When Should I File For Bankruptcy? -'Tis The Season

Many individuals who are facing mounting consumer debt issues may begin to wonder: "When should I file for bankruptcy?" When it comes to filing for bankruptcy, as with many other legal proceedings, timing is a major factor and should be considered when deciding when is the right time to file for bankruptcy. Many debtors may substantially benefit from filing a bankruptcy petition in December rather than in January or other ensuing months. First, many employers give their employees annual bonus checks at the end of the calendar year to coincide with the holidays. The bonus money becomes part of an individual's income and is factored into the Means Test calculation if the debtor files in January. This may cause the debtor's average income amount, for the purposes of the test, to exceed the allowable amount thus disqualifying him from filing for Chapter 7 bankruptcy. Therefore, it would be beneficial for a debtor to file after he receives a bonus check, but before the income is used as part of the Means Test calculation. Next, if a debtor owes federal taxes and expects a tax refund, he can avoid a federal tax offset if he files before December 31st . The Bankruptcy Code permits a creditor to decrease the refund amount that is owed to a creditor by the amount that a debtor owes to that creditor. Stated differently, if the IRS owes a debtor a tax refund and the debtor owes the IRS a tax debt for a previous year, the IRS can keep that debtor's tax refund and use it to satisfy his tax debt, even with the automatic stay that bankruptcy provides to debtors. Although, there are some rules that the Bankruptcy Code includes, one being the "mutuality of the debts." As expressed in the court case, In re Meyer Med. Physicians Group, Ltd., 385 F.3d 1039, 1041 (7th Cir. 2004), most courts find that mutuality requires that: 1) the debts are held by the same parties; 2) in the same capacity; and 3) the off-setting debts are both either pre-petition or post-petition. A debtor's tax debt is a pre-petition obligation owed by the debtor to the IRS. If the debtor files for bankruptcy in December rather than in January, the income tax refund is a post-petition debt owed by the IRS to the debtor - as a refund for tax year 2013 is not owed by the IRS until after December 31, 2013. The Bankruptcy Code does not allow the IRS to take and apply your post-petition income tax refund to offset a pre-petition tax debt because there is no mutuality of the debts. If you are having trouble dealing with your consumer debt and are wondering when it would be the right time to file for bankruptcy it is imperative that you seek the advice of experienced legal counsel to advise you about the timing of your bankruptcy filing. For more information regarding when you should file for bankruptcy, Chapter 7 bankruptcy, Chapter 13 bankruptcy, foreclosure or any other consumer debt issues in New Jersey visit TheNJBankruptcyAttorney.com. This blog is for informational purposes only and not intended to replace the advice of an attorney

Costs and Benefits of Bankruptcy Reaffirmation

Individuals usually choose to file bankruptcy to discharge debts that they simply are unable to pay but, because the process carries a risk of having to forfeit certain property they wish to retain, people may wish to reaffirm some of their debt as a means to keep certain items. It should be duly noted that bankruptcy reaffirmation comes both with costs and benefits. Filing for bankruptcy is usually a last resort for most people and for the vast majority of people the process allows them to start their financial lives anew and debt free. The first issue is that many are concerned that a bankruptcy filing will ruin their credit, however, those considering bankruptcy are likely substantially behind in their bills and their credit is already in bad shape. With a fresh start from bankruptcy, as long as filers begin making all payments on time thereafter, the former debtors will reverse the downward spiral and their credit will improve. Second, depending upon whether the debtor files for chapter 7 or chapter 13 bankruptcy, a great deal of their assets and property may be at risk of being taken by the bankruptcy trustee to sell to satisfy some of the debts. If a debtor decides that he or she would like to reaffirm a debt, they are effectively removing a particular debt from the bankruptcy discharge proceeding so that it may never be discharged. The reason that a debtor may elect to reaffirm a debt is so that he or she may keep a particular asset or piece of property. For instance, many people need a car to get to and from work and they do not want to risk losing the car in the bankruptcy proceedings, therefore they choose to reaffirm the debt they owe on the vehicle so that they do not lose it. The obvious benefit of reaffirming a particular debt is the debtor keeps that property. Upon reaffirmation, the debtor will immediately need to continue to make full and regular payments on the affirmed debt and satisfy any back payments on the debt that are owed that the time of the reaffirmation. When a debt is reaffirmed and thereby removed from the bankruptcy, the debtor may not later cease paying or pay late and may not reopen the bankruptcy to include the asset. As bankruptcy may be filed only once every 7 years, it is critical that you seek the advice of experienced counsel in the event you are considering bankruptcy and reaffirmation of certain debts. For more information regarding reaffirmation, Chapter 7 bankruptcy, Chapter 13 bankruptcy, foreclosure or any other consumer debt issues visit TheNJBankruptcyAttorney.com. This blog is for informational purposes only and not intended to replace the advice of an attorney.

Bankruptcy and Divorce

Although couples decide to get divorced for many reasons, disagreements over money and finances are one of the main reasons that people file for divorce in New Jersey, if the issue is the mismanagement of money, filing for bankruptcy and divorce simultaneously can be a dangerous combination if the individuals involved are not well informed. A couples' marriage and their finances go hand in hand. Most married couples share a residence, hold joint bank accounts, share jointly owned vehicles, share credit cards, and incur shared expenses. Therefore, in the event that a couple is contemplating a divorce and a bankruptcy at the same time, the process can become very complex. Filing for either a Chapter 7 or Chapter 13 bankruptcy or getting a divorce are each stressful and arduous processes by themselves, but combining both may seem unimaginable to some. Therefore, it is imperative that individuals who find themselves in this situation make sure that they are well informed about both divorce, bankruptcy, and the affect that one has on the other - before engaging the processes. First, the couple will need to decide whether they wish to file for bankruptcy prior to the divorce proceedings or following them. If the spouses file for bankruptcy before their divorce, they will have the option to file either jointly or singly. By doing this, the couple will be compelled to present the court and the bankruptcy trustee with all of their financial information - such as assets and other property. In the vast majority of cases, most of the couples' assets will be exempt, but non-exempt assets will become part of the bankruptcy estate and the uncertainty of their discharge may make divorce property settlement negotiations more difficult. Alternatively, filing for bankruptcy may settle many debt or property issues between the couple before divorce negotiations even begin, thereby easing the process. If a couple can anticipate an amicable divorce it may be within their best interest to file for bankruptcy before filing for divorce for this aforementioned reason, as issues regarding ownership and title of property will be settled during the bankruptcy. If the couple realize early in the process that their divorce will be contested by either or both spouses, they may want to distribute the marital assets first, through negotiation and agreement, and then deal with each of their respective debts later. If you have any questions regarding how filing for bankruptcy and divorce will affect each respective process, it is critical that you seek out the advice of an experienced bankruptcy attorney to assist you with your finacial issues and to advise you properly in regard to bankruptcy. For more information regarding Chapter 7 bankruptcy, Chapter 13 bankruptcy, foreclosure or any other consumer debt issues visit TheNJBankruptcyAttorney.com. This blog is for informational purposes only and not intended to replace the advice of an attorney.

Meeting Of Creditors Is Not What Most Debtors Expect

In New Jersey, when a debtor files for bankruptcy the process that follows may seem frightening and confusing for the debtor, especially when debtors learn that there is a meeting of the creditors that is held as part of the process. Most debtors who are filing for bankruptcy have recently experienced months or even years of badgering at the hands of harassing creditors who have sent many letters and made many phone calls in an attempt to get repayment. Therefore, the thought of having to confront these dunning creditors at a meeting during the bankruptcy proceeding could cause debtors to experience a reasonable degree of anxiety and distress. First, it should be noted that although this anxiety and distress is reasonable, it is usually unfounded because it is very rare that a creditor will attend the meeting of the creditors, and in the event that a creditor does attend - it is even rarer that the creditor would have direct contact with the debtor. In a Chapter 7 bankruptcy, this meeting of the creditors, called a 341(a) hearing, is mandatory. In a Chapter 13 bankruptcy, this hearing is the first hearing in the process. Typically, the only people who attend this hearing will be the debtor, the debtor's attorney, and the trustee. The only time that a creditor might appear at the 341(a) hearing is when a creditor is someone that has a personal involvement with the debtor such as a former business partner, an ex-spouse, or a landlord. Even in this very unusual and rare occasion, the creditor would only be given a very limited time to question the debtor. If you have any questions regarding the bankruptcy process including what you should anticipate, what you will need or other important questions it is critical that you seek out the advice of an experienced bankruptcy attorney to assist you with your consumer debt issues and to advise you property in regard to bankruptcy. For more information regarding Chapter 7 bankruptcy, Chapter 13 bankruptcy, meeting of creditors, foreclosure or any other consumer debt issues visit TheNJBankruptcyAttorney.com. This blog is for informational purposes only and not intended to replace the advice of an attorney.