney immediately.

401(k)s Fund Your Future
Just as bankruptcy provides a much-needed stopping point for those drowning in debt, maintaining registered retirement accounts, such as IRAs, 401(k)s, and pension plans—even in tough times—provides a comparable and essential starting point for your family’s viable financial future.

So, before you consider liquidating any retirement accounts, such as IRAs, 401(k)s, and pension plans, talk to the skilled bankruptcy attorneys at The Law Offices of John T. Orcutt.

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Published Wednesday, November 25, 2009 @ 12:12 pm

Should you try to modify your mortgage before filing for bankruptcy? Bankruptcy will stop foreclosure proceedings; a Chapter 13 bankruptcy will allow you to keep your home, and to develop a payment plan to meet your back payment obligations. But it won’t necessarily lower your monthly mortgage payments. Is it worth it to try to modify your mortgage and secure lower payments first?

The evidence is mounting that it’s probably not worth your effort. A recent report shows that although 362,348 loans have been approved for “trial” modifications, only 1,711 of those trial modifications have been made permanent. Assuming you can even get over the first hurdle of being approved for a trial modification, you’re likely to get stuck in “trial mod limbo”. Depending on your lender’s mood on any given day, you could at any point be dropped from your trial modification, worse off than where you started.

But isn’t the program backed by the government It’s true, the government had high hopes for the Making Home Affordable program, designed to help homeowners who are having trouble making their payments. However, mortgage companies have dragged their feet over it; they make more money off fees when a house goes into foreclosure than they do modifying a mortgage. The government may well say you qualify for MHA, and your lender simply refuses to go along.

Faced with a recalcitrant lender, you might turn to foreclosure consultants. While there are legitimate consultants, be wary of scams. Many consultants will simply charge you a fee and never even bother to contact your lender!

You also have to consider whether or not changing the terms of your loan is in your best interest. For example, you may be qualified to refinance under the Hope for Homeowners program (H4H). However, H4H requires upfront fees and additional mortgage insurance; later, when you sell or refinance your house, you will be required to share between 50 and 100 % of the proceeds with the government.

Some lenders might agree to roll your loan into a 40-year fixed mortgage. In this case, you’d pay less per month, but for a much longer period of time. Depending on your loan amount, the additional money could be tens or even hundreds of thousands of dollars. Plus, of course, you will have payments for an extra 10 years, and less equity in the home if you sell before that. Will the difference in monthly payments make that additional debt worth it? It depends on your circumstances, of course, but possibly not. Remember, once you file for Chapter 13, much or all of your unsecured debt may be erased, freeing up more of your income for your mortgage payment.

The earlier you file for Chapter 13 bankruptcy, the more likely you are to save your home. If foreclosure proceedings have advanced enough prior to your filing, you may not be able to afford the Chapter 13 payment that is required to catch you up. If you’re starting to get behind, call a bankruptcy attorney today.

While modification is still receiving a lot of hype in the press, it’s becoming clear that it’s all just hype. . The best way to sort through these options is with the help of a professional bankruptcy attorney. It doesn’t make sense to spend weeks trying to modify your loan, only to find out it resulted in filing for bankruptcy too late.

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Published Tuesday, November 10, 2009 @ 11:16 am

The number of people filing bankruptcy due to medical bills has been rising every year. A recent study in the American Journal of Medicine shows that more than 62% of people filing for bankruptcy do so at least partly because of medical bills they can’t pay. Many filers have insurance – often they’ve ‘capped out’ their insurance and the insurance company refuses to pay any more bills, leaving them tens or even hundreds of thousands of dollars in debt. In other cases, illness has forced people to lose or leave their jobs, meaning that not only do they have no money coming in to pay their bills, but their insurance coverage has often lapsed as well.

A bill recently introduced in Congress – by Carol Shea-Porter (D-NH) in the House and Sheldon Whitehouse (D-RI) in the Senate – hopes to make filing bankruptcy easier for people in this situation. People who owed either 10% of their income or $10,000, or who had been out of work for more than 4 weeks in the last year due to illness, would qualify as medical debtors. The bill would exempt these filers from the requirement to take credit counseling. More importantly, they would no longer be subject to the means test – all medical debtors would be allowed to file Chapter 7. And the homestead exemption – the amount of equity they could keep in their home after filing bankruptcy – would rise to $250,000 for medical debtors.

Will the Medical Fairness Act pass? It’s hard to say. To some extent, the debate seems to be falling along the same lines as the general health care debate: democrats for, republicans against. At a recent hearing in the Senate, Whitehouse brought in a number of debtors to make the emotional point that they lost everything, including in many cases their homes, due to unavoidable medical bills. Kerry Burns told the tragic story of her son, who died at the age of 4 after a long struggle with cystic fibrosis. She and her husband both took leaves from their jobs. They cashed in their 401K accounts, spent every penny in their bank accounts and had insurance– and all that wasn’t enough to pay their son’s medical bills, which came to over five million dollars.

Republican opponents, particularly Sen. Jeff Sessions (R-AL), seemed unmoved. Sessions seemed more concerned with the plight of the credit card companies, who will likely lose money if more people file Chapter 7. Sessions worried that people would qualify as medical debtors when the ‘real’ reason for their bankruptcy was due to overspending on their credit cards. He called experts who claimed that the study was flawed and the real role of medical bills in bankruptcy is much smaller. Others rebutted both arguments, pointing out that the number of medical debtors may be greater than the study shows, as many people put medical bills on their credit cards.

The Democrats have the votes in both the House and the Senate to pass this bill. But the credit card companies and the medical industrial complex spend an enormous amount of money on lobbyists to protect their interests. The Medical Bankruptcy Fairness Act is a common sense relief for people who’ve incurred enormous bills simply due to their medical problems. Whether or not it passes says more about politics than policy.

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Published Wednesday, October 21, 2009 @ 6:45 am

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 has made some people wary of even considering bankruptcy. This was undoubtedly the intention of the credit industry, who went to great lengths to make sure the “reform” passed. The passage of the law and subsequent misinformation from the credit industry lobby has led to a general perception that bankruptcy is now a difficult, if not impossible, undertaking. But for many people it may not be the legal changes that keep them from filing for bankruptcy–it may just be fear and misunderstanding.

Before you decide that the 2005 reforms make  bankruptcy impossible for you, you should get a handle on the major changes in the law that affect bankruptcy filings. But hey, before you do even that, remember that there’s no need to play the guessing game; many bankruptcy attorneys, including the Law Offices of John T. Orcutt, offer a free initial consultation to help you better understand the new bankruptcy laws. Here are some of the main changes that are likely to affect your situation as an individual filer:

• Bankruptcy filers are now required to receive credit counseling before filing. The role of the credit counselor is to help filers decide if they are eligible for Chapter 7 or Chapter 13 bankruptcy, and to educate the filer about credit decisions.

• Filers who have income higher than the median income for their county of residence may be required to file a Chapter 13 bankruptcy, instead of Chapter 7. The intent of this provision is to force more middle to high income filers to repay some of their unsecured debt. However, in many cases, even if you are above median, you will still qualify for Chapter 7. Even if you don’t qualify for a Chapter 7, chances are you are still eligible for a very reasonable Chapter 13 payment plan– in some cases for as little as $99 per month. Talk to an experienced bankruptcy attorney to discuss your unique situation.

• If you bought your car less than two and a half years ago, you will be required to pay the full payoff amount of the lien in a Chapter 13 bankruptcy. However, if your car was bought more than two and a half years ago, you will only be required to pay the fair market value of the vehicle. This can be very beneficial if the car is severely upside down, and can cut your car payment significantly.
• In Chapter 7 bankruptcy, if you want to keep your car, your lender may require you to sign a reaffirmation agreement, the effect of which puts you back on the hook personally for the full amount of the loan. The requirements vary by jurisdiction, and courts are increasingly holding lenders to a very high standard for these agreements. The bottom line is, if surrendering your car is not an option, talk to your attorney about a Chapter 13. A Chapter 13 bankruptcy will allow you to keep your car, often on much better terms than you currently have with your lender.
• Repeat filers may not immediately be entitled to the automatic stay. If this is your second or third filing in the past year, discuss with your attorney whether the automatic stay will go into effect automatically, or if there is some further action needed by your attorney. Court interpretations vary, so if this is a second or third filing, make sure your attorney knows the local judge’s position on this important issue.
• A Chapter 13 discharge can’t be obtained within 2 years of the filing of a Chapter 13 case in which you have received a discharge, or within 4 years of a Chapter 7 discharge. If you have previously filed for Chapter 7 and received a discharge, you will not be eligible for another Chapter 7 discharge for 8 years
• More paperwork. Naturally! Bureaucrats love it. You now have to provide more documents than in the past, but the end result is well worth the effort.
• Past due support obligations, such as child support payments, get first priority over everything else. You must remain current on your ongoing support payments
• Certain kinds of debts may be more difficult to discharge after completion of the Chapter 13 repayment plan; debts which are now impossible to discharge are trust fund taxes (such as employee withholding taxes, and excise taxes), debts from fraudulent activities, debts relating to a drunk driving accident, and criminal restitution.

These changes are not the only ones made by the law, which is why you definitely should consult with an experienced bankruptcy attorney before filing. As you can see, help is still available to those who need the protection of the bankruptcy laws.

If you’re suffering with debt, don’t even consider a debt consolidation scam. Bankruptcy offers real relief. Contact the Law Offices of John T. Orcutt to discuss your options. Call 1-800-899-1414 for a free initial debt consultations, or visit www.billsbills.com to fill out a free and confidential debt questionnaire.

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Published Monday, September 21, 2009 @ 1:49 pm

Many of us now come into marriage with some debts in tow. Some of us also arrive owning some of our own property. Once married, we incur new debts, jointly or separately; for example, one spouse may finance a car under his name, while both spouses may need to list their income together when they borrow for a new home. In addition, you may have credit cards and checking accounts in your own name, and some held jointly.  Sometimes one spouse will have the legal responsibility for credit card debt, but the other spouse, as an authorized user of the account, has the ability to add to it. A spouse may not have the responsibility for a debt, but may contribute to payment from her income. And then there are the difference in state law, which also adds layers: in the nine community property states, both partners own all property equally, while in the non-community property states (or “equitable distribution” states, such as North Carolina), each spouse owns all of his own property and one half of the property held jointly.

As you can see, marriage can definitely complicate matters when it comes to property and debt! For many couples facing an unmanageable amount of debt together, these different factors may complicate the decision to file for bankruptcy However, there’s no need for alarm. If your marriage is suffering from the pressures of debt, bankruptcy can offer the relief to allow your family to focus on the things that really matter. An experienced bankruptcy attorney will be able to assess your situation and advice you on the best strategy for taking care of your debts while saving your property. Based on the kinds of debt and property your couple has, he will be able to help you choose whether to file separately or jointly. And in some situations, he may advise one partner to file and the other partner not to. Let’s look at some of the factors he’ll weigh in making his determination:

If you file together, all of your separately held debts, as well as all of the jointly held debts acquired during the marriage will be discharged. Filing together is also cheaper than filing two separate bankruptcies, and often times the financial troubles of one spouse are tied to those of the other. If only one spouse files, jointly held debts will be discharged only for the spouse who files; the other spouse will still be responsible for the debt.

However, if one spouse holds most of the troublesome debt in her own name, it may make sense for her to file alone. This is especially true if the non-filing spouse has better credit. Preserving one party’s credit can help the filing spouse recover from bankruptcy faster. The non-filing spouse can co-sign on future accounts, allowing the filing spouse a better chance to rebuild post-bankruptcy.

Don’t let these nuances deter you from the most important point: no matter what kind of debt you have and what kind of property you hold, bankruptcy can offer a life-changing opportunity for you and your spouse to put unmanageable debt behind you. Because you want to approach your filing strategically, it’s an excellent idea to contact an experienced bankruptcy attorney to help you and your spouse make the right choice.

In North Carolina, contact the Law Offices of John T. Orcutt at 1-800-899-1414, or visit www.billsbills.com to complete our free and confidential debt questionnaire.

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Published Thursday, September 17, 2009 @ 7:27 am

Most people understand that wage garnishment is basically what happens when a court order requires your employer to withdraw a portion of your paycheck for the repayment of a debt. If you are already up to your ears in debt and barely able to make ends meet each month, one wage garnishment, be it by the IRS or another entity, can be the straw that breaks the camel’s back.

Although any kind of debt can eventually result in garnishment of wages, the most common types include back child support, unpaid court fines or judgments, defaulted student loans, and the biggie: delinquent taxes owed to the IRS or any state government.

The good news, which may come as a surprise to some, is that tax debts are dischargeable in bankruptcy (within certain parameters).

Just so you know, if a debt is “dischargeable”, that means you can get rid of it permanently by filing bankruptcy; and that means you never have to pay it back.

Six Rules to Discharge Income Tax Debts

If the income tax debt meets all six of these rules, then the income tax debt is dischargeable in Chapter 7 and Chapter 13 bankruptcy cases.

Note: Each of these rules must be applied separately to each year’s tax debt.

1. First, the tax debt must be “income” tax debt. That is, the debt for which you are required to file an IRS 1040 form. Other types of tax debts, for example employer tax withholding and sales taxes, are never dischargeable.

2. The “due date” for filing your income tax return (for the particular tax involved) had to have been at least three years prior to the bankruptcy.

3. The tax return had to be actually filed at least two years prior to the bankruptcy.

4. The tax assessment must have occurred at least 240 days prior to the bankruptcy. “Assessment” basically means the date when the IRS billed you for the tax.

5. The tax return was not fraudulent.

6. You are not guilty of tax evasion.

The bottom line is that tons of income tax debt gets relieved as a result of filing bankruptcy.

Caveat: In some situations, you may have to pay back a part of even a discharged debt. For example, where the IRS has filed a “tax lien” for the debt in question, in which case some of your property ends up serving as collateral for the payment of the debt. As a practical matter, however, even though there may be a tax lien on file, that does not mean the IRS will. Certain types of property, like household goods for example, are protected. Certain types of property are not worth enough for the IRS to bother with. And certain types of property are untouchabable by the IRS, as a practical matter, for more or less political reasons. However, if there is a tax lien filed against you, you have to be careful. We suggest you check with a good bankruptcy attorney to find out what, if any, of your property is at risk.

Got a lot of older income tax debt? Got the IRS bugging you and trying to grab your income, your bank account or other stuff? You may be able to do something about it.

The one thing that trumps the IRS is the bankruptcy laws. You may want to check with a good bankruptcy attorney.

In North Carolina, you have one. The Law Offices of John T. Orcutt, with offices conveniently located in Raleigh, Durham, Fayetteville and Wilson. For a totally FREE, initial consultation, call toll free to: 1-800-899-1414.

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Published Wednesday, September 16, 2009 @ 10:06 pm

The four-year anniversary of the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) is right around the corner. You might recall all the hype in the months leading up to the enactment of BAPCPA. This was the banking and credit industry’s seventh attempt to get the legislation on the books. They pitched BAPCPA as necessary to curb “rampant abuse” and to restore “personal responsibility and integrity” in the bankruptcy process. With the Bush Administration at the helm of a Congress chock full of conservative lawmakers, the banks and credit card companies finally clinched a large enough sympathetic audience to bring its agenda to life.

BAPCPA called for sweeping changes to the Bankruptcy Code – undoubtedly the most significant overhaul of the Code since it was enacted in 1978. The depth and complexity of the changes caused much confusion, uncertainty, and speculation about what protections would be left for consumers in the new world of consumer bankruptcy practice. This sparked a mad dash to file bankruptcy before the new laws went into effect on October 17, 2005. So what does this new world of bankruptcy practice look like four years after BAPCPA took effect? Did the banking and credit industry get its money’s worth for the billions it spent marketing the legislation?

Well, one thing’s for sure: the new laws did make it more expensive and difficult for consumers to take advantage of the protections that bankruptcy has historically provided. But one of the primary things BAPCPA’s backers hoped to achieve was to force more debtors out of Chapter 7 liquidation and into repayment plans under Chapter 13. The primary mechanism to achieve this goal was a set of eligibility thresholds for Chapter 7 based upon a person’s income – particularly BAPCPA’s now-infamous “means test.” Generally, if your income exceeds the median income for a family of your size in your state, or if your monthly disposable income is more than $100, you’re presumed ineligible for Chapter 7.

BAPCPA’s backers were betting these new rules would sharply reduce the number of Chapter 7 cases, so debtors would ultimately have to pay back more of their debt. But despite the sweeping “reform,” the numbers have remained pretty much the same. Between 1999 and 2004, before BAPCPA was enacted, the average percentage of cases filed under Chapter 13 was 29 percent. Initially, in the first year after BAPCPA, the percentage of Chapter 13 filings rose. But, by this year, the numbers had returned to pre-BAPCPA levels: in fact, during the first seven months of 2009, the average percentage of Chapter 13 cases was actually lower – 27.6 percent.

Here’s another interesting fact: The United States Trustee’s Office reviewed the Chapter 7 filings between October 17, 2005, and June 30, 2006, and determined that 94 percent of the debtors automatically qualified for Chapter 7 under the means test – based upon their income alone. Another 5.4 percent qualified when their expenses were taken into account. That is, 99.4 percent qualified for Chapter 7; only 0.6 percent were presumed abusive filers under BAPCPA’s new rules. This likely explains why the percentages of Chapter 7 and Chapter 13 cases have remained fairly consistent: the vast majority of those who file for Chapter 7 meet the new strict income requirements.

It also appears that BAPCPA credit counseling requirements have had little impact on the number of filings, other than to make the process more expensive and time-consuming. The Government Accounting Office issued a report finding that “by the time most consumers receive credit counseling, their financial situations are dire, leaving them with no viable alternative to bankruptcy.” In addition, the National Federation of Credit Counseling has found that less than four percent of potential filers choose not to file bankruptcy after attending the required counseling.

As far as the overall number of consumer bankruptcy filings, while the total number of filings dropped in the first year after BAPCPA was enacted, they have steadily climbed back to their historic levels. In fact, with the current economic downturn – which kicked in less than two years after BAPCPA came on line – so many people are seeking bankruptcy protection that the filings are beginning to rival the figures we saw during the mad dash to file before BAPCPA was enacted.

Much to the chagrin of those who footed the massive bill to push BAPCPA through Congress, the numbers show that the vast majority of those who need the protection of Chapter 7 will still seek that protection – and qualify for it. The numbers also suggest the backers’ central platform for marketing BAPCPA – that people were routinely abusing Chapter 7 – was groundless, or at least greatly exaggerated.

Bankruptcy is back! – despite the efforts of the banking and credit industry to stifle filings through BAPCPA. With the help of an experienced bankruptcy attorney, you too can use the power of bankruptcy to eliminate debts that have made your life unmanageable.

In North Carolina, contact the Law Offices of John T. Orcutt, with convenient office locations in Raleigh, Durham, Wilson, and Fayetteville. The firm offers a free debt consultation, as well as affordable payment plans for both Chapter 7 and Chapter 13 cases. Call (toll free) 1-800-899-1414 or visit www.billsbills.com for more information.

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Published Tuesday, September 8, 2009 @ 8:50 am

As you are getting ready to file for bankruptcy protection, one piece of information your attorney will request from you is a value of every item of property you own. Your attorney will want you to make a list of all the property you own and give an estimate of the fair market value. There’s no need to worry about this part of the process; the request for valuation does not mean any of your property will actually be sold, most families don’t own property worth more than the state exemption limits. Even if you have substantial property, it is still possible to protect the value above exemptions by filing for Chapter 13. To properly advise you on this issue, it is essential that your attorney know the fair market value of all of your property

The fair market value of a possession is the amount of money you would probably receive if you were to sell the item “as is” and relatively quickly. This means you don’t factor in what it could cost with some repairs or touch-ups, what it cost when it was new or what it would cost to replace the item. This also does not mean the insured value of an item; again, remember that replacing an item and selling it at market value are two different undertakings. Instead of thinking about what you would pay to replace the identical item, or what you’d get from your insurance company, imagine a quick sale to the general public. How much money do you think you’d get for your item if you sold it at a garage sale or over Craig’s List? This is a good way to estimate the fair market value of an item.

The fair market value of real estate can be estimated by thinking about how much you would be able to get for the real property–for example, your home–if you had to guarantee a sale in the next couple of months. Naturally, if you were really going to sell your place you would probably allow more time or invest in repairs to make the home more attractive to buyers, but that’s not what fair market value means. Don’t just provide the figure from a property tax assessor who may never have seen your home. If you’re not sure about how to value your home, you may want to consult an experienced real estate agent familiar with your neighborhood, and one who will take into account a distressed sale scenario.

While you are making these calculations, use common sense to arrive at the likeliest amount for the market value. The garage sale method will work for a valuation of your Ikea furniture, but may not work for very pricey antiques more likely sold to professional dealers or major auction houses. Of course, it’s not really usual for people filing for bankruptcy to have many such items, so you probably don’t need to worry too much about this anyway.

As you can see, property valuation is nothing to worry about. Chances are you can get this part of your filing done easily, without too big of a headache. Keeping your attorney fully informed of the value and extent of your property is key to a successful bankruptcy.

From: The Law Offices of John T. Orcutt, with offices in Raleigh, Durham, Wilson and Fayetteville. Call 1-800-899-1414 to set up your free debt consultation.

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Published Tuesday, August 4, 2009 @ 9:53 am

In 2005, Congress passed the most dramatic reforms the laws of bankruptcy had seen for 20 years. You may have heard of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 already because it’s a sore topic with bankruptcy lawyers and other consumer and debtor advocates. Though the name of the law suggests that Congress also intended to protect consumers, the fact that “abuse prevention” appears first in the title is telling.

Unfortunately, Congress gave in to lobbying efforts by credit card companies and other large stake holders which fueled the belief that folks in America were out to game the system. The reality is that most people who file for bankruptcy do so following a serious, life-altering change in circumstances. Thanks to the law, people who lose their jobs, go through painful divorces or survive cancer are sometimes forced to face obstacles to the protections the bankruptcy law rightly affords to every member of our society. So how did this happen?

On one side of the battle, creditors argued that there was wide spread abuse of bankruptcy law that permitted people with the ability to meet their liabilities walk away scot-free. This, they argued, made credit more expensive for everyone, forcing consumers who didn’t declare bankruptcy to pay for those who did. There were also many who were neutral to the issue, because they felt that the law wouldn’t significantly affect the people who most needed help.  Most filers, they believed, would be able to pass the Median Test anyway, which means you never have to do the Means Test at all. Consumer advocates argued that lenders had alternative means of controlling the cost of credit, and that the continued growth of the credit card and lending industries demonstrated that the credit game had clearly remained profitable. Unfortunately, it looks like the credit lobby prevailed.

If you’re starting to feel like this all sounds pretty grim, cheer up! There is a bright side. People are still declaring bankruptcy in record numbers; not that this is something to celebrate, but it does demonstrate that it is not at all impossible for you to benefit from bankruptcy protection. The Means Test makes bankruptcy a little more burdensome, but it doesn’t act as a true barrier to those who really need the protection of bankruptcy law.
It’s also true that the law created uncertainties that are still being played out in the courts. For example, the Means Test is only supposed to apply to people who have “primarily consumer” debts, but there is some disagreement about both terms. Does “primarily” mean that the dollar amount of your consumer debt is higher? Or does it mean that more of your debts are consumer debts than not? Are mortgages consumer debts? Are taxes? What about student loans?

Here again, there is plenty of reason to keep a positive outlook. The courts are settling these questions gradually and there is general consensus over many of the questions.  What’s more, an experienced bankruptcy attorney will be keeping up with changes to the law as soon as they happen, and will also have knowledge of local jurisdiction practices. With the help of a good attorney, bankruptcy will remain navigable, even if you may come across a few more obstacles on the road to financial freedom. Bankruptcy law remains one of the most important safety nets provided by the American government, and the bankruptcy law in America is still among the best for debtors in any industrialized nation. If you need help, don’t hesitate to take advantage of this privilege.

In North Carolina, contact the Law Offices of John T. Orcutt by calling toll free 1-800-899-1414. Attorney John Orcutt offers a totally FREE consultation out of 4 offices conveniently located in Raleigh, Durham, Fayetteville & Wilson. If you need to file bankruptcy, you want John Orcutt.

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Published Saturday, July 25, 2009 @ 5:35 pm

It shouldn’t take more than a few visits to our blog for you to find a slew of posts about how to prepare for your bankruptcy and manage all the relationships along the way, like those with your attorney and bankruptcy trustee.

Like any relationship, the ones that are forged during a bankruptcy should be built on trust. That is, you need to be upfront with everyone and every entity involved, even your creditors, to ensure that in the end you wind up where you need to be. A large part of building that trust has to do with how you handle the disclosure of your assets. The following point almost deserves to be in all caps, but no one likes to be yelled at, so: never try to hide or transfer assets with the intention of shielding them from creditors.

Okay, now that the lecture is over, it should be noted that sometimes people transfer assets with good intentions. A constructively fraudulent transfer is not an deliberate attempt to hide an asset but is looked down upon by creditors because quite often, the gift or item in question is transferred at a value less than its actual worth. For a simple example, imagine you sold a $25,000 SUV for $15,000 out of simple desperation to raise cash for the bankruptcy. Sure, you now have cash, which is still an asset, but the creditor would have preferred the $25,000 SUV. And you can rest assured, they’ll make a case out of it.

Consider these additional examples of constructively fraudulent transfers:

• Ty Webb gives Lacy Underall $10,000 to help her move from dreary old Manhattan to a high-end suburban country club. His creditors will end up pretty unhappy with Ty’s attempt to secure his girlfriend a spot at the club pool because that money could have been used to pay his debt. Worse yet, he received no real asset in return. As a result, the bankruptcy trustee handling Ty’s case will most likely try to sue Ms. Underall for the money. Since Ty’s asset transfer wasn’t an attempt to hide anything, his bankruptcy will probably go through as planned. But now his girlfriend is involved, and that doesn’t bode well for Ty’s post-bankruptcy dinner plans.
• Al Gore, on the cusp of bankruptcy and in a last-ditch effort to remain relevant, decides to switch political parties and attend an expensive fundraising dinner for the Green Party candidate in the 2012 election. He pays $50,000 to attend. Once he officially files for bankruptcy, the court immediately rules that the party candidate’s election committee needs to relinquish Mr. Gore’s donation to the trustee because it was ruled that the dinner was not equal to $50,000 cash that could be used to pay creditors.

As you can see by the example above, even donations are subject to becoming constructively fraudulent transfers in the eyes of the court. Large donations to churches, schools and other non-profits can all be retrieved by the trustee if they result in the reduction of an asset’s value or are considered an attempt to quickly move money and thus, diminish the trustee’s ability to obtain proper restitution for your debts. There has been some action against this practice, however. In 1998, a contingent of religious organizations successfully lobbied for the Religious Liberty and Charitable Donation Protection Act, which was formulated to protect good-faith monetary gifts of up to 15 percent of a person’s gross income based on the year before filing bankruptcy.

If you’re considering filing for bankruptcy, it’s important to talk to a bankruptcy attorney early to avoid an innocent mistake like the ones described in this post. In North Carolina, call the Law Offices of John T. Orcutt for a free initial consultation. 1-800-899-1414.

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Published Friday, July 24, 2009 @ 3:27 pm

Few of us learned much about balancing a checkbook, let alone managing our finances during high school. And for many years credit card companies have been trolling college campuses for fresh bodies to press into servitude. So it comes as no surprise that so many young adults are overloaded with debt. Young people, in their early to mid 20’s, are finding out how easy it is to get into debt, and how backbreakingly hard it is to get out of it. Add the present economy and virtual impossibility of securing a decent paying job, and you’ve got the recipe for a disillusioned, frustrated, and eventually hopeless generation.

It’s hard to imagine just starting out in life and being ‘in the hole’. Many of these debt-laden young people are still struggling through college, but many have given up on it. The stress of juggling classes, homework, limited job availability, and staving off the debt monster proves to be too much. They end up working two or three low paying jobs just to keep a roof over their heads and to service their debts.

It’s a catch 22: they can’t go back to school because they have to work to keep up their debt payments; but they can’t get ahead on repaying their debts because they can’t go back to school to get a better job and earn more money to be able to pay more than just the minimum payments and the usurious interest and fees added on. That’s no way to live.

Enter the concept of bankruptcy. Bankruptcy could help many of these young people get off the debt treadmill and get on with their lives. Now, bankruptcy will not be able to get any student loans discharged, (unless the person can show ‘undue hardship’), but it could remove the unsecured debt, thereby freeing up money that be used to pay back the student loan debt. Also, the Department of Education has launched a program, passed in 2007, which will reduce student loan payments to a lower percentage of income, or remove them altogether in the case of very low income. Better yet, if the person returns to school, their student loans can be deferred for as long as they remain a full time student.

But what about getting access to more money to pay college tuition and expenses after filing bankruptcy? Many people are under the impression that filing bankruptcy cuts off your ability to borrow money for a very long time. That’s partially true, but unlike most credit, government guaranteed educational loans are not based upon credit history or income. They are called Title IV loans, and they must be extended if you meet the statutory and administrative criteria. As long as there are no other eligibility issues, such as a student loan in default or drug conviction, the government is restricted from discriminating against those who have filed bankruptcy under § 525 of the Bankruptcy code , however, there are limits to the amount of government loans you can receive each year.

Although default on an existing educational loan may effect your ability to get a subsequent loan, the filing of a bankruptcy in itself should not. To be sure, filing bankruptcy will affect your ability to secure loans from private entities. But then again, those opportunities wouldn’t have been available regardless of whether or not bankruptcy was filed because negative reporting on a credit report would have caused the private loan application to be rejected regardless.

For many young people, filing bankruptcy is a necessary, if unexpected, step toward improving their future. But so is a college education. It is the only long-term solution to their financial woes. And government backed student loans can not be withheld because of a bankruptcy.

If you’re having trouble paying your student loans and other debt, consider bankruptcy as an option. Call the Law Offices of John T. Orcutt today to discuss your options. Offices in Raleigh, Wilson, Fayetteville, and Durham.

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Published Saturday, July 11, 2009 @ 8:07 am

Chapter 11 bankruptcy is in the news a lot these days. Like individuals, more and more large corporations are struggling to weather the current economic downturn. Just think of GM, Chrysler, Lehman Brothers, and the like. Chapter 11 bankruptcy essentially does for corporations what Chapter 13 does for individuals: it allows them to reorganize their debts into an affordable repayment plan.

With all the talk about large corporations, you may think Chapter 11 bankruptcy is reserved just for them. But individuals and small business owners can also file under this chapter. You might be wondering why someone would ever do so. Well, in most cases, it’s because there’s no other choice.

Chapter 7 “liquidation” bankruptcy is a powerful tool for individuals, because it lets you completely wipe out a host of unsecured debts. But you have to satisfy the “means test” to qualify, which means your income can’t exceed a certain level — typically, the median income for a family of your size in your state.

If you can’t satisfy the means test under Chapter 7, or you want to keep certain property that would otherwise be subject to liquidation in a Chapter 7 case, Chapter 13 bankruptcy can be a great alternative. You can reorganize your debts into an affordable repayment plan and, at the end of the plan, the remaining amount on the debts is generally discharged. But there are limits to the amount of debt that can be included in a Chapter 13 plan. The figures change every few years, but right now there is a cap of $336,900 for unsecured debts and $1,010,650 for secured debts. (As of 5/23/09)

These limits don’t pose a problem for most people. For some debtors, though, the ceiling just isn’t high enough. Think of people of high net worth who suffer a major financial blow, or people carrying substantial debts tied to a small business on the verge of collapse. These individuals probably make too much to qualify under Chapter 7 and owe too much to qualify under Chapter 13. While these cases have been historically rare, with the boom-bust economic cycle we’ve experienced over the last several years, this scenario is likely to become more and more common.

This is where Chapter 11 bankruptcy can help. In Chapter 11, the debt limits of Chapter 13 go out the window. There are other advantages too. Unlike under Chapter 13, there is no five-year time limit for the repayment plan. Also, instead of having to make monthly payments like you would under Chapter 13, you can make the payments at different intervals — such as quarterly or biannually — if that would be more convenient. In addition, the court does not appoint a trustee to represent the creditors; the creditors deal directly with you. This can give you a greater degree of control over the process. On the downside, Chapter 11 bankruptcy is generally more complicated – often requiring a lot of time and effort on the debtor’s part — and significantly more costly.

The gist is, if you think you might not qualify for bankruptcy because of too much debt, or too high of income, it is crucial to seek the advice of an experienced bankruptcy attorney before ruling out bankruptcy. It could be that you really do qualify under Chapter 7 or 13 and it’s just a matter of understanding exactly what goes into the calculation when determining your income and your debts.

Call a bankruptcy attorney today to discuss your options. In North Carolina, contact The Law Offices of John T. Orcutt, with convenient office locations in Raleigh, Durham, Fayetteville, and Wilson.

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Published Tuesday, June 30, 2009 @ 2:15 pm

There are at least three excellent reasons why should be very circumspect about reporting your assets accurately when you file for bankruptcy. The failure to list assets can have a serious impact on your case and your future ability to file. Be careful to advise your bankruptcy attorney of all assets, regardless of how insignificant the asset may seem. Consider these important reasons to accurately list your assets:

First, and perhaps most importantly, inaccurately reporting assets could land you in jail. Since almost everything you turn in in connection with your bankruptcy will bear your signature, fraudulent misrepresentation on these forms is perjury. At a guess, you’re not trying to go to jail, right? Thus, make sure those forms are accurate!

Second, if your bankruptcy trustee catches on to any funny business with your assets, he could ask the court to deny your discharge. This one doesn’t sound much better than jail time: you’ll have a bankruptcy on your record, you’ll lose the ability to declare bankruptcy for the next several years, and you get nothing for your troubles. Remember that a lot of the actions you take in connection to your assets can easily be discovered by a prudent trustee; a fraudulent transfer of title, for example, will probably be on the public record, where anyone, including your trustee or one of your creditors, could look it up. Playing games here is both wrong and foolish.

Third, accurately reporting an asset could actually help you keep it in the end. Remember that legal technicalities can shape the broad strokes of your case, and make those technicalities work for you! Here are a couple of situations in which your accurate reporting of assets can help you keep them:

One scenario involves an asset you claim as exempt. When you claim an asset as exempt and accompany it with an accurate description, the trustee and your creditors only have 30 days following the 341 meeting of the creditors to raise an objection. If they miss this deadline, the property becomes exempt even if the court could have challenged the exemption of that asset by objecting in a timely manner. This one can really turn out in your favor, and it is not a trick, it’s the way bankruptcy is supposed to provide efficient, workable solutions both for creditors and borrowers.

Even if you’re not claiming an asset as exempt, accurately describing it and listing it could help you keep it if your trustee fails to sell it while your case is still open. If this happens, the asset is considered “abandoned,” and it means that when the case closes,  the asset becomes yours once more. This is a great possibility you definitely want to reserve for yourself, but on the other hand, not reporting accurately could really hurt you. If you do not accurately describe an asset, your case could be reopened even years down the line. Imagine getting all the way through the bankruptcy process and beginning to rebuild your life only to have the case barge back into play years down the line. What a headache! Thus, keep this rule of thumb close when you file: make sure you accurately list your assets. Hire a bankruptcy attorney who will assess your total financial situation and advise you on protecting all of your assets.

From: The Law Offices of John T. Orcutt, with convenient office locations in Raleigh, Durham, Fayetteville, and Wilson. Call (toll free) 1-800-899-1414, to set up a free, confidential debt consultation. Visit www.billsbills.com for more information.

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Published Sunday, June 28, 2009 @ 8:45 pm

Planning for your retirement early is extremely important, yet appreciating this point can be difficult for people who aren’t looking to retire soon. It’s even harder to remember the importance of planning for retirement when it remains years or even decades off…all while the harsh realities of the economy are here today. Credit card companies compound the problem, advertising instant gratification while minimizing focus on long term financial stability. As the credit markets tighten, it’s tough to resist cutting back on retirement contributions. For those with a significant nest egg, it’s very tempting to cash out now and rebuild later.

Unfortunately, many of us approach bankruptcy as a last resort, an option to be avoided at all costs in the interest of our future financial soundness. In order to avoid bankruptcy, we make serious mistakes that betray the security of our financial futures. Those kinds of mistakes are precisely what this blog is intended to highlight and discourage. Before you make a mistake you may regret years if not decades from now, just to avoid declaring bankruptcy, make sure you have the facts straight. One classic mistake people make in a misguided effort to avoid declaring bankruptcy is dipping into― yep, you guessed where this is going― their retirement funds.

But it’s your money, so why is spending it such a bad idea, especially if it may save you a lot of trouble or help you avoid bankruptcy? An important clue can be found in the status of retirement funds in bankruptcy law. Did you know that in most states, your creditors cannot touch your retirement unless your actions enable them to do so? 401lks, IRAs, 529 plans- all protected by state and federal exemptions Even your rollovers are protected. Generally, a creditor will only be able to call in money from your retirement funds if you withdraw the money or take out a loan and fail to repay. For this reason, it is very important to avoid taking withdrawing any money from your retirement. Bankruptcy protection can’t protect you unless you allow it to!

What if you have high credit card debt, and you are thinking about borrowing against your retirement in order to chip away at those payments? This is exactly the kind of move you want to avoid and exactly the kind of situation where you need to think of bankruptcy as the next step, and not a last resort. Bankruptcy protection can allow you to discharge unsecured debts like credit card debt while keeping your retirement funds safe for the time they’re meant to be used: retirement. You may also be creating a whole new host of problems for yourself by borrowing against your 401k, even if you are able to address some issues in the short term.

What if you borrow against your retirement but then can’t repay it on time? You will likely face some serious tax consequences; remember, recent tax liabilities are one area where bankruptcy protection won’t be able to help you. Or what if you borrow against your retirement funds, but then you lose your job? You may be responsible for repaying the loan almost immediately, and this will naturally be difficult if you are out of work. As these scenarios illustrate, dipping into the well of retirement funds can be more trouble than it’s worth. Bottom line, if you’re thinking about withdrawing from your retirement to deal with your debt, it’s time to call a bankruptcy attorney. Protect your financial future, file bankruptcy now!

From: The Law Offices of John T. Orcutt, with convenient office locations in Raleigh, Durham, Fayetteville, and Wilson. Call (toll free) 1-800-899-1414, to set up a free, confidential debt consultation. Visit www.billsbills.com for more information.

Raleigh bankruptcy. Wilson bankruptcy. Apex bankruptcy. Durham bankruptcy. Fayetteville bankruptcy. Sanford bankruptcy.

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Published Saturday, June 20, 2009 @ 7:07 am

Chapter 7 bankruptcy, or a liquidation bankruptcy, involves the sale of any non-exempt assets, and is generally the fastest route to a discharge of debt.. Chapter 13 offers the option of a payment plan, or wage earner’s plan, that allows a person to create a structure to catch up on missed mortgage or auto payments. Another form of bankruptcy that is not as often filed but relevant to many, especially in states like North Carolina, is Chapter 12, or Family Farmer and Family Fisherman bankruptcy.

Chapter 12 bankruptcy was established in 1986 to support family farmers and fisherman who are struggling economically. Similar to Chapter 13, it allows for a repayment plan of three to five years but in most cases, all debts need to be settled within three years. Specifically, Chapter 12 is designed around those who carry debt that is no less than 80% occupational costs. And, a person filing Chapter 12 needs to owe less than $1,500,000.

While Chapter 13 is meant for the more common wage earner, or someone who has regular, balanced income, farmers and fisherman face unique circumstances in their efforts to make money. Natural disasters, difficult growing conditions and Acts of God, for example, play a much more important role in a farmer of fisherman’s ability to pay off debt. Moreover, intrinsic to being either type of professional is the cost of equipment. Boats, tractors, and machinery are considered capital expenditures and therefore are often financed. Thus, farmers and fisherman are almost operating on substantial debt. Chapter 12 allows for the forgiveness of liens on property that is considered critical to the work being performed.

Additionally, leases for land and boat slips eat into their income and on top of that, farmers and fisherman are also affected by prices set on Wall Street, making their professions even substantially more subject to hardship than most 9 to 5 employment situations.

Chapter 12 is more streamlined than Chapter 13 because it is designed around the unique working conditions of its constituents and the typical size of the debt owed, which is usually much larger than debt subject to other forms of personal bankruptcy. And, it takes into consideration the seasonal nature of a farmer’s income.

Like other forms, Chapter 12 bankruptcy begins with the filing of a petition in the bankruptcy court that serves the region where the person filing lives or has an established business presence. It costs $200 and the paperwork that is required includes:

• schedules of assets and liabilities
• a schedule of current income and expenditures
• a schedule of executory contracts and unexpired leases
• statement of financial affairs

Federal law allows those filing Chapter 12 to do so as an individual or as a corporation or partnership, and each classification has it’s own unique set of qualifications. Once the petition for Chapter 12 is filed, collection efforts, for the most part, are halted. Creditors are not allowed to begin new or continue collection efforts, lawsuits or other forms of financial restitution. There are some exceptions to the automatic stay provision, which your bankruptcy attorney can explain in full detail.

For more information on your options under Chapter 12 bankruptcy, and on all other forms of bankruptcy, contact the folks on the other side of this blog.

Brought to you by The Law Offices of John T. Orcutt, with convenient office locations in Raleigh, Durham, Fayetteville, and Wilson. Call (toll free) 1-800-899-1414, to set up a free, confidential debt consultation. Visit www.billsbills.com for more information.

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Published Sunday, June 14, 2009 @ 6:45 am

You’ve probably heard by now: if you want to file bankruptcy, you have to go through “credit counseling.” This new requirement is part of the “Bankruptcy Abuse Prevention and Consumer Protection Act,” which became law in 2005. The idea is that those filing bankruptcy should get “educated” on how to manage their money. This, of course, carries with it a sweeping assumption: those who file bankruptcy do so because because of financial carelessness.

If you’re like the vast majority of people who seek bankruptcy protection, you might find this insulting. Rightly so. In reality, 99% of people who file bankruptcy do so not because they’re reckless spenders, but because they’ve suffered a life-changing event, like illness, death, job loss, or divorce. It is the reality of life’s unexpected events, not bad decision making which has brought you to the point of filing bankruptcy.

The notion that bankruptcy filers are irresponsible is an idea the credit card companies sold to lawmakers over a ten-year, multi-million lobbying campaign to get a “bankruptcy reform act” on the books and make it more difficult for people to obtain bankruptcy protection. One of the big problems with this requirement is that it may deter those who need bankruptcy protection the most.

So, we’ve established that the counseling requirements are unfair and likely counter-productive in most cases. But, at least for now, credit counseling is still a requirement. The bottom line, however, is that the credit counseling requirement is easy to satisfy, won’t take much of your time, and you might even learn something.

The pre-bankruptcy credit counseling normally lasts 60 to 90 minutes and can be conducted in person, over the phone, or online. It usually costs about $40, but you can ask for a waiver of the fee if you can’t afford it. The program will discuss your financial situation, alternatives to bankruptcy, and a budget plan.

The post-filing debtor education course can last up to two hours. The cost is nominal, and can be waived if necessary. The course can also be conducted in person, over the phone, or online. You’ll discuss developing a budget, managing money, and using credit wisely.

How do you find a credit counseling or debtor education organization in your area? The U.S. Trustee’s Program oversees the administration of bankruptcy in all states, except North Carolina and Alabama, and it decides which organizations may conduct these courses. If you’re in North Carolina or Alabama, court officials called “Bankruptcy Administrators” approve the eligible organizations. Your bankruptcy attorney can give you the information you need to find a reputable organization.

In North Carolina, the pre-bankruptcy credit counseling can be completed entirely over the internet. As a result, you can complete this requirement for less than $40. In North Carolina, the hands down best organization to use is Hummingbird, available “online”, 24/7 for a cost of $34. This cost is per case, meaning that you pay $34 total, whether you file by yourself or with your spouse. Need to get your pre-bankruptcy counseling done? Hummingbird can be accessed at www.hummingbird.org.

But be careful. The counseling is only good for 6 months. If you wait longer than that to file, you will have to suffer through it again.

Lastly, beware. A cottage industry of illegitimate counseling organizations has cropped up. Before signing up with a particular organization, check with your attorney to make sure it has been approved and one that your attorney has had good experience with.

So those are the basics of the new counseling requirements. Don’t buy into the false assumptions and perceptions the counseling may create. With a good attorney at your side, you’ll be able to wade through this and the rest of the red tape the new laws have created, and make your fresh start.

In North Carolina, set up a FREE initial consultation with the Law Offices of John T. Orcutt, offering services in 28 different counties through 4 offices in Raleigh, Durham, Wilson and Fayetteville. During normal business hours, just call toll free to 1-800-899-1414. On nights and weekends, you can make your own appointment “online” by visiting our website at www.billsbills.com, available 24/7.

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Published Saturday, June 13, 2009 @ 10:32 am

We have put a lot on the blog about how your home can be affected by bankruptcy. Hopefully, you’ve read through some of those posts. If not, simply do a search to find as much as you can about the topic because knowing how bankruptcy affects where you lay your head down at night can be very helpful to you and your family.

To continue on the topic, let’s talk about the Homestead Exemption. It can be a little confusing and this post will touch on the general aspects of it and the specifics can (and should) be left for your face-to-face meeting with one of our attorneys.

Homestead exemption laws are in place to shield your house from creditors who do not have a lien on it. In other words, your credit card company can’t come after it. The amount of value placed on your home is based on its equity. If the market says your home is worth $200,000 and you owe $180,000 on the mortgage, your equity is $20,000. Pretty simple math.

Different states have different numbers for the amount of the exemption. So, if you are in a state where the exemption is $20,000 or more, your only concern is the mortgage holder. Thus, one of the best questions you can put on your list when you meet with your bankruptcy attorney for the first time is: “What is the state’s homestead exemption?” In North Carolina, it’s $18,500 per owner. (But that is not all you need to know about it; so still ask the question!)

In most states, the amount of the exemption is limited. Some states in the South and Midwest, however, have unlimited homestead exemptions, including Texas, Florida, Iowa and South Dakota. However, even in those states, if you acquired your home within 1,215 days of bankruptcy, you are limited to protections of only $125,000.

Here’s another confusing aspect of the homestead exemption laws: some states allow you to choose either their state’s exemptions or the federal government’s exemptions under the Bankruptcy Code. North Carolina does not, however. You are subject to the state’s rules. Also, you need to have been a resident of your state for at least two years to claim the exemption in your current state. However, if you have not lived in your state for two years, you are subject to the exemption rules of the state in which you lived 180 days prior to filing.

As some people have done, never try to leverage the homestead exemption by quickly buying down your mortgage in order to create more equity. The amount of the exemption can actually be reduced by whatever amount of equity a person tries to create intentionally as a way to hamper creditors ability to collect from you. So, let’s say things were starting to get bad for you and the creditors have found your phone number. You decide that a bunch of cash you have from a recent windfall will be better spent buying into your mortgage instead of paying off the delinquent boat loan. If you then file for bankruptcy within a few weeks, your homestead exemption will be reduced by that amount.

The homestead exemption is one of the more challenging bankruptcy concepts to grasp at first, which again, is why you should make sure to ask your bankruptcy attorney about how it will affect you. In the end, it’s all about protecting your home. While you may have made some spending errors along the way, they are certainly not worth losing your home.

Live in North Carolina and need to find out what your rights are. Contact the bankruptcty attorneys at the Law Offices of John T. Orcutt, experienced attorneys offering a totally free and confidential consultation and serving 28 counties in N.C. (See list at www.billsbills.com/offices.php. To make an appointment for a free consultation, during normal business hours, call toll free 1-800–899-1414, or make an “online” appointment by visiting our website at www.billsbills.com.

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Published Sunday, May 24, 2009 @ 6:42 pm

Whether you file bankruptcy under Chapter 7 or Chapter 13, pretty much everything you own at the time you file the petition becomes property of the “bankruptcy estate”. Sounds bad, right? Wrong! Just because property is included in the bankruptcy estate doesn’t mean your creditors can get their hands on it. Many, if not all, of your assets will be considered “exempt,” meaning your creditors can’t touch them. The rest are considered “nonexempt.”

Understanding the difference is very important in both Chapter 7 and Chapter 13 cases. In a Chapter 7 case, nonexempt assets are subject to liquidation; the trustee can take the property, sell it, and distribute the proceeds to your creditors. In a Chapter 13 case, the amount you have to pay your creditors is generally equivalent to the value of your nonexempt assets. In other words, if you have $10,000 in nonexempt assets, you’ll have to pay at least that much over the life of the repayment plan.

So what is considered “exempt”? Well, the Bankruptcy Code sets forth a list of various types of property and assets that debtors can keep. Each state also has its own list of exemptions. Thirty-four states have opted out of the federal exemptions. Debtors in those states must use the state exemptions. The other states allow debtors to choose between the federal and state exemptions. Fortunately, the federal exemptions and those of each state allow you to keep most of the property that you need and value the most.

For most people, the two most important assets are their home and their car. The exemptions for these types of property generally turn on the amount of equity a person has in the property. Equity is the extent to which the value of an asset exceeds what you owe for it. If you don’t have any equity in your home or car, there’s no issue; you get to keep it, end of story. If you do have equity, you can exempt up to a certain amount of that equity. To the extent your equity exceeds that amount, it is considered nonexempt. In a Chapter 7 bankruptcy, this means the trustee could sell the property to recover that equity, or you may have to pay the difference if you want to keep the property. In such cases, Chapter 13 bankruptcy may be the better option for you.

The exemptions avaliable in North Carolina, which has opted out of the federal exemptions, are a good example. North Carolina provides a “homestead exemption,” which allows you to keep up to $18,500 of the equity in your home. You can also exempt up to $3,500 of equity in your car. For household goods (furniture, appliances, clothes, etc.), you get to exempt up to $5,000 in value, plus an additional $1,000 for each dependent you have (up to $4,000). You can exempt up to $2,000 for professional books and tools particular to your trade.

Additional exemptions in North Carolina include: life insurance proceeds; personal injury awards; retirement accounts and annuities; all IRA accunts; public benefits (e.g., social security and unemployment payments); up to $3,500 in professionally-prescribed health aids; all alimony and child support payments; and up to $5,000 toward any other property, to the extent you haven’t used all of your homestead exemption (the “wildcard” exemption).

There is also an unlimited “tenancy by the entirety” exemption to protect any and all real property you have. In North Carolina, real property bought in the name of husband and wife is deemed to be a “tenancy by the entirety”. The only drawback is that this exemption cannot be claimed against creditors where both you and your spouse owe the debt. Where that is not a problem, this exemption can be a lifesaver, to protect your home as well as other real property.

The really good news is that, in North Carolina, every person gets to claim a full set of these exemptions. For example, if you and your spouse decide to file bankruptcy together (called “jointly”), you get a full set of exemptions and so does your spouse. In effect, this doubles the amount of stuff you and your spouse can keep and protect.

Understanding and correctly applying the available exemptions is crucial to ensuring you get the maximum benefit bankruptcy has to offer you. That’s why it is essential to retain an experienced bankruptcy attorney who can walk you through this process. In North Carolina, contact The Law Offices of John T. Orcutt, with convenient office locations in Raleigh, Durham, Fayetteville, and Wilson.

P.S. Want to know the “really, really good news”? Most of the time, with proper planning, clients of The Law Offices of John T. Orcutt get to keep everything and lost nothing. That’s right…file bankruptcy…and lose nothing.

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Published Friday, May 15, 2009 @ 12:35 pm

Bankruptcy is a tool to be used strategically. Part of the reason you should consult with a bankruptcy lawyer is precisely to work out that strategy. A smart bankruptcy is timed judiciously; you don’t want to wait until it is too late and you have lost too much, but you also don’t want to file if waiting a little is to your benefit.

A good bankruptcy attorney will review your situation and help you decide if the time is right. Because so many people view bankruptcy as the ultimate stigma, they wait too long to file―until they’ve suffered unreasonably long or lost too much in the battle with debt. If you are considering bankruptcy seriously, chances are the time is right. Actually, it was probably right quite some time ago. Nevertheless, some financial circumstances or life situations call for postponing bankruptcy until the best moment.

One important consideration is maximizing your exemptions. If you are expecting a considerable tax return, you should probably wait to file until after you have received the refund. When you get the money, you can use it toward essentials that will be exempted and then file; if you file before you get the return, it will be put to use toward your debts.

Another consideration is anticipated debt. If you are facing some serious medical bills in the future, you may want to wait to file until after that happens. You will not be able to file a Chapter 7 for another eight years, four for a Chapter 13, so if you get in over your head you may be out of luck. You should time your bankruptcy so that you can get the maximum protection; sometimes you have to wait to ensure that you will be able to discharge all credit purchases and as much tax as possible.

Certain recent activities on your part can count against you in the process, so if you’ve engaged in them you may consider delaying your filing. One example of this is if you have recently repaid considerable personal debts owed to family members or friends. A trustee can recover this money from your family members or friends, and you surely want your loved ones to hold on to that money. You also want to delay filing if you have recently acquired a large amount of debt or have purchased luxury items. For the former, your creditors may be able to prevent you from eliminating those recent debts by claiming fraud; for the latter, the trustee may be able to set the purchases aside. If you transfer property fraudulently or to avoid handing it over to creditors too close to the bankruptcy, the trustee can set these aside or the court may dismiss your case.

You may also want to wait to file until you can pass the Means Test. Because the Test is based on your average income over a six month period, a month or two of greatly reduced income may allow you to pass where a big paycheck didn’t. That doesn’t mean you should go out and quit your job! However, if you have lost your job recently but wouldn’t pass the Means Test right away because of a large paycheck, delaying the filing might be a good idea.

Think over your options carefully, but don’t wait too long or take stabs in the dark. If you’re unsure about your circumstances, you should consult with a bankruptcy attorney to strategize the timing of your bankruptcy so that you can get the maximum protection filing can afford. Raleigh bankruptcy attorney John T. Orcutt has helped thousands of families plan for bankruptcy. If you are in North Carolina, call our office today to set up a free initial consultation. Offices in Raleigh, Durham, Wilson and Fayetteville.

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Published Monday, May 11, 2009 @ 11:53 pm

To file or not to file bankruptcy is one of the most difficult decisions you’re ever going to make. It involves more than just money and the debts you’re struggling to repay. Bankruptcy has its own set of emotions attached to it. You may ask yourself:

‘How did I get into this situation?’
‘How have other people worked their way out?’
‘What will my friends and family think?’

As you work through these difficult questions, understand that there is an attorney waiting to help you work through your financial problems and give you the facts you need to make an informed decision.

Bankruptcy is there for people like you, honest, hardworking people, who for reasons beyond their control, need the chance to start fresh in their financial lives. It can help you break free from overwhelming credit card and medical debt, and help you catch up on missed mortgage or car payment. Bankruptcy is indeed the “play” button for a life on pause.

There are two different kinds of bankruptcy which your qualified bankruptcy attorney can help you choose.

Chapter 7 bankruptcy is an option for individuals who pass a certain test of their disposable monthly income, as determined by median income figures for your state. While both Chapter 7 and Chapter 13 offer an opportunity for a fresh start, a Chapter 7 discharge can be obtained quickly- in about 6 months from filing in most cases.

If you are behind on your mortgage or car payment, Chapter 13 is your best option to get caught up and save your property from foreclosure or reposession. Your missed payments can be repaid over the course of a 3 to 5 year repayment plan. If you have disposable monthly income above the Chapter 7 threshold amount, Chapter 13 is also an option to get a handle on your unsecured debt.

A qualified bankruptcy attorney can help you determine which version of bankruptcy will be best for you. Using the federal protection of the bankruptcy code, you can begin to tackle your financial problems and shut out the bill collectors forever. You can restructure or eliminate your debt, keep your personal property, and begin your financial life again.

There may be one or many reasons why you’ve been placed at bankruptcy’s doorstep. Understand that there is professional help available, and that the benefits of bankruptcy probably outweigh many of the downsides. With offices in Raleigh, Durham, Wilson and Fayetteville, the Law Offices of John T. Orcutt will help you get back on your financial feet.

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Published Thursday, April 23, 2009 @ 3:06 pm

Like so many others right now, you’re struggling to pay your bills, falling further and further behind, and wondering what you can do about it. Maybe you’ve heard about the benefits of bankruptcy: the ability to wipe out your unmanageable debts and save your home from foreclosure. But maybe you also think you don’t qualify for bankruptcy protection, because it just so happens that you’re not actually a U.S. citizen. Well, the good news is you can file bankruptcy, under certain circumstances.

To qualify as a “debtor” under the Bankruptcy Code, you only need to reside in the United States, or have a place of business or property in the country. There is no citizenship requirement for filing. Technically, you don’t even need to actually live in the United States. The courts vary in their interpretations of what constitutes “property in the United States.” But in some U.S. jurisdictions, it may be enough that you simply keep a bank account there. Others may require that you demonstrate an intent and ability to become a permanent resident in the future. This could mean you have to have a permanent visa or a “green card.” The key point is that you may be eligible to take advantage bankruptcy protection, regardless of your non-citizen status.

Keep in mind that while filing bankruptcy generally will not affect your immigration status or naturalization application, if you’re currently residing in the United States, the information you provide in connection with the case may affect your right to stay here. You are required to be truthful in your disclosures regarding your financial situation. This includes the income you’ve earned, the taxes you’ve paid, the specific debts you owe, and any transfers of money or property you’ve made in the months leading up to your filing. If you’ve been paid “under the table,” evaded income tax, used credit cards in other people’s names, or transferred property to hide it from creditors, this will inevitably come out in the bankruptcy filing process. The Immigration and Naturalization Service may consider these actions as crimes of “moral turpitude,” exposing you to potential deportation.

As long as you haven’t engaged in these sorts of actions (or been convicted of certain criminal offenses), and you approach bankruptcy with honest intentions, the bankruptcy filing should not create any immigration problems. If you’re a non-citizen struggling with unmanageable debts, and you live or work in the United States, call an experienced bankruptcy attorney in your area today, and learn how bankruptcy can help you fight back against debt.

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Published Tuesday, April 14, 2009 @ 9:56 pm

Chapter 13 bankruptcy (sometimes called the “wage-earner’s bankruptcy”) is designed to allow you to restructure your past due financial obligations into an affordable repayment plan. The repayment plan will include secured debts (such as mortgages and car loans). In some circumstances, it can include repayment of some of your unsecured debt (such as credit cards and personal loans). However, in the majority of Chapter 13 plans, your unsecured creditors receive little or no payment- the unsecured debt is simply discharged.

If you are behind on your home mortgage or car loan, a Chapter 13 bankruptcy is your best option to avoid foreclosure or repossession. By filing bankruptcy, you can stop a foreclosure or repossession immediately! The plan will allow you to catch up on missed payments, and put you in a a much better position to keep your home and car. Once your plan is filed, all creditors must cease collection efforts. This “automatic stay”, stops your unsecured creditors dead in their tracks, freeing up more money so you can successfully complete your Chapter 13 plan.

Depending on your unique situation, the Chapter 13 plan can be structured to pay your secured debts and catch up missed payments over a period of time, usually between 3 and 5 years. So long as you continue making the plan payments, you are protected from any collection efforts for the duration of the plan. At the end of the repayment plan under Chapter 13, all unsecured debt is discharged. You can then resume making your secured debt payments directly to your mortgage or auto lender, just as you did prior to filing bankruptcy.

The eligibility requirements to file a Chapter 13 bankruptcy are fairly straight-forward. You must be United States resident some form of income (yes, unemployment benefits are considered income). You must also receive credit counseling from an approved credit counseling agency. If you’ve filed for bankruptcy before, you may file again under Chapter 13, but there are some limitations. If you previously filed under Chapter 7, you may file again under Chapter 13, if it’s been at least four years since your previous filing. If you filed under Chapter 13, you may file again so long as it’s been at least two years since you filed your previous case.

Because of its ability to stop foreclosures and prevent car repossessions, Chapter 13 can be a very powerful tool to help you keep your home and car during these turbulent economic times. If you are facing a foreclosure or repossession, don’t wait until its too late. Speak with an attorney now! A Chapter 13 bankruptcy may be the help you need to get back on your financial feet.

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Published Wednesday, April 8, 2009 @ 5:47 pm

Wondering about the basics of Chapter 7 bankruptcy? Here they are, in a nutshell:

Chapter 7 bankruptcy (sometimes referred to as “liquidation bankruptcy)” is designed to allow you to wipe out all or most of your unsecured debts. These are things like credit card debt and medical bills, which are not secured by some sort of collateral. Getting rid of these debts is the biggest benefit of filing bankruptcy. Imagine how much money you’d have in your pocket if you weren’t throwing it away on monthly credit card payments?

Many people are under the impression that they must give up their property when they file for Chapter 7. This is not necessarily true. The property you get to keep is called “exempt” property. Bankruptcy exemptions are dollar amounts, and act to protect an individual’s assets. Depending on the state you live in, these dollar amounts are fairly generous. For example, in North Carolina, the real property exemption for a married couple is up to $37,000.00 of any home equity. Of course, there are various exemptions for different kinds of assets, including household goods, automobiles, etc. So long as the “yard sale” value of your assets do not exceed the exemption, you get to keep your assets. But even if they do exceed exemption limitations, another form of bankruptcy might still be an option. Talk to a knowledgeable attorney who can guide you through these issues.

What are the qualifications for a Chapter 7? The first eligibility requirement is usually easy enough: you have to be a resident of the United States. You also have to meet certain financial requirements. Your income over the last six months must have been equal to or less than the “median family income” (the median income of a family of your size in your state). If you made too much money to meet this test, you can still qualify under “the means test.” This is based upon the amount of your monthly “disposable” income (what’s left after you’ve paid all your bills). As long as the disposable income doesn’t exceed a certain amount, you probably qualify for a Chapter 7 bankruptcy.

While having filed for bankruptcy in the past won’t necessarily prevent you from doing so again, there are some time period limitations. You can file again so long as the last time you filed was more than six months ago and you have not received a discharge under Chapter 7 in the last eight years (or in the last six years under Chapter 13).

So, that’s it in a nutshell. The specifics will vary from case to case. If you’re having trouble managing your unsecured debts and want to know if Chapter 7 is right for you, it’s best to contact a bankruptcy attorney to discuss your specific situation.

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