Bankruptcy Answers

Bankruptcy Answers

Why I Started My Own Bankruptcy Law Firm

by Amy Szilagyi on 08/07/10

One question that I get asked a lot is why I started my own bankruptcy law firm.  The short answer is that having my own firm allows me to provide the high quality service that I want to provide to clients at a reasonable price.

When I started my legal career, I worked for a large regional law firm.  The money and the perks were great, but the sacrifices were not worth it.  Yes, I'm talking about personal sacrifices like feeling like someone else had to raise my children because of the required hours of "billing time" and the additional required after-hours commitments.  But, I am also talking about the sacrifices for client service.  Don't get me wrong, large firms often provide very high quality service.  But that service comes at a price, both financial and otherwise.  As a young lawyer in a large firm, I actually had very little contact with the clients for whom I worked.  Their direct contact was the partner in charge of their account.  How fair is it to the client not to know the attorney who is actually handling their issues?

I left that firm while pregnant with my second child and began working with a small local  firm.  This was a much better situation for me for many years.  I was solely responsible for my own clients and had flexibility to balance work and personal life.  The problem was that, in order for me to make a living, I had to charge my clients more than I wanted.  Believe it or not, most lawyers do not make huge incomes to start.  And, by working with another firm, I had to split the money that I brought in with that firm. 

So, by starting my own firm, I have solved all of these problems.  I can offer the type of personalized service that clients deserve and do it at a lower price.

Retirement Accounts & Bankruptcy

by Amy Szilagyi on 07/24/10

If you are seriously considering filing for bankruptcy, it is a very bad idea to empty out your retirement account (401k, IRA, etc.).  While it is tempting to take that money to keep you going for awhile longer, there is a good chance that it will end up making your situation worse. 

To file under chapter 7, you must meet the income requirements of the "means test," which looks at your income over the last six months.  A disbursement from your retirement account will artificially inflate your income.  Most bankruptcy districts will disregard the disbursement income, but some count it for means test purposes, even if they don't count it as current income for repayment plans.   If they count it as income for the means test, it could push you into a chapter 13 or, at the very least, make it more difficult to get a chapter 7 approved.

Second, if you have the cash from those accounts sitting in a regular bank account, you may not have enough exemptions available to protect all of the money.  There is no specific bankruptcy exemption for cash or for checking or savings accounts.  So, you must have enough of a general exemption (usually unused homestead exemption) to protect that money.  On the other hand, retirement accounts are normally exempt without limit.

Third, if you use the money to pay off some creditors (but not all) and then file for bankruptcy, the court may look unfavorably on the preferential treatment given to some creditors.  This is especially true if  you use the money to pay off debt owed to family or friends.

Finally, don't forget that any disbursement you take from a retirement account is taxed and penalized.  You will pay income tax on the entire amount, plus you will pay a 10% penalty for early withdrawal if you are under age 59 1/2.

The bottom line is that I have had many clients who have cashed out their retirements and still ended up filing bankruptcy.  They are much worse off, having given up a relatively large asset that they could have kept. 

If you are even remotely considering filing for bankruptcy, talk to a bankruptcy lawyer before cashing out your retirement account.

Click here for more information on filing bankruptcy in Holland, Michigan

What Bankruptcy Can Do For You Part 2

by Amy Szilagyi on 06/24/10

      Delay eviction  If you are being evicted from your home, the automatic stay may delay the eviction for a few weeks.  If, however, the landlord already has a judgment of possession against you when you file, the automatic stay will not delay the eviction and the landlord can proceed just as if you hadn’t filed for bankruptcy.  Also, if the landlord alleges that you’ve been endangering the property or using a controlled substance on the property, the automatic stay won’t protect you.

6.     Stop collection of public benefit overpayments  If you receive public benefits (unemployment, social security, etc.) and were overpaid, the agency is normally entitled to collect the overpayment out of your future checks.  The automatic stay in bankruptcy will prevent this from happening.

7.     Get rid of certain types of liens  A lien is a creditor’s right to take some or all of your property.  For example, the lender who provides auto financing will keep a lien on your car until all payments are made.  If you do not make your payments, the lien allows the lender to repossess your car.  Liens survive bankruptcy unless certain rights are invoked during the bankruptcy process.  

      Cram down secured debt  To “cram down” debt means to reduce the amount of the loan to the current value of the property.  For example, if you have a car loan with a balance of $8,000, but the car is worth only $5,000, you can propose a plan to repay $5,000 to the creditor and have the remaining $3,000 debt discharged in the bankruptcy.  Note, however, that you can’t cram down a car debt if you bought the car within 30 months prior to filing for bankruptcy.  You cannot cram down other types of secured debt if you purchased the property within one year of filing for bankruptcy.

      Get your drivers license back if it has been suspended because you didn't pay court-ordered damages for a driving accident  unless you were driving under the influence of drugs or alcohol.

For more information about Bankruptcy in Holland Michigan, click here.

What Bankruptcy Can Do for You Part 1

by Amy Szilagyi on 06/21/10

Bankruptcy Can:

Wipe Out Unsecured Debts  "unsecured debts" are debts that are not backed by any of your assets. They include things like credit cards, medical debt, personal loans, unpaid utilities, most lawsuit judgments, etc. They do not include things like mortgage loans or car loans. After your bankruptcy is discharged, you have no more liability to your previous unsecured creditors, unless you take on more debt

Stop Collection calls and Collection Actions  As soon as your bankruptcy petition is filed, an "automatic stay" goes into effect. That means creditors cannot take any further actions against you. They cannot call you, send you letters, file a lawsuit or anything else. If they do, it is a violation of the "Fair Debt Collections Practices Act" and they may liable for damages. Bankruptcy may also allow you to stop foreclosure on your house and/or reposession of your car.

If you use an attorney, they may let you refer creditors to their office before your bankruptcy petition is filed and maybe even before you pay the entire amount of your legal fees for the bankruptcy.

Stop Wage Garnishments  If your wages are being garnished, or if a creditor is threatening to garnish wages to satisfy a court judgment, the automatic stay in bankruptcy will stop the garnishments immediately.

Delay or Stop Utility Disconnections  If a utility company (water, electric, gas or telephone) is threatening to turn off your service because of missed payments, bankruptcy can prevent that for at least 120 days.

Check Back Soon for part 2 of this topic.

For more information about Bankruptcy in Holland Michigan, click here.

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