Do Both Partners in a Marriage Need to Join a Bankruptcy Filing?

Posted on February 15, 2012 by john

Married people may file for bankruptcy jointly, or they may choose to each file separately. In addition, one spouse could file for bankruptcy while the other abstains.

There are many different factors to consider when determining how married couples should approach bankruptcy, including the couples’ net worth, who owns what portion of the assets, and whether most of their property is jointly owned.

The information listed below may help guide couples who are trying to determine whether they should file jointly or in another fashion.

Features of Bankruptcy for Married Couples

Listed below are several key factors for married couples to remember when they are considering filing for bankruptcy:

  • Legal requirements. First, filers should remember that bankruptcy laws do not require married couples to file jointly. To be fair, filing separately may not always be a good idea, but there are some situations in which a joint filing is not the best practice, and filers should know this does not run afoul of the law.
  • Caveats. Of course, even if only one spouse files, the other spouse must know that he or she can be held responsible for debts discharged in the other spouse’s bankruptcy if he or she co-signed on those debts.
  • Good times for single filing. If all of the debts belong to just one spouse, it is often best for that spouse to file bankruptcy alone. If the spouses’ finances are completely separate, a bankruptcy filing by one spouse will likely leave the other spouse’s credit rating intact.
  • Joint debts. If, however, both of the spouses hold their debts together, it is often wise to file for bankruptcy jointly. If they don’t, their creditors will simply go after the non-filing spouse as soon as the bankruptcy is over.

These are only some of the many issues filers must consider when approaching bankruptcy within a marriage. Other questions include whether to file for Chapter 7 or Chapter 13 bankruptcy, how to locate an attorney, and whether bankruptcy is ultimately the best solution for your debt woes.

And remember that filing for bankruptcy as a couple can have many benefits, such as keeping your assets from creditors and finally shedding debts, but it also brings its own unique issues.

Keep in mind, though, that the law does not require married couples to file for bankruptcy jointly, and there may be some situations where filers would be better suited to keep one spouse out of the bankruptcy filing.

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U.S. Economy Begins 2012 With Positive Economic News

Posted on February 8, 2012 by john

Former U.S. Treasury Secretary Lawrence Summers recently made headlines when he announced that the U.S. economy was on the road to recovery, particularly in light of recent news that the unemployment rate had dropped to 8.3 percent.

The drop in the unemployment rate, and decrease in the number of individuals who are bankruptcy, are two of many factors that show the U.S. economy may finally be headed in the right direction.

Signs of Economic Growth in the United States

A recent article from Bloomberg Businessweek highlighted several different factors that suggest that economy is steadily improving:

  • Unemployment rate declining. American employers added a net total of 243,000 jobs in January, which lowered the unemployment rate from 8.5 to 8.3 percent, a sharp decline from the jobless rate that topped 9.1 percent last August., according to the Labor Department.
  • Other factors. In addition to the decline in the jobless rate, a concurrent rise in consumer confidence and increase in manufacturing also bode well for the economy. In Summers’ words, “[u]nlike many of the favorable past reports, if you look beneath the surface of this one almost every indicator within it is favorable.”
  • Dissenting opinions. While Summers and other economists praise the economic recovery, some critics—particularly those who do not agree with President Obama’s economic policies—are less optimistic. Glenn Hubbard, an advisor to Republican presidential candidate Mitt Romney, is skeptical about the unemployment numbers, and suggests that the figures only reveal that thousands of Americans have quit looking for jobs out of despair.

Analysis of Economic Signs and Effects of Bankruptcy

Both Summers and Hubbard may be right. Summers, for his part, observes a declining unemployment rate and rising consumer confidence, and concludes (probably correctly) that the economy is on a real, albeit fragile, incline.

On the other hand, Hubbard is correct that the unemployment rate may be artificially low due to the number of Americans who have given up on the job hunt and are out of the job market altogether.

And, regardless of the real state of the economy, consumers are definitely hurting. Record levels of consumer debt have led many individuals to ask questions about bankruptcy, especially bankruptcy’s ability to eliminate debts.

Even as the economy improves, American consumers will have to reconcile with their mounting debts—particularly credit card and medical debt, and many will look into the benefits of bankruptcy, which may offer relatively painless debt relief in a matter of months.

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Bank Transfer Day Leads to Widespread Consumer Upheaval

Posted on February 6, 2012 by john

During the highly publicized Bank Transfer Day last November, more than 600,000 consumers switched their banking accounts from large banks to credit unions or community banks.

The transfer day was intended to punish large financial institutions for their perceived aggressive tactics, such as raising fees on debit cards and inserting hidden fees in so-called “free” checking accounts.

Consumers have also been burdened with rising levels of consumer debt, which prompted more than a million people to file for personal bankruptcy last year.

Bank Transfer Day Sees Big Results

According to a recent report from Reuters, last November’s Bank Transfer Day saw massive results:

  • 600,000 accounts. As mentioned above, more than 600,000 consumers reportedly took their funds out of major banks and sent them to credit unions or smaller, local institutions, according to analysis from Javelin Strategy & Research.
  • Additional exits. According to sources, an additional 200,000 people also left large banks, but they moved their money to other large financial institutions, so they weren’t counted as part of the 600,000 figure.
  • Reason for the campaign. Sources indicate that the bank transfer holiday was prompted, in part, by the Occupy Wall Street movement, and the day also came on the heels of Bank of America’s controversial decision—which it has since rescinded—to charge consumers monthly fees for using debit cards.
  • Banks lose popularity. Outside of the Bank Transfer Day, sources indicate that 6.5 million Americans removed their money from major banks last year. The transfers that occurred on Bank Transfer Day accounted for roughly 11 percent of this total.

As major banks continue to add additional fees to their routine banking services, consumers may keep flocking to local credit unions or smaller banks, which typically charge less aggressive fees than major banks.

In addition to their more reasonable fees, local banks also offer a sort of community spirit and warmth that are hard to find in institutions that hold billions of dollars in assets.

Of course, if you are experiencing serious debt problems, switching banks won’t cure your financial ills. Filing for personal bankruptcy might allow you to take swift, permanent action to tackle your debt.

In addition, bankruptcy cases can be determined by local laws and regulations, so many filers seek assistance from personal bankruptcy attorneys in their area.

To learn more about the potential benefits of bankruptcy, contact a local bankruptcy lawyer today.

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Drop in Bankruptcies May be Temporary Trend

Posted on January 25, 2012 by john

A recent decline in the number of bankruptcies filed in Memphis, Tennessee parallels a drop in bankruptcy filings nationwide, but local experts believe that the economic news isn’t all good.

Specifically, local bankruptcy attorneys believe that the decline in bankruptcies is only temporary, and may reflect an inability of people in Memphis to afford to pay for bankruptcy, rather than a desire not to file.

While the reasons for the decline in bankruptcies may be debated, it’s almost certain that the numbers will eventually rise again.

Memphis Experiences Decline in Bankruptcy Filings

As reported by the Memphis Daily, the drop in bankruptcies in western Tennessee this year has been fairly pronounced:

  • Fewer bankruptcy filings. Sources indicate that filings of both Chapter 7 and Chapter 13 bankruptcy, as well as other forms of corporate bankruptcy, in Memphis dropped in 2011, falling to a total of 12,414 from 12,461 in 2010. Granted, the decline is very gradual, but still represents a clear trend.
  • Chapter 7 filings fall. Chapter 7 bankruptcy filings, which account for roughly 70 percent of personal bankruptcies across the country, in the U.S. Bankruptcy Court for the Western District of Tennessee saw a drop from 3,282 in 2010 to 3,112 in 2011. Again, these numbers aren’t drastic, but they represent the first time for several years that bankruptcy courts have seen a downward trend.

The reasons for the drop in bankruptcies are somewhat complex. Contrary to popular opinion, the recently improving economy does not wholly explain the drop in bankruptcies.

In fact, some local attorneys in Memphis believe that more people would be headed to bankruptcy could if they could afford it. They observe that people with lower incomes are still struggling, despite the economic improvement, and remain in a vulnerable financial position.

Attorneys in Memphis also claim that many of their clients have shifted from Chapter 13 (which allows filers to try to repay all their debts over an extended period of time) to Chapter 7 bankruptcy, which is cheaper but sometimes involves the liquidation of some of a filer’s property.

National Bankruptcy Trends

The trend of declining bankruptcies in Tennessee mirrors a similar trend nationwide, as bankruptcy filing numbers have been slowly dropping from the record highs they reached after the recession.

Still, though, more than a million people are on track to file for bankruptcy in 2012, as consumers continue to struggle with record levels of debt, particularly student loan debt, credit card debt, and medical bills.

If you or someone you love is in serious debt and looking for a potential path to relief, contact a local bankruptcy lawyer in your area to learn more about the potential benefits of seeking debt relief inside a bankruptcy court.

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Chapter 7 and Chapter 13 Bankruptcy Offer Unique Forms of Relief

Posted on January 19, 2012 by john

In 2011, consumers bucked the trend of the past several years and filed fewer bankruptcy petitions than they had in the prior year. Even with this slight drop, more than one million consumers still sought debt relief in a bankruptcy court.

This year, however, some experts predict a rising tide of bankruptcy filings, particularly because consumer debt levels have reached record highs.

So, for consumers who may be considering the possibility of heading to bankruptcy court, it may be fruitful to help parse out the differences between Chapter 7 and Chapter 13 bankruptcy.

Chapter 7 Bankruptcy Features

Chapter 7 bankruptcy is the most common choice for bankruptcy filers, with more than a million people filing for Chapter 7 in the past year. Chapter 7 is limited to people with relatively low incomes—a person’s eligibility for Chapter is determined by taking a means test that measures that filer’s income against the median income in his or her state.

Once a person determines his or her eligibility, the next step is to give the bankruptcy court a list of assets and debts.

In Chapter 7, filers may be able to discharge some or all of their unsecured debts (including medical debt and credit card bills), but some of their property may be liquidated in exchange for this debt relief.

However, many forms of property are exempt from liquidation in Chapter 7. These exemptions vary by state, but they often include things like cars, homes, family heirlooms, livestock, and certain amounts of cash.

In addition, Social Security benefits, disability payments, and the like are typically exempt from Chapter 7 liquidation.

Chapter 13 Bankruptcy in Brief

In contrast to Chapter 7, Chapter 13 bankruptcy is designed for people with more assets who have steady sources of income, whether that income is in the form of wages or some type of pension.

While Chapter 7 usually takes only a few months, Chapter 13 lasts for about three to five years. This longer period is necessary because, in Chapter 13, filers create a new debt repayment plan that lasts for a couple years.

Under this repayment plan, filers can keep their jobs and make monthly payments to a trustee, who distributes the money to the filer’s creditors based on seniority.

In addition to potentially allowing the filer to completely eliminate his or her debt, Chapter 13 may also throw a wrench in the plans of lenders who are looking to foreclose on a filer’s home.

In fact, of the roughly 400,000 people who file for Chapter 13 each year, preventing home foreclosure is often cited as a primary reason why they opted for Chapter 13 bankruptcy.

Chapter 13 and Chapter 7 offer unique forms of relief, but they are both intended to help consumers with one common goal: tackling their debt.

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Bankruptcy Filings Fell Slightly in 2011

Posted on January 13, 2012 by john

Bankruptcy filings fell by almost 12 percent in 2011 from a record high level in 2010, but experts doubt that the trend will continue in 2012, according to a recent report in the New York Times.

And, as the economy continues to sputter along in its half-hearted recovery, and as unemployment levels remain stagnant, more and more consumers will likely seek debt relief by filing for bankruptcy.

So, while 2011 saw a dramatic decrease in the overall number of personal bankruptcies, 2012 may see an entirely different bankruptcy landscape.

Bankruptcy Statistics in 2011

According to statistics compiled by Epiq Systems, which tracks bankruptcy data, bankruptcy filing took a dip in 2011:

  • Slightly fewer filings. Roughly 1.4 million people sought to relieve their debts in bankruptcy court last year, which represents a 12 percent decline from the total number of bankruptcy filings in 2010.
  • Chapter 7 remains most popular. About 70 percent of those 1.4 million filings were for Chapter 7 bankruptcy, which allows filers to discharge some or all of their unsecured debts if they pass a means test. The other 30 percent of filings were for Chapter 13 bankruptcy, which allows filers to consolidate their debts into a single repayment plan, which is paid off over the course of a few years.
  • Decline spread evenly. While Chapter 7 bankruptcy saw a slightly larger decline in absolute terms, the drop in bankruptcy was spread fairly evenly over both Chapter 7 and Chapter 13.

In addition to a decline in the absolute number of bankruptcy filings, the last month (December 2011) also saw a 12 percent drop in the rate of bankruptcies filed compared to the same month in 2010.

The decline in bankruptcies should also not be interpreted as a sign that the economy is improving, warned a report in the New York Times. Rather, it simple means that people have easier access to credit.

When people have easier access to credit, they often put more debts on their credit cards, rather than seeking a long-term solution through bankruptcy.

Bankruptcy Forecast for 2012

In 2012, if consumer credit remains readily available at relatively low interest rates, consumers may continue to shy away from bankruptcy, even if the economy does not improve.

Of course, whether the economy improves or sinks, consumer debt is at an all-time high, which will likely foster the need for hundreds of thousands of bankruptcy filings.

Consumers should also remember that paying off debt by using a credit card may only lead to higher debts in the future, as interest rates tend to accumulate faster than most people expect.

As a result, savvy consumers may choose to explore the possibility of filing bankruptcy, especially if they want a chance to find a long-term solution to their debt problems.

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Some Debt Relief Options Too Good to be True

Posted on January 4, 2012 by john

Debt relief firms, which often advertise heavily on television and the Internet, may offer some aid to debt-ridden consumers, but they are very loosely regulated and may prove to be ineffective or, at worst, fraudulent.

In order to help consumers discern good debt relief agencies from bad, the information listed below offers five tips for spotting fraudulent debt relief firms.

And, consumers should also remember that bankruptcy takes place in the safety of a federal court, and may offer stronger debt relief than many alternatives.

How to Spot Fraudulent Debt Relief Firms

According to a recent article in the San Francisco Chronicle, which cited tips offered by the Federal Trade Commission, consumers should beware of the following debt relief tactics:

  • Promises that are too good to be true. Consumers should be wary of debt relief agencies that promise individuals they will be able to unload their debts without paying a dime to their creditors. While this may be possible in bankruptcy, it rarely occurs outside that context.
  • Multiple payment requirements. Any firm that asks you to pay a monthly fee, or that asks for multiple payments, is probably scamming you. If you are asked to keep paying the company, run to the nearest exit.
  • Do a background check. Before giving money to a debt relief agency, check out their credentials by contacting your local Better Business Bureau and seeing if any other consumers have filed complaints against them.
  • Upfront payments. Consumers should also watch out for firms that require them to make large payments upfront. If a firm is charging you before it offers any sort of aid, they are likely engaged in a scam.

Of course, while there are fraudulent agencies, some firms offer genuine debt relief. The key, as with many things, is to thoroughly vet a debt relief firm before signing up for it. And, if you are looking for more certainty, there is a more powerful option: bankruptcy.

Bankruptcy and Debt Relief

Rather than blindly entering the world of debt relief agencies, many consumers instead choose to file for bankruptcy.

In personal bankruptcy, filers may be able to discharge some or all of their unsecured debts within the safe and relatively predictable confines of a federal bankruptcy court.

In the past few years, more than a million consumers have filed for bankruptcy in each year, with the majority of filers opting for Chapter 7 bankruptcy, which helps filers eliminate their debts through a process known as liquidation.

Among the many advantages of bankruptcy is that these courts are monitored closely by federal and state regulators, which represents a stark contrast to the often loosely regulated world of debt relief agencies.


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Steps to Take Before Filing Bankruptcy

Posted on December 21, 2011 by john

Before filing a bankruptcy petition, consumers are often curious about the steps they should and should not take in anticipation of the bankruptcy process.

Questions often include what they should do about their debts, whether they should pay off credit card bills, whether they can sell large items of property like cars and homes, and what kinds of loans are legal leading up to bankruptcy.

While these questions could be answered by a bankruptcy attorney, who may help filers sort through their finances and build their bankruptcy case, the information given below might also help people who are looking towards bankruptcy court for debt relief.

Things to Avoid Doing Before Bankruptcy

According to the folks at JDSupra.com, which offers free legal information from professionals, there are a few different things to remember to avoid doing before filing bankruptcy:

  • Don’t pay off debts to family members. If you repay debts to family members within 12 months before filing bankruptcy, the bankruptcy trustee may be able to recover those funds from your family and distribute them to creditors.
  • Don’t ignore credit card payments. Some people choose to rack up huge credit card debts with the expectation that bankruptcy will completely wipe them out. This tactic, however, does not reflect well on a filer in bankruptcy court, and could ultimately backfire. Likewise, if you can afford to make some payments, you should consider doing so to lighten your debt load in bankruptcy.
  • Don’t transfer assets to others. Another misguided ploy used by some filers is transferring their assets (such as a house or car) into someone else’s name. Again, these actions are very transparent, and will likely raise suspicions in bankruptcy court.
  • Don’t hide assets. When people file for bankruptcy, they give the court a detailed list of their debts and assets. This information helps the trustee make well-informed decisions. By falsifying this information, or hiding assets from the trustee, filers do themselves a disservice and may be acting fraudulently. If filers commit fraud, their cases will likely be dismissed.

So, a major theme when approaching bankruptcy is to be as honest as possible with the trustee, even if you believe the information could hurt you financially. Remember, too, that giving certain types of faulty information—even inadvertently—could lead to the dismissal of your bankruptcy case.

The bankruptcy court is only able to offer as much aid as a filer allows, so make sure to be fully honest with your trustee and your bankruptcy attorney.

Most filers opt to enlist the aid of a bankruptcy attorney, as bankruptcy law is very complex and often involves narrow legal issues. To learn more about your legal rights, contact a local bankruptcy lawyer in your area.

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Bankruptcy Alternatives and Their Limitations

Posted on December 13, 2011 by john

While bankruptcy may offer a helpful method for consumers to relieve their debts, many people prefer to explore other options before heading into bankruptcy. This is a sound tactic, but consumers should be advised that not all bankruptcy alternatives are as safe as they seem.

Possible alternatives to bankruptcy include debt counseling agencies, direct negotiation with creditors, and simple default, but each of these options comes with certain risks.

The information below details some of these risks, and offers tips on how to avoid the perils of certain bankruptcy alternatives.

Consumers Should Beware of Shaky Debt Relief Options

Listed below are a few potential bankruptcy alternatives, along with the possible downsides of each choice:

  • Credit counseling. This, perhaps, is the most reputable of bankruptcy alternatives, provided that the credit counseling agency is legitimate. Be careful, though, about potential credit counseling scams, particularly agencies that demand large upfront fees before they offer any services.
  • Negotiate with creditors. This tactic is often worth trying, even if it may not be fruitful. Some creditors may be willing to lower your debt if you can offer payment quicker, or in one lump sum. Healthcare providers, for example, may be willing to negotiate prices. However, as a consumer, you are often at a serious disadvantage when negotiating with professional lenders.
  • Default. Some consumers simply choose to ignore their debts. This may work for people who don’t have any assets for creditors to attack, but if you have any valuable property (like a home or a car), defaulting on your loans could lead to serious financial losses.

If you are interested in seeking credit counseling, your local listings probably offer some resources, although you should check with your Better Business Bureau about an agency’s reputation before giving it any of your hard-earned cash.

Of course, if credit counseling agencies, direct negotiations, and default don’t seem like suitable options to help you solve your debt problem, there remains a very popular alternative: bankruptcy.

Do Your Homework on Bankruptcy

In contrast to the methods listed above, filing for bankruptcy may allow consumers to completely eliminate some or all of their debts.

Chapter 7 bankruptcy, for example, allows filers to attempt to discharge their unsecured debts, such as credit card bills, medical debt, utility bills, and some personal loans.

And it’s not like Chapter 7 is a bizarre or little-used option. In fact, in the last year alone, more than 1 million Americans sought debt relief through Chapter 7 bankruptcy.

So, while you’re doing your homework on bankruptcy alternatives, remember that there is often no replacement for bankruptcy itself, particularly if you are facing severe debt problems. To learn more about bankruptcy, check out the top 12 bankruptcy questions.

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Wisconsin Court Punishes Negligent Bankruptcy Petition Preparers

Posted on December 7, 2011 by john

Bankruptcy often provides much-needed debt relief for consumers who are struggling to pay their bills, but filers must be wary of whom they choose to help them file for bankruptcy.

Fraudulent bankruptcy petition preparers are becoming increasingly common as the recession rolls along, and consumers should not fall prey to non-lawyers who offer immediate debt relief with little or no risks.

To protect consumers, though, state courts are taking a more active role in punishing bankruptcy fraud, as evidence by recent activity in Wisconsin.

State Courts Tackle Bankruptcy Fraud

According to a recent article in the Milwaukee Journal Sentinel, consumers should be cautious about using bankruptcy services offered by people with the following characteristics:

  • Non-lawyers. First, the vast majority of bankruptcy filers seek the aid of a professional bankruptcy attorney, who must be licensed in the state in which he or she practices. Non-lawyers who offer bankruptcy services may be under-trained, unlicensed, and possibly fraudulent.
  • False promises. Bankruptcy may help eliminate credit card debt or medical debt, but it cannot perform miracles. Your bankruptcy attorney should be honest about what bankruptcy can and cannot do. If someone promises to solve all your problems with no risk, he or she is likely not telling the truth.
  • Suspicious advertising. Most attorneys will not advertise with hand-written flyers or hastily posted signs at gas stations. If the advertising looks untrustworthy, then consumers should shy away from using those services.

In addition, courts have little tolerance for people who file bankruptcy with the help of a fraudulent agency. If a bankruptcy petition containing too little information is delivered to a court, the judge may simply delay the case.

Of course, bankruptcy judges tend to be more patient with bankruptcy filers who do the filing themselves, but people who have questions about bankruptcy may prefer to contact a bankruptcy lawyer before they start filing bankruptcy.

Stories of Bankruptcy Fraud

The Milwaukee Journal Sentinel states that the city’s bankruptcy court has one of the highest rates of people filing bankruptcy without a lawyer. And these do-it-yourself bankruptcies have resulted in a lot of trouble for filers.

One filer, for example, hired a bankruptcy “preparer” instead of a lawyer because he thought a lawyer would be too expensive. An error in the filer’s paperwork made it look like he was trying to conceal his identity and hide assets, which ultimately cost him more money in the long run.

In addition, the newspaper discovered that one bankruptcy preparer, Jennifer Abbott, had stolen at least $10,000 from a single client. That client might have avoided using Abbott’s services had he known that she was a convicted felon.

To be fair, stories of such fraud are relatively rare, but savvy consumers should always do their homework before signing up for bankruptcy services, especially if they are offered by someone who does not have a license to practice law.

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