Filing Bankruptcy With Cosigners
We all need help from time to time, whether it’s help with moving, babysitting, or securing a loan for a large purchase. If you take on a debt with a cosigner, it’s important for both of you to understand the terms of the loan and what could happen if you’re unable to keep up with your payments. If you’re filing bankruptcy, your cosigners should be informed, because they may be financially affected. How Cosigners Work If you’re just starting out or have a low credit score, you may qualify for a loan on your own. Instead, you may need to have a cosigner who will be responsible for the debt if, for some reason, you were unable to make the payments. Bankruptcy can discharge debts in your name, but it may leave your cosigner with the responsibility. As soon as you file, the automatic stay goes into effect, so you are no longer required to make payments on unsecured debt, and your creditors may no longer attempt to collect your debts. However, your cosigners may not be off the hook. Chapter 7 You’re pretty much guaranteed that your creditors will contact your cosigners to start collecting what you owe if you file a Chapter 7. But there are some things you can to do take this burden off of them. Knowing that your unsecured debts will be discharged, look at your budget to see if you can keep up with your secured debts with cosigners once the other debts are gone. If you can, you may choose to reaffirm the debt and put it in your name only before filing. You and your cosigner may also agree that you’ll go ahead with the Chapter 7, but will make the secured payments on their behalf. These may be the only ways to keep peace in the relationship. Chapter 13 If you’ve chosen to file a Chapter 13, your cosigners may not be affected at all. Your secured debts with cosigners will be included in your 3-5 year repayment plan and will be considered up to date. Your co debtor would be part of a “co debtor stay,” similar to the automatic stay. If you start to fall behind on your payments, your creditor could ask the court to lift the stay, which means your cosigner would be responsible for payments. Also, if you decide to convert to a Chapter 7 or if your case is dismissed at any point, the co debtor stay would end, and your creditor would contact your cosigner to begin making payments. Communication is Key Even the closest of friends and tightest of family members can be strained if a loan cosigning situation goes sideways. Be sure to have open communication before taking out a loan together so that you’re both on the same page. If it looks like you’re not going to be able to make your loan payments and you’re considering bankruptcy, call me right away. We’ll come up with a plan to take care of your financial responsibilities while preserving your important...
read moreSchedules I and J – Your Income and Expenses
In most areas of life, accuracy is important, and this is especially true of completing bankruptcy paperwork. This is the only way the court trustee can accurately evaluate your case. On Schedules I and J, we’ll list all of your income and expenses, and this will help us decide which chapter is the best way for you to file. The court will use this information to conduct the means test to determine if you’re eligible for a Chapter 7. If you’re filing a Chapter 13 instead, the data on these forms will help them to evaluate your proposed repayment plan. Married couples need to include the income and expenses for both partners. Things get a little more complicated if you’re in the process of separating or divorcing, and I can walk you through this, if necessary. Schedule I Whether you’re filing a Chapter 7 or 13, you’ll need to complete Schedule I and include all of your income. This gives the court a snap shot of your current income, and we’ll use other forms to show them what has happened over the preceding six months. This way, you can explain why you’re filing; everything may have been fine until you lost your job or faced unexpected medical bills. You’ll need to include employment income for yourself and your spouse, as well as other monthly income, such as child support/alimony, retirement, disability, public assistance, or retirement. You’ll also be given space to explain to the court if you’re expecting any income changes over the next year. Schedule J Schedule J gives the court a deeper understanding of your overall financial situation by looking at your current monthly expenses. You’ll also need to share some basic information such as a list of your household members, which includes your spouse, along with biological, adopted, or step children, as well as any other dependents (minor or adult) for whom you provide at least half of the support. It’s not necessary to include names; just their age and relationship to you. Before getting started on this form, I’ll give you a list of possible expenses that most people have. I’ll help to ensure nothing is omitted and that the information you provide is accurate. One hundred percent honesty is imperative here, but some people attempt to make their case “look better” by changing numbers, which the court will not tolerate. If you have any expenses that are incurred annually, we’ll pro-rate to a monthly figure. After all of your expenses have been added together, we’ll subtract that from your total income listed on Schedule I; this will give us your monthly net income. As with Schedule I, you’ll be able to tell the court about any expected changes. Filing Paperwork As we prepare your case, I’ll give you a packet of just the forms you need to avoid any unnecessary busy work. Many of the forms can be pre-filled with your identifying information, further reducing your work. I’ll guide you through the entire process so that you always feel confident in your decision. ...
read moreCredit Counseling Forms
Filing bankruptcy can be a complicated process with many steps. It’s very important that no steps are missed and that you accomplish everything on your “to-do” list. One of the final steps in the process is the completion of credit counseling classes. It may seem like just one more thing that you have to do, but the classes can actually be really helpful. As you complete each class, make sure you keep your documentation, as the court will need it so that you can move on to the next phase. Although there are quite a few steps, don’t worry. I will make sure you don’t miss a step. Before You File When we have spoken and have decided that bankruptcy is the right move for you, the first step will be to complete a 60-minute online credit counseling course. There are several options out there for taking this course, but I will give you the Executive Office for the U.S. Trustees list of approved agencies that offer these courses. You will have to make sure that you take the class within 180 days prior to filing your case. The goal of the course is to ultimately help you decide if filing bankruptcy is your best option. The course will help you create or revise your budget. It will help you take a look at ways to cut spending and manage your money. The course will also help you to fully understand the consequences of filing bankruptcy. When the course is finished, you will receive a certificate of completion. You will need to forward that certificate to me so that I can forward it to the court within 15 days of your filing. To Discharge Debt After you file bankruptcy, but prior to your debt being discharged, the court requires that you take a two-hour post-filing debtor education course. This course is designed to help you learn about how to recover from bankruptcy and ideas on how to improve your credit score as you plan for your future. This course must also be approved by the U.S. Trustees and can be taken online. If you have a unique situation that prevents you from taking this course, such as being on active duty in a military zone or you have a disability or are incapacitated, the requirement may be waived. When you are done with the classes, you will receive a “Debtor’s Certification of Completion of Instructional Course Concerning Financial Management”. I will submit the certificate to the court in addition to Form 23. If you and your spouse are both filing the bankruptcy, both of you will have to complete the course as individuals and obtain your own certificates. If you are filing a Chapter 7, these documents have to be filed within 45 days of your 341 meeting with your creditors. Don’t worry, I will make sure that you don’t miss the deadline, because if you did, the court could close your case. If that were to happen, you would have to reopen your case and that could have additional fees. If you are filing a Chapter 13, you have a little more time to get everything done. You could wait until your last payment to submit your documentation, and that could be 3-5 years down the road. It is best to not procrastinate and to just get it done so you don’t forget. Not to mention, there is some good information in these classes that you will want to know about as you rebuild your credit reputation. Building Your Future No one wants to do more paperwork...
read morePre-Bankruptcy Payments
When you take out a loan, it is a promise that you will, in fact, repay that loan. When life happens and you are no longer able to keep up with your obligations, you may experience quite a bit of guilt over the situation. When people file bankruptcy, oftentimes they decide to try everything they can to make a few payments so that the lender will get some of their money back. Although I can appreciate your heart in this gesture, don’t do it. The court could see this as “avoidable preferences”. When you file bankruptcy, the court trustee does what they can to pay back each creditor fairly. If you make payments to one creditor, the trustee may go after them and those payments so that the money can be evenly divided among all those that you owe. Avoidable Preference If you do end up making payments to one particular lender, it is not illegal and does not constitute fraud. However, the court trustee will assess those payments and will take a close look at who received those payments and the value of the payment. If you make a payment to a friend or family member who loaned you money, that is fine as long as it is less than $600. If you have made a payment for more than $600 within the last year, the trustee could contact your friend or family member for that money back. This applies to debt payments, not gifts, unless a gift was in place for a debt that you owe. If you have made a payment within 90 days of filing bankruptcy, and that amount is over $600, the court trustee could take the money back. In most cases they usually won’t make the effort unless the amount that you paid was much more than $600. Alternatives and Exceptions If you have made a payment, don’t worry; you won’t have to come up with the money again. The court trustee will go after whomever you made the payment to, not you. Even though this is the case, it is best to avoid the situation. It could strain relationships with loved ones. There are of course exceptions to this rule, such as if you were not insolvent when you made the payments. What this means practically is that you had more assets than debts. This could be difficult to prove to the court, and I will work with you to make sure we provide solid proof for the trustee to review. If this is the case, it might be the best choice to postpone filing bankruptcy until the 90-day period has passed. Of course, it is best just to avoid this entire situation. If you cannot wait to file bankruptcy, it is possible that the friends or family members may be willing to wait until after you have filed to receive their payment. Your Advocate No one plans on filing bankruptcy; often it is a series of unfortunate financial circumstances that lead to that point. Most people experience stress when they are not able to live up to their commitments, and if you find yourself in need of bankruptcy, I am here to help you deal with creditors and relieve that stress. Let’s get you back on the right foot and headed toward financial...
read moreWhat if I Need to Make Changes to my Case?
When taking on something like filing for bankruptcy, it is important to do all your homework to establish which chapter to file and which one is best for your personal financial situation. As you work on the paperwork and supporting documents, it is very important that you take your time to make sure all your information is correct. This will decrease the chance of making any mistakes that could damage your case. Of course I will thoroughly review your paperwork, checking for errors before we file, but it is possible that an error can happen at some point in the process. If an error does happen, we will need to amend the affected forms to ensure your case moves forward smoothly. Why Would I Need to Make Changes? For the most part, completing Bankruptcy forms is problem free, and I will provide you worksheets to keep you on track. They will be included in a customized package that I will develop for you to make sure that no information is missed. Most often the mistakes that would require a form to be amended are not done on purpose. It could be as simple as transposing an account number or forgetting a small debt or asset. Sometimes even while filing for bankruptcy, the unexpected can happen. If you change your job or divorce, it could affect the outcome of your case, and the trustee will need an up-to-date overview of your situation. You will need to immediately revise your forms as this could affect the outcome of your case. Changes If there are any changes that need to be made, I will help walk you through the process. We will first complete a new form in addition to an amendment cover sheet. In some districts, they allow you to simply submit the revised forms and supporting documents. In other areas, you will have to resubmit all of your paperwork on new forms and tell the court why you are amending the forms. I’ll take care of any forms that need to be submitted as a result of changes. Copies of these forms will be sent to the court trustee and any related creditors. Most of the time there are no additional court fees unless you are adding a new creditor. Making a New Start Obviously, changing forms can cause more work and potentially delay your case. Overall, making the changes are generally pretty simple. However, if the change is something much larger such as converting your case from a Chapter 13 to a 7, there are several additional steps we will have to take. Don’t worry, we will work together to try to avoid any substantial changes that could delay your case. I will work with you to put this challenging time behind you as soon as possible. If you have questions or are confused about the process, give me a call and let’s talk about your situation and make a plan that is right for...
read moreSummary of Your Assets and Liabilities and Certain Statistical Information
I don’t know too many people that are excited about paperwork. When you file bankruptcy, there is quite a bit of paperwork associated with it. We will put together an entire financial package that will be submitted to the court for review. The good news is, I will be completing most of this paperwork for you based on information you share with me, and all you will have to do is review and sign the documents. The forms will include a total financial picture including your income, debts, and living expenses. It will also include all your property and assets. This package will help the court to evaluate your financial situation and ensure that you qualify for bankruptcy. One of the last forms we will complete is called the “Summary of Your Assets and Liabilities and Certain Statistical Information.” The form has quite the title, but it is also pretty self-explanatory. It is a total summary of your finances that the court looks at. First Steps The summary takes information from multiple forms and consolidates them into one document. So to start we will need to complete the Schedule A/B to summarize your assets, real property, personal property, and total property values. Schedule D will summarize your liabilities to include secured, unsecured, and non-priority claims along with total claims. Schedule E/F will include all creditors who have unsecured claims against you. Schedule I and J includes all of your income and expenses and will help us determine which chapter you should file. When we choose what chapter to file, you will need to either fill out a Chapter 7 Statement of Your Current Monthly Income or Chapter 13 Statement of Your Current Monthly Income and Calculation of Commitment Period. The totals from all the forms will be included into your Summary form. The summary will also include some questions to determine if your debts are primarily consumer or business debts. There will be some administrative and statistical questions in the Schedule E/F forms. In addition to these forms, you will be required to provide supporting documents for the past six months before you filed. You will also need to provide copies of your last tax return in addition to any documents related to your property/assets. Don’t worry, I will give you a list of everything you will need and will help you keep track to make sure we don’t miss anything at your 341 Meeting with the court trustee. Quick Process It may seem like a lot of paperwork, but I will help minimize it to the best of my ability. When we get to the point of summarizing your case, you will know that we are almost there, and you are almost debt free. Once we complete your 341 Meeting, if you are filing for a Chapter 7, you will need to complete your post-filing Credit counseling course. Once that is done, your case will be discharged. If you have chosen a Chapter 13, the next step will be starting your reduced repayment plan and one giant step toward financial...
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