Bankruptcy Tips

How to keep your tax refund

Do NOT file your bankruptcy before you get your tax refund and spend the money for everyday living expenses. One of the trustee?s favorite tricks is to take people?s tax refunds. This trick can be defeated by filing your bankruptcy AFTER you get your tax refund.

DO NOT PROCRASTINATE

One of the most common mistakes is putting off seeing attorney. This is understandable. Visiting a bankruptcy attorney sounds about as appealing as a root canal. But if you are in financial distress, at least learn your options quickly so the right strategies can be employed. And you can be told the Dos and Don?ts of pre-filing activity. This could save you a lot of money and aggravation while eliminating that stress build up.

Stop paying your credit card bills

If know you are going to file BK, stop paying your credit cards immediately. Put that money to better use. This is BK 101. Paying credit card debt after you have concluded BK is the way to go is nothing more than flushing hard earned cash down the toilet.

No Cash Advances or luxury purchases on Credit Cards

Cash advances and large luxury purchases on your credit cards within 90 days of filing can result in what is called an adversarial proceeding? this basically means you might have to pay all or much that money back. Haste can sometimes make waste.

Have a little fun

Bankruptcy can be one of most stressful times of your life. However, once you decide that bankruptcy is smart thing to do?and that it is not as bad as you thought, a sense of relief typically comes over people. The stress dissipates and it?s a great time to cut loose and have a little fun. I have found that it?s usually been some time since my clients have had a little fun and I have found that it can therapeutic for most people.

Possibly Keeping a Credit Card

One of the most common questions I get is ?Can I keep a credit card?? The short answer is No. Bankruptcy is not a pick and choose process. If you owe even as much as 10 cents, technically you are supposed to declare that debt. However, there is a possible ay to keep a credit card. If you have a credit card that has balance of $1,500 or so and you want to keep you may consider paying it off before you file (you may have to wait 90 days), and then it does not have to be declared and that creditor does not get notified. They may still cancel your card but the smarter thing for them to do, which often does happen, is for them to do nothing, leaving you with a functional credit card.

Lower your Car Payment

One of the biggest concerns of many people is keeping their car. Usually this can be done. But what comes as great shock to some is that, you might be able to lower your payment through a bankruptcy. If you have a high interest rate, are upside down on your vehicle, have steady work history and bought the car 910 days or more ago, you are excellent candidate to have your payments lowered through a Chapter 7 Bankruptcy.

Adopt a New Attitude

Bankruptcy feels very personal. I have seen enough of it that it weighs on people like a ton of bricks and is very stressful. So many people like they are failure. I do understand this, but I urge people try adopt a new attitude. You were not a bad person before you got into debt, and financial struggles did not make you a bad person. This is a business decision, not a personal reflection. And in this economy, countless people have been caught up in the storm. And when you are feeling low, remember this: Abraham Lincoln declared bankruptcy and turned out just fine.

Go to the Doctor!

I tell all my clients that they should visit the doctor prior to filing. This is especially true if you lack insurance. Why? Because, God forbid, something is amiss with your health, first, you need to know, and second, any medical bills associated with your malady can be wiped out in the bankruptcy. On the other hand, however, if you incur medical bills after the bankruptcy you will be left on the hook for them. Ouch! No one needs that sort of double whammy. So yes, guys, time for the prostate exam.

Upside down on the house? Strip the Second mortgage.

The bursting of the real estate bubble and the decline in real estate values has sadly left a lot of people upside down on their house?that is, they owe more than it is worth. This is not the point of home ownership. The point of home ownership is to build equity and wealth. If you are upside down on your house you are, in reality, renting your own home. However, if you have second mortgage you might be able to get rid of it entirely?provided that the value of the home is less than the balance on the first mortgage. If so, that $500 a month second mortgage payment goes bye-bye forever. (Note: this can only be done in a Chapter 13.)

Realizing that Real Estate Values will probably be slow to rebound

When deciding whether or not you should walk from your home, one of things I try to impress upon people is the following: real estate values are not likely to ever experience the sort of rapid appreciation we experienced a few years ago. In other words, the decline in real estate values is likely going to take years to recoup. Recognizing and understanding this can have a drastic impact on your decisions.

Here is the analysis in a nutshell. (1) Real estate values were largely driven up by very easy credit. (2) This created a huge pool of buyers. (3) This drove up prices. Easy enough. Then, the bubble burst and the game changed.

(1) Banks are once bitten, twice shy when it comes to extending credit. Now it is very difficult to get a mortgage even with good credit (2) Making it harder still, are the banks? stricter down payment requirements. How many people have $50,000 lying around for a down payment? (3) In addition, stated income loans are gone and self-employed people have a very tough time getting credit. (4) These factors combine to restrict and reduce the pool of potential buyers and upward pressure on real estate values.

This means that real estate appreciation will more than likely hover around the pre-bubble historical rate which was around 2-3% per year. If this makes sense and you are say, $50,000 upside down on a $185,000 house it will take you around nine to ten years just get back to even money. Is that smart financial sense? Not really. Understanding this analysis, may lead you to conclude, walking is the thing to do.

Rent free living through a BK

If you are upside down on your house, you must remember you are doing no more than renting. Having mortgage is designed to build equity and if you are upside you have none. Making payments on such an investment is questionable at best. Or, perhaps you have had severe reduction in your income and you simply cannot afford the house anymore. In either scenario, bankruptcy can actually be used to help build significant cash reserves. How? You simply let the house go into foreclosure. The foreclosure process, thank to due processes of the law, usually takes 9-11 months to come to a sale date. A strategically filed bankruptcy can make it take even longer. What do you do during this time? Continue to live in the house without paying a dime?rent free living. This should enable you save some real cash. By the time the house is sold you could have thousands of money in your pocket.

Keep Credit in Perspective

One of the biggest concerns and causes for hesitancy is the impact bankruptcy has on your credit. No question about, it damages your credit. While I talk at length elsewhere, how the damage does not last as long as most thing, here I urge people to keep the importance of credit in perspective. Sure, credit is important but so is cash. Especially these days when credit is hard to come by anyway.

Let?s remember that the reality is this: If you are reading this site your credit is probably not all that great as it is. So the relative damage is not that bad in many cases. Second, I see people all the time propping up their credit score even though they are tapped out and don?t even want any more credit or cannot afford any more credit. They are paying thousands of dollars to protect something they cannot even use. Thousands of dollars that could go to college funds, new cars or retirement accounts. And, if you own a home, you already have that thing that most people want good credit for anyway. And if you don?t own a home and want to, spending thousands of dollars to prop up your credit will severely hamper your ability to come up with a down payment, which all banks require these days. Not a good trade off, especially if you are tapped. So, while credit is important its just one piece of the overall puzzle.

NEVER EVER sign up for debt settlement before talking to an attorney

This speaks for itself and for a more thorough discussion Click here.

Remember that divorce and bankruptcy can be intertwined

Sadly, divorce and bankruptcy often go hand in hand. If you are in a position where you are considering both consult a bankruptcy attorney first and quickly. Usually, it makes sense to file the bankruptcy first and doing so can actually lower you?re family attorney fees and make that part of the process simpler. However, this is not always the case, especially in higher income situations, and a good bankruptcy attorney can help determine which should happen first.

Got sued? Buy time by filing an answer

Getting sued is scary. Often times it?s that very event that causes people to come to my office but lots of times they need more time to get filed. The key to buying this time is to ensure a default judgment is not entered against you. All you have to do is file an answer-the court summons will have space allowing for that at the back your summons. All you have to say is the following: ?I dispute the validity of this debt? and mail a copy to the opposing side. Creditor attorneys hate this because now they have to prepare for a trial which is a ton of work. There is a filing fee generally around $75-$95 but it buys you valuable time.

Facing foreclosure? Be wary of short sales

Those facing foreclosure often ask about short sales. I generally discourage them though not always. If you have a lot of debt in addition to your mortgage this is almost always the case. Short sales require you to vacate the house while bankruptcy can buy you months of rent free living. And while short sales do prevent a foreclosure, they are still a significant negative credit event and if you have a ton of other debt you may have to file bankruptcy anyway?.so you?re better off getting as much rent free living as you can. Short sales simply don?t have a ton of benefits in most cases today.

Avoid paying debt down?with a 401K Loan

A?lot of people think a good way to pay down your debt is to take out a 401K loan. Generally, this is a not a good idea and should never be done without consulting an attorney.? The main reason for this is because 401Ks and IRA are 100% exempt in a bankruptcy.? This means if your debt level is high enough to consider bankruptcy you would have parted with those assets needlessly.? It could be no different than flushing your money down the drain.? Talk to an attorney first!

Don?t over rely on loan modifications to solve housing problems?foreclosure process continues

I see alot of people with false optimism regarding loan modifications.? The fact is most people don?t get them, the banks have no great incentive to grant them and those that do get them often default later?and this is one of the reasons banks don?t like them.? And they only postpone a foreclosure a week at a time.? Don?t ever forget the foreclosure process continues and while they may postpone the sale?they typically only do so a week or so at a time.? Thus, if they reject you your house can sold almost immediately afterwards.

Source: http://www.coloradofreshstart.com/bankruptcy-tips/

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