Dalton Georgia Bankruptcy Attorney addresses Common Myths about Bankruptcy

Today’s discussion addresses some of the most common myths about bankruptcy.

1. Everyone will know I’ve filed for bankruptcy.

Unless you’re a prominent person or a major corporation and the filing is picked up by the media, the chances are very good that the only people who will know about a filing are your creditors. While it’s true that bankruptcy is a public legal proceeding, the number of people filing is so massive that very few publications have the space, the manpower or the inclination to run all of them.

Some local newspapers publish bankruptcy filings (the newspaper in Rome, GA, for example), but the majority of local newspapers have better things to print. The newspaper in Cartersville, GA – The Daily Tribune News – for example, does NOT print bankruptcy filings.

2. All debts are wiped out in Chapter 7 bankruptcy.

Certain types of debts cannot be discharged and erased. They include child support, alimony, government-issued or government-guaranteed student loans, and debts incurred as the result of fraud.

3. I’ll lose everything I have.

This is the misconception that keeps people who really should file for bankruptcy from doing it. They think the government will sell everything they have and they’ll have to start over in a cardboard box.

While the bankruptcy laws vary from state to state, every state has exemptions that protect certain kinds of assets, such as your house, your car (up to a certain value), money in qualified retirement plans, household goods and clothing. Georgia’s exemptions are discussed in a previous blog. If you’re concerned about keeping your property, it’s a good idea to make an appointment with me, or Brad Stephens, to discuss whether any of your property is at risk.

Most people will pass through a bankruptcy case and keep everything they have.

4. I’ll never get credit again.

Quite the contrary. It won’t be long before you’re getting credit card offers again. They’ll just be from subprime lenders that will charge very high interest rates. “There are innumerable companies that will provide credit to you,” says California bankruptcy attorney and trustee Howard Ehrenberg. “I don’t advise any of my clients to run out and run up the bills again, but if someone does need an automobile, they can go and will be able to get credit. You don’t have to go underground or something to get money.”

5. Only deadbeats file for bankruptcy.

Most people file for bankruptcy after a life-changing experience, such as a divorce, the loss of a job or a serious illness. They’ve struggled to pay their bills for months and just keep falling further behind.

With credit markets tightening, chances are you’re not in a position to buy a house or car. But if you are, you might want to do that before you file. After bankruptcy, those loans will be tough to get and the higher interest rate on such a large purchase would have a significant effect on your payments. Also, if you have a credit card with a zero balance on the day you file for bankruptcy, you don’t have to list it as a creditor since you don’t owe any money on it. That means you might be able to keep that card even after the bankruptcy.

6. If you’re married, both spouses have to file for bankruptcy.

Not necessarily. It’s not uncommon for one spouse to have a significant amount of debt in their name only. However, if spouses have debts they want to discharge that they’re both liable for, they should file together. Otherwise, the creditor will simply demand payment for the entire amount from the spouse who didn’t file.

7. I don’t want to include certain creditors in my filing because it’s important to me to pay them back someday and if the debt is discharged, I can’t ever repay them.

Bless you for even thinking about such a thing. You’re no longer obligated to repay them, but you always have that opportunity. If your conscience won’t let you sleep nights because you didn’t pay your debts, there’s nothing in the bankruptcy code that prevents you from doing that once you’re back on your feet. But bankruptcy is an all-or-nothing deal, so you have to include all your creditors in the petition.

8. You can’t get rid of back taxes through bankruptcy.

This is one of the most common misconceptions about bannkruptcy. Taxes CAN be discharged through bankruptcy, but you’ll need to dicuss the criteria for dischargeability with your attorney. Generally, income taxes that came due more than 3 years ago CAN BE EILIMINATED.

9. You can file for bankruptcy only once.

You can file for bankruptcy more than once, but the bankruptcy law that went into effect in October 2005 lengthened the required wait between filings. You can file for Chapter 7 bankruptcy only once every eight years. You have to wait two years to repeat a Chapter 13 filing and four years between a Chapter 7 and a Chapter 13 case.

10. I can max out all my credit cards, file for bankruptcy and never pay for the things I bought.

That’s a form of fraud and credit card lenders, as well as bankruptcy judges, can get really cranky about it.

For a free consultation about bankruptcy or debt relief, call today for an appointment. We have offices located in Cartersville, Dallas, Calhoun and Dalton. (770) 382-8900

Brian R. Cahn
brc@perrottalaw.com
www.NorthGaBankruptcy.com
www.PerrottaLaw.com
Cartersville | Dallas | Dalton | Calhoun | Atlanta

Declaring Bankruptcy – Where to Start? What to Bring?

There’s a right and wrong way to handle any situation. For example, this is the wrong (but hilarious) way to declare bankruptcy.

If you’re getting calls from collectors, falling behind on mortgage or car payments, or just curious about your legal rights to eliminate or manage your debt, the right thing to do is GET A FREE CONSULTATION FROM AN EXPERIENCED ATTORNEY. The starting point is a phone call.

The lawyers with Perrotta, Cahn & Prieto offer free consultations. Our phone number is (770) 382-8900. We can meet with you at your convenience in any of our offices. We have offices located in Cartersville, Calhoun, Dallas and Dalton.

Make sure to bring a list of bills, or the bills themselves. If you’ve been sued, bring the lawsuit.

We have a worksheet that you can print and fill-out. The worksheet covers almost every question and issue that we need to guide you in the right direction.

Finally, make sure to bring your last-filed tax return, and all pay stubs you and your spouse have received in the past 60 days.

Your consultation is confidential and free. We give you INFORMATION and OPTIONS. We help empower you to protect your property, and get the fresh start you deserve.

Brian R. Cahn
(770) 382-8900
brc@perrottalaw.com
www.NorthGaBankruptcy.com
www.PerrottaLaw.com
Cartersville | Dallas | Dalton | Calhoun | Atlanta

Clark & Washington Sued – Class Action Lawsuit

Yesterday’s post “Chapter 7 Bankruptcy – How Do Lawyers Get Paid” contained a link to the class action lawsuit filed against Clark & Washington. I wanted to follow-up that post with a link to an Order by Judge Michael Williamson from the Middle District of Florida. That Order explains the legal and ethical implications of paying for chapter 7 legal services AFTER the case is filed. Judge Williamson found that the practice of accepting post-dated checks violates the automatic stay and discharge injunction.

On the one hand, I understand WHY Clark & Washington opted to accept post-petition post-dated checks from their clients. Section 362(b)(11) states that it’s NOT a violation of the stay to “[present] a negotiable instrument [i.e., a check].”

Any attorney that has attended one of Judge Paul W. Bonapfel’s ethics lectures knows that it is completely unethical to put a client into a chapter 13 wage-earner plan simply because that client can’t afford the $1,300+ chapter 7 fee. (Note: a chapter 13 case only costs the $274 filing fee to start.) The problem arises when a client NEEDS a chapter 7 IMMEDIATELY, but doesn’t have any available money.

But, on the other hand, it’s hard to deny the fact that “financing” a chapter 7 case, and accepting payments AFTER the case is filed, creates an unethical conflict of interest (see yesterday’s blog).

The Lundquist class action is an intersting case that has generated much discussion in the bankuptcy legal community.

The Plantiff’s attorney is Terry Haygood, a very good friend of mine, and tenacious advocate. The managing partner of the Defendant is Rich Thompson, whom I owe a debt of gratitude for helping me with various issues in the past. Rich is also a very well-known, and well-respected bankruptcy attorney in the Northern District of Georgia.

I’m not sure how the case will play-out, but a lot of consumer bankruptcy attorneys will be on the sidelines watching.

Brian R. Cahn
brc@perrottalaw.com
www.NorthGaBankruptcy.com
www.PerrottaLaw.com
Cartersville | Dallas | Dalton | Calhoun

Chapter 7 Bankruptcy: How do lawyers get paid?

Here’s the scenario: I’ve met with an attorney and discussed all the options. Chapter 7 bankruptcy seems to be the best option for me. Wipe-out tens of thousands of dollars in credit card debt, medical bills, back taxes, etc. Keep the car and house. This is a HUGE RELIEF. But wait, the fee for the bankruptcy is more than a thousand dollars – I don’t have any money!

Your first instinct may be to use a credit card. Yes, I’ve had dozens of clients ask me if they can charge their bankruptcy fees to a credit card with an available balance, or take a cash advance. Is this a good idea, or even legal? The answer is “no.” Section 523(a)(2) of the Bankruptcy Code provides that recent credit card charges or cash advances may not be dischargeable in a bankruptcy. In general, charges made on a credit card within 90 days of filing bankruptcy will not be eliminated by the bankruptcy. The policy behind the Section makes sense – it’s not fair to go crazy with the credit cards right before filing bankruptcy. Essentially, incurring charges without the intent to repay them is fraud.

The next instinct would be to ask your lawyer if he can file the case for a small down payment, then make payments on the balance. For a variety of reasons, this option is problematic in the context of a chapter 7. First of all, this arrangement creates a debtor-creditor relationship between you and your attorney. You owe your attorney the balance of the fee, so your attorney is a creditor – just like the credit card lenders and medical bills. In my opinion, this creates a conflict of interest. Your attorney needs to represent you against your creditors, and that’s difficult to do when he’s one of them.

Last week, one of my colleagues, an attorney from Rome, GA, filed a CLASS ACTION LAWSUIT against a high-volume bankruptcy firm – Clark & Washington (“C & W”). The lawsuit is filed on behalf of all clients of C & W that paid for their bankruptcy after it was filed through a series of post-dated checks. The lawsuit alleges that C & W’s collection of fees post-bankruptcy constitutes a violation of the automatic stay. The issues are complicated, because there’s a provision in the Bankruptcy Code that specifically ALLOWS a creditor to present a post-dated check for payment after a bankruptcy. Clearly, the ethical implications and threat of lawsuits should give any attorney pause before collecting post-filing fees.

Perrotta, Cahn & Prieto has a better solution. We allow our clients to make payment arrangements on their chapter 7 case. The case isn’t filed until the fees are paid, but we provide pre-bankruptcy legal representation to our clients as soon as we are paid the first dollar. In that regard, we notify collectors, pursuant to the Fair Debt Collections Practices Act (FDCPA) that all collection activity is to be directed to our firm, and not the client. If a lawsuit is filed, we help defend our clients. Our legal defense and resources give our clients the time and breathing room they need until the case is filed.

For a free consultation, contact our office today. (770) 382-8900

You can e-mail me directly with any questions. Brian R. Cahn brc@perrottalaw.com

We have offices located throughout Northwest Georgia, including Cartersville (serving Bartow County), Dalton (serving Whitfield, Murray and surrounding counties), Dallas (serving Cobb, Paulding, Polk and surrounding counties) and Calhoun (serving Gordon, Floyd and surrounding counties).

Brian R. Cahn
brc@perrottalaw.com
www.NorthGaBankruptcy.com
www.PerrottaLaw.com
Cartersville | Dallas | Dalton | Calhoun | Atlanta

Brad Stephens is back from his Napa Valley vacation!

Perrotta, Cahn & Prieto is headquartered in Cartersville, GA (Bartow County), but we also have offices in Dallas (serving Paulding, Douglas, Cobb and Polk Counties), Calhoun (serving Gordon County), and Dalton (serving Whitfield, Murray, and Chattooga Counties).

Bradley (Brad) Stephens is our associate attorney in the Dallas and Dalton offices. Last week, Brad was on vacation. He took his wife to Sonoma and Napa Valley, California. While he was gone, I had the opportunity to fill-in for him, and meet with clients in Dallas and Dalton. My impressions are as follows:
– Clients definitely love Brad, and had very positive things to say about him. Brad has the unique combination of personality and razor-sharp legal skills. There isn’t a bankruptcy problem that Brad can’t solve.
– I have a new respect for Brad’s schedule. Brad was raised in Cassville, GA, just outside Cartersville, but now lives in Marietta. It’s a long drive to Dalton!
– Our offices in Dallas and Dalton are beautiful, and easy to find.
– Brad said Napa Valley was one of the most beautiful places on Earth. He took this picture one morning at a vineyard in Sonoma. Glad you had fun, Brad, but I’m glad you’re back. For a free consultation to discuss debt relief options, call Brian Cahn or Brad Stephens: (770) 382-8900

Visit us at northgabankruptcy.com

Reaffirmation Agreements – Should I sign, or not?

One of the benefits of a chapter 7 bankruptcy, is the ability to keep (or “reaffirm”) debts secured by property the debtor needs for his or her fresh start.  Typically, clients need their vehicle and house, and reaffirming the loans on those items seems like the right thing to do.

Maybe.  Maybe not.

More often than not, I will advise clients NOT to reaffirm their mortgage loan, especially under the following circumstances: (1) if there is a 2nd mortgage; (2) if my client is self-employed or has fluctuating pay; or (3) if the property has little or negative equity.  Under the new bankruptcy laws, a mortgage company could foreclose on the property if a reaffirmation agreement is not signed, even if the debtor is current with their mortgages (I will blog about ipso facto clauses in the near future).   However, in 17+ years of bankruptcy practice, I have never seen a mortgage company attempt to foreclose when a reaffirmation is not signed and the debtor remains current.  The chances are very slim that the mortgage company would want to foreclose when the loan is current, espically in today’s real estate market.  By not signing the reaffirmation agreement, the debt would be discharged and would show up on the credit report as being discharged.  But as long as the debtor continues making regular mortgage payments, there is a great chance that they would be able to keep the property, and own it outright at the end of the loan.  There is no guarantee, but chances are very good that the mortgage company would never foreclose if the account remains current.  And in two to three years after the bankruptcy, the borrower could qualify to refinance their house!

Another debt that most individuals may want to reaffirm is a car payment.  I will typically advise my clients to reaffirm their car payment IF they’re one-thousand percent certain they can afford the payment; the car is worth at least what’s owed; and the account is current.   If a debtor wants to keep their car through the bankruptcy, they probably need to sign a reaffirmation agreement.  Car creditors, unlike mortgage companies, can and do repossess collateral (the car), even if the payments are current, but a reaffirmation agreement is not signed!  Why?  The new bankruptcy laws gives the creditor this remedy.  Why are they doing it?  It could be to go ahead and cut their loses?  Or, as I believe, it could be a way for them to scare debtors into signing the reaffirmation agreement.  Some debtors may need to sign a reaffirmation to keep their car, but usually most individuals can and do qualify to purchase another vehicle soon after their bankruptcy is over.  Therefore, one should really think twice before signing a reaffirmation for their car.

Other secured debts that my clients like to reaffirm are furniture loans, or loans for jewelry or a computer (typically Dell Financial).  Again, I also advise them NOT to sign reaffirmation agreements for these items.  If a reaffirmation is not signed on a furniture debt, the debt is discharged and the only recourse for the creditor is to pick up the furniture.  What are the chances that the creditor will pick up their furniture.  Very, very, very slim.  The reason is simple.  Most furniture depreciates as soon as you take it out of their store.  Further, the creditor can not sell used furniture for more than what it would cost them to pick it up.  So, the best course of action is to NEVER sign a reaffirmation for a furniture debt and take the chance that they do not come and pick up the furniture.

What about loan companies that made you pledge everything of value as collateral for the loan?  Do NOT reaffirm this loan.  The Bankruptcy Code gives us the ability to avoid the finance company’s lien on your household items.  Yes, we can eliminate the loan, and you keep your household items.  I will explain the details to you at your free consultation.

All in all, the only two debts that consumers should ever consider reaffirming are their house or their car.  The main objective is to avoid biting off more than you can chew.  Sure, reaffirming the debt helps your credit and will guarantee that the lender won’t take your car or home as long as you stay current.  But the risk of future financial problems frequently outweighs the benefit of reaffirmations.

Make an appointment with me, or my partner – Brad Stephens – to discuss the implications of reaffirmation agreements.   We are experienced attorneys, and we fight for our clients’ Federal right to a FRESH START.  Our offices are located in Cartersville, Dallas, Calhoun and Dalton.

find us at www.northgabankruptcy.com