Your Bankruptcy hinges on Financial Records

If you are a small business owner, say of a Mom and Pop shop, it’s quite common to take a casual approach to keeping accurate financial records. After all, your revenue may seem small and too insignificant to have your accounts constantly updated and monitored, enforce checks and balance procedures and keep your documents systematically. But keeping these financial records properly and up-to-date may be more important than you think.

In tough economic times such as these, it is not uncommon to see small business owners file bankruptcy petitions in efforts to clear their debts and start afresh financially. Many business owners might have received advance payments for jobs they have contracted with their clients. But due to the credit squeeze and increased cost of doing business, they might have spent the advance payments without finishing the job they promised to do. If such a pattern continues, it will inevitably lead to increasing debt and disgruntled clients. I know of a small business owner who did not keep good financial records including records of a 6-figure advance payment from a client whose job he failed to complete. When it became clear his client was about to sue him, this business owner filed a bankruptcy petition.

But unfortunately, his petition was dismissed by the judge because of lack of up-to-date financial records.

So do not take chances. Even though you may be a small business owner, you should still keep accurate records of your income and expenditure and all other business transactions. Do not let bad financial record keeping become a hindrance to a successful bankruptcy petition.

If you are a small business owner struggling with debt and irate clients, call us at (813) 200 4133 for a free consultation on what you can do to discharge your debts through bankruptcy.


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    Chapter 7 Bankruptcy and Your Income

    Chapter 7 bankruptcy is known as liquidation bankruptcy because your non-exempt assets are sold to raise money to pay your debts. Any further debt remaining after liquidation of assets is cancelled. This makes Chapter 7 bankruptcy quite an attractive proposition. This is why not everyone is eligible to file for Chapter 7 bankruptcy. In order to qualify for Chapter 7 bankruptcy, you must take a means test.

    The means test is what determines if you are eligible to file for Chapter 7 bankruptcy. The means test compares your average household income over the last 6 months prior to filing for bankruptcy with the average income for a household of your size in your state. If your mean income is lower than that of the state average then you qualify to make a Chapter 7 bankruptcy petition.

    But it is important to note that all sources of income are to be included in your total income. This includes part time or one-off income as long as it was within 6 months prior to your bankruptcy filing. Even if you delivered newspapers, designed a website or undertook any contract job for a month or two, it is to be counted into your total income to calculate your average over 6 months. Likewise if you hold a part-time (after work hours) job, the income you earn from here must be included in your total income for the means test.

    It is highly unlikely that the bankruptcy judge will permit part time or one-off income to be excluded from your total income. Although your bankruptcy attorney might say that it should be excluded in calculating your average income because a particular job was only a one-off contract, you and your attorney would most likely have to appear before the bankruptcy judge to explain your situation.
    If you wish to file for bankruptcy, call us at (813) 200 4133 for a free consultation. We will show you how your various sources of income may affect your bankruptcy petition.

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      Bankruptcy Before or After Divorce

      Bankruptcy and divorce are both major decisions in life. Having to decide on one is difficult enough but having to decide on both at the same time is tremendously hard. A wrong decision would almost certainly cost more in time and money. The question is if you have to consider filing for bankruptcy, do you do so before or after your divorce?

      In most cases, it would be more expedient and cost saving to file for bankruptcy before filing for divorce. Let me explain. After a typical divorce, the cost of living usually goes up for both parties because of having to manage two households. This increase in cost often results in a drop in standard of living. This results in falling behind in payments, unpaid bills and further debt. When you file for bankruptcy, both parties can have their debts discharged (if filing for a Chapter 7 bankruptcy) or pay off their debts over time in a repayment plan (if filing for Chapter 13 bankruptcy). This will leave more assets for both parties and their children. In my opinion, it is generally better for couples to file Chapter 7 bankruptcy if possible, although there can be exceptions.

      Another aspect to think about during an impending divorce is asset protection since assets will play a major role in your bankruptcy proceeding. You are going to want to have your assets properly separated between both spouses when the divorce goes through. Here are some things you should consider doing:

      • Review all assets to decide how they are to be divided as well as how they can be protected. In certain cases, you may want to do so with a divorce attorney who can advise you on how state laws will affect the division of your property
      • Gather important documents and information related to your assets, including title deeds, vehicle registration documents, bank statements, pension or retirement accounts, stocks and investments and other items of value
      • Have certain important or valuable items appraised to assess their current market value
      • Note what assets may be missing or hidden. It would be a good idea to make a separate list of what assets that may have gone missing since divorce proceedings began
      • If your spouse holds the power of attorney to act or make decisions on your behalf, you should have that removed
      • Close all joint accounts

      If you are considering bankruptcy and are about to file for a divorce, call us at (813) 200 4133 for a free consultation. If you file for bankruptcy as a couple and if you hire us, we will represent both you and your spouse equally. We can advise you on bankruptcy but we cannot do so for your divorce.

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        Positive Effects Bankruptcy has on You

        I often meet people that have bought into a negative perception about bankruptcy. “If I am a bankrupt, I will never be able to secure credit again…”, “Bankruptcy will rob me of my home…”, “Bankruptcy will be so embarrassing for me…” – I have lost count the number of times I have heard these statements.

        But in today’s article, I would like to write about some positive effects bankruptcy will have on you. As you read, you will be surprised to find that your perception of bankruptcy has not only been inaccurate but detrimental to you all along.

        Positive effect #1: Bankruptcy will help you secure credit in the long run

        If you are buried under a deluge of debt, no credit card company or bank will touch you with a 10-foot pole. Your credit score will be zero and you will be struggling to pay the minimum amount every month, so forget about securing new credit. Face it, the system is designed to benefit the credit card companies, not you. Credit card debts are designed to have you pay off as little as possible over a maximum time period and by you doing so the credit card companies make profit. So without filing for bankruptcy, you will be caught in a never ending vicious cycle that benefits no one but your credit card company.

        But if you file for bankruptcy, all your credit card debts will be discharged and you can start afresh. Sure, you will likely have to live without credit for a couple of years after exiting bankruptcy, but with regular payment of bills like your utility and rent etc and prudent management of your money, your credit score will improve very quickly and credit card companies will come knocking at your door before you know it.

        Positive effect #2: Bankruptcy will improve your finances

        Bankruptcy will not impoverish you, far from it. In fact, the reverse is true. If you continue in the vicious cycle as described above, you will be driven to poverty sooner rather than later as debt piles up. It is better to nip your debt problem in the bud before it grows into an uncontrollable monster.
        Bankruptcy will put a halt to all creditors’ collection efforts against you and give you time to consolidate your debts and repay them. You can either file for Chapter 7 bankruptcy where your non-exempt assets are liquidated to pay off your debts or Chapter 13 bankruptcy where you pay off your debts according to a payment plan of from 3 to 5 years.

        Once your debts are discharged, you can start again with a clean slate instead of struggling with debt. This is how bankruptcy improves your finances.

        Positive effect #3: Bankruptcy can save your home

        Do not worry about losing the roof over your head should you file for bankruptcy. The tax law makes certain assets exempted from liquidation under Chapter 7. Furthermore, if you wish to preserve all your assets you can file for Chapter 13 bankruptcy instead. As explained above, Chapter 13 bankruptcy allows you to retain all your assets as you pay off your debts in a payment plan.

        Without bankruptcy protection, your primary home and other assets may be foreclosed or seized by your lenders.

        So bankruptcy is a very viable option if you are struggling with loads of debt. Call us at (813) 200 4133 for a free consultation and discover how bankruptcy can benefit you.

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          Which is Better – Bankruptcy or Debt Settlement

          In today’s bleak economy, many people are straddled with too much debt. If you are wondering how much debt is “too much”, just look at your credit card debt and other unpaid bills. If you do not clear your credit card balance every month and if you have unpaid bills that have exceeded beyond their credit limit and period, then your debt is “too much”. Both bankruptcy and debt settlement are designed to help you deal with debt but one may be a better option over the other depending on your personal situation. Now if you are someone struggling with “too much” debt, I would like to help you discover which option is better for you – filing a bankruptcy petition or entering a debt settlement arrangement with your creditors.

          The main thing you have to do is review your finances to see how much you owe to each creditor. Make sure you include all outstanding balances due on all accounts both unsecured and secured. Next, you are going to want to review your monthly expenses to see how much disposable income you have that can be utilized towards repaying your debts. This will give you an indication whether you can afford to go into a debt settlement agreement with your creditors or otherwise.

          Another thing you should look at is the amount of savings you have. Debt settlement and certain types of bankruptcies entail having to make regular and fixed payments towards your debts. If you have savings, you can utilize them to help you meet your obligations each month especially if some unforeseen extra expense arises in any particular month.

          If you have enough disposable income each month to utilize towards paying your debt, you can consider either a debt settlement agreement or filing Chapter 13 bankruptcy, both of which entail repaying a fixed amount every month towards your debt. If you choose to enter a debt settlement agreement, you would work with your creditors to determine the payment plan. Some creditors may use the services of a settlement company.

          In some cases, your creditors may allow you to pay less than you owe but there are also times when your credit is damaged further if the settlement company holds onto your payments till you can afford a total settlement to the creditor. So make sure you thoroughly review companies and their policies before opting in.

          Alternatively, you may want to utilize your disposable income to pay your debts under Chapter 13 bankruptcy instead. Under Chapter 13, the bankruptcy court fixes the amount and period of repayment (usually between 3 and 5 years). Your repayment will be overseen by a bankruptcy trustee appointed by the court.

          If you have little or no disposable income, the best option for you to discharge your debts would be to file for Chapter 7 bankruptcy. Chapter 7 is liquidation bankruptcy where your non-exempt assets are liquidated to pay off your debts. Don’t worry, in most cases your primary home and vehicle are among the exempted assets so you will not lose them in bankruptcy.

          If you wish to discuss this matter further, call us at (813) 200 4133 for a free consultation.

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            How to Obtain Loan Modification and file Bankruptcy

            For most people, a home loan or mortgage is the largest single amount of debt they have. And most people will do everything in their power to prevent their properties from being foreclosed, including incurring more debt. Many people would charge their mortgage payments to their credit cards in the months when they are financially tight. One thing you can do to keep your property from being foreclosed is to seek a loan modification. Another option is to file for bankruptcy.

            A loan modification changes the terms of your loan to enable you to fulfill your repayment obligations more easily. Modifications may come in different forms like forbearance allowing you temporary time to get back in good standing or a trial repayment plan through Making Home Affordable program. In any case, there is a trial period during which you have to comply with the new terms set. A loan modification is usually not permanent to start with; it depends on whether you can meet your obligations under the new terms. If you can, then the loan modification will likely become permanent. But some lenders may not be willing to accept payments from you during the bankruptcy process.

            So if you are considering modifying your loan and filing for bankruptcy, talk to an experienced bankruptcy attorney about doing both of these together. This is because the outcome of your bankruptcy may be affected depending on the timing of the completion of your loan modification and if the modification is temporary or permanent.

            If you wish to discuss this further, call us at (813) 200 4133 for a free consultation.


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              Understanding Avoidable Preference in Bankruptcy

              Understanding Avoidable Preferences in Bankruptcy

              There is a little-known principle in bankruptcy called “Avoidable Preference” that could work to your detriment if not clearly understood. Let me explain. If you decide to pay off some debts in order to save certain assets from being seized by your creditor, such an action may be termed as “avoidable preference” by the bankruptcy court. “Avoidable preference” means making payment to your secured creditors to the detriment of unsecured creditors.

              Suppose you have issued bounced checks to purchase certain assets like your car. You may decide to make good your bounced check before filing for bankruptcy in order to avoid repossession by your creditor. However, if such a repayment is made within 90 days of filing for bankruptcy, the bankruptcy judge may classify your payment as “avoidable preference” if he or she feels the payment gave preference to your secured creditor and jeopardized your unsecured ones. In such a case, the bankruptcy judge may order the creditor to return the payment and retain the debt in your bankruptcy estate.

              However, there are exceptions to the rule. Suppose your creditor has filed a lien on your property and in order to remove the lien, you pay up your debt. If the creditor releases the lien after the bad check has been made good, the bankruptcy judge may allow the payment.

              If you have issued bad checks and wish to file for bankruptcy, call us at (813) 200 4133 first before filing your bankruptcy petition. Let’s discuss this matter so that there will be no “avoidable preference” ruled against you in your bankruptcy.

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                When You Should Delay Filing Bankruptcy

                Bankruptcy is your given right afforded to you by law to eliminate or reduce your debts. You do not have to continue shouldering a burden of crippling debt and constantly live under the harassment of creditors or debt collectors. As such, I always advice clients to file for bankruptcy as soon as possible to rid themselves of debt. But there is a situation when you should not file for bankruptcy just yet.

                You should delay filing for bankruptcy if you are pregnant or if you expect to undergo a major medical procedure. These medical procedures may include dental procedures, elective surgery or even routine check-ups. This is because whatever debt you incur becomes part of your bankruptcy estate (unless they are disqualified) and subject to discharge. Thus if you need to deliver a child or undergo some form of medical procedure, you might as well delay filing bankruptcy until after doing so that the debt that is created by these occasions will become part of your bankruptcy estate and be discharged in due course.

                Although you may have health insurance to cover for these expenses, sometimes part of the expenses may not be covered or complications occur that inflate the cost. Therefore, it is still better to delay filing bankruptcy till after incurring these medical expenses.

                If you are contemplating filing for bankruptcy but are not certain when to do so, call us at (813) 200 4133 for a free consultation.

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                  Good News for Above Median Debtors

                  If you are in financial problems and wish to file for bankruptcy, you will have to take a Means Test. This is to determine if your level of income is higher or lower than the average income level of a household of your size in your state. The average income level is set by your state government and varies from state to state. It is not uncommon for debtors to find their level of income above the mean level of the state. In such cases, the debtor is not eligible to file for Chapter 7 bankruptcy and have to file for Chapter 13 bankruptcy instead.

                  In Chapter 13, you have to make monthly payments according to a payment plan to pay off your debts. But many above median debtors worry about whether they can keep up to the payment plan because even though their level of income exceeds the average income set by their state, they do not have much disposable income to pay off debts (which is why they file for bankruptcy in the first place).

                  So if you are in such a situation where your financial ability on paper does not match the actual reality of your circumstances, I’ve got good news. In the past, as a “above median income” debtor filing for Chapter 13 bankruptcy you would have been required to either pay your debts in full or to partially/fully repay creditors over the course of 60 months, even if your do not have any disposable income.

                  But nowadays, bankruptcy courts have started to consider your “real” income and expenses when the judge sets the amount you need to pay each month under a Chapter 13 bankruptcy plan. In other words, the bankruptcy court will consider your real ability to pay when determining the amount of the repayment plan over the course of 60 months.

                  This means even if your income is higher than the average income set by your state, filing Chapter 13 bankruptcy to rid yourself of your debts is a good option. If you are considering filing for bankruptcy, call us at (813) 200 4133 for a free consultation.

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                    Payments in Chapter 13 Bankruptcy

                    Would you like to know how much your monthly repayment will cost if you file for Chapter 13 bankruptcy? Unfortunately, no lawyer will be able to give you an exact figure. However, there are certain factors that come into play to determine how much monthly repayment you would have to pay in a Chapter 13 bankruptcy.

                    The primary factor that governs the amount of repayment under your Chapter 13 payment plan would be the Means Test. This is basically to evaluate if your average monthly income over the last 6 months is lower than the average household income in your state. The average monthly household income is determined by your state government and varies from state to state. If you pass the Means Test, it shows that your monthly income is less than the average household income in your state and the amount you repay under Chapter 13 will commensurate with your monthly income.

                    The next factor is what is known as ‘Chapter 7 Liquidation Analysis’ that analyses what would happen to your unsecured creditors in a Chapter 7 bankruptcy. If after liquidating your assets to pay off your debts in a Chapter 7 bankruptcy, there is still some money left over to pay unsecured creditors, then this amount of money will be added to your Chapter 13 bankruptcy as part of the repayment plan.

                    Another factor in the calculation of your monthly repayment is how much disposable income you have each month. Disposable income is the amount of money left over after deducting regular essential expenses every month. Expenses do not include credit card payments, student loans or any other payments to unsecured creditors; they include expenses for necessities like food, utilities, rental etc. Once your disposable income is determined, the bankruptcy court will decide how much of this disposable income should go towards repaying your debts under Chapter 13 bankruptcy.

                    Finally, the amount of your repayment every month will include the payments towards priority and secured creditors. These include student loan lenders, children who receive child support from you, certain taxes etc.

                    Based on these various factors, the bankruptcy court will tabulate the amount of repayment you need to make each month under a Chapter 13 bankruptcy. In some cases, the judge may want you to use all your disposable income to repay your creditors.

                    If you wish to discuss filing for bankruptcy (Chapter 7 or Chapter 13), call us at (813) 200 4133 for a free consultation.


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