It is not just the poor who can face financial difficulty. In fact, the Wall Street Journal reported in 2014 that bankruptcy attorneys were seeing an increase in high earners filing for personal bankruptcy after running up significant debt.
More than 35 percent of people say that meeting regular obligations, such as mortgage or rent, cause them concern each month. In addition, 31 percent have no retirement income and 19 percent of those surveyed were in the 55 to 64 age bracket.
With even wealthy people admitting to living paycheck to paycheck, it is easy to see why financial problems are so prevalent today. For many of these people, bankruptcy may be the only option.
We can help in many ways including:
Chapter 7 bankruptcy cancels many, if not all, of your debts. If you own property, the bankruptcy trustee may sell a portion of your property in order to repay creditors.
However, there are laws in place so that you can keep your home, especially if there is little or no equity available, clothing, household furniture, payments from Social Security and your car. You must undergo credit counseling with an agency approved by the United States Trustee and you cannot file Chapter 7 bankruptcy if you filed within the last six to eight years.
Once you have filed for Chapter 7, an automatic stay is put into effect. This means that all collection actions, including phone calls, threatening letters or court action must be halted. Your wages cannot be garnished, your bank accounts cannot be frozen, your utilities may not be turned off and liens may not be filed on any property.
The courts take over your property and debts through a trustee who will determine what, if anything, your creditors can get. In most cases, creditors receive nothing after the filing of a liquidation bankruptcy.
If you are working and have a steady income, it may be more beneficial for you to file a Chapter 13 bankruptcy. In this type of bankruptcy, you use your income to pay some or all of your debt through a payment plan that lasts between three and five years. Your secured debts must be less than $1,149,525 and your unsecured debt must be less than $383,175.
Just like in Chapter 7, you must undergo credit counseling through an approved agency. Certain debts must be paid in full, such as child support, alimony, some tax debts and wages owed to employees. You must also pay regular payments on secured debts, such as your mortgage or vehicle loan. If you are behind in either of these loans, the payment plan may include an amount known as arrearages in order to bring them current.
Your remaining income is used to pay back all or some of your unsecured debt. You may not have to pay the debt in full and some creditors may not require payment at all. If you are unable to make your plan payments, you may be able to modify your plan or you may be able to discharge the remaining debt on the basis of hardship. A hardship could be a debilitating illness or closure of the business where you work.
If you are behind on your mortgage, you may be concerned about foreclosure. One way that banks can help you bring your mortgage current is through a loan modification.
A modification allows you to change the terms of the loan, either interest rate, years you must pay or other factors in order to reduce your payment. A modification as a permanent change to the loan and banks have been reluctant to allow them in the past.
For this reason, it is recommended you discuss any modification with real estate attorneys or bankruptcy attorneys to be sure the modification is the right way for you to go.
If you are struggling to meet your financial obligations, dealing with constant calls and letters about past due debt or are facing foreclosure, contact our bankruptcy or real estate attorneys in our office to learn more about what rights you may have under bankruptcy or modification laws.