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Too often, debtors see grace periods offered by lenders as free benefits. “Grace” makes it sound so innocent. However, debtors who routinely rely on grace periods when making payments will find themselves facing financial difficulties that might lead to bankruptcy. The reason is that although creditors offer grace periods to debtors, they also use them to their own advantage. Here’s why.
In short, loan payments are not due on the last day of the grace period; rather, they’re due when lenders say they’re due. If the check is delayed in the mail until after the grace period, or the Internet payment doesn’t clear in time, then it’s a very late payment. The creditor will assess all interest, penalties, and other fees that it would without the grace period.
Moreover, these extra costs are all free money to the lender. Debtors who refinance or renegotiate their loans to shave off a fraction of a percentage point end up losing everything if their payments arrive after the grace period. Thus, grace periods can lull debtors into paying higher effective interest rates than if they hadn’t refinanced at all and paid on time. Over time, debtors who fall behind on their debts despite using grace periods as a crutch might end up paying an effective financial surcharge each year that’s worth a few hundred dollars. It’s a bad habit.
Grace periods also hurt debtors because they can mislead them into believing that their last payments were due later than they were. As a result, homeowners who might be trying to cure missed mortgage payments might be surprised to find their homes in foreclosure sooner than they predicted, forcing them to scramble to stop it. The countdown to foreclosure is usually 90 days from the day the last payment was due, not the end of the grace period. Debtors filing bankruptcy might also be confused by how many payments they missed because they counted from the end of the grace period and not the payment deadline, adding more debt to the bankruptcy.
By contrast the advantages of paying down a debt before the deadline are quite clear: No penalties and somewhat less in interest. Even debtors who are heading toward bankruptcy nonetheless are better off than those who over-rely on grace periods. If your debts are becoming too hard for you to manage, then contact an experienced New York bankruptcy lawyer to discuss your options instead of turning to grace periods.
For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced Brooklyn bankruptcy attorney Bruce Weiner for a free initial consultation.
The post Beware Grace Periods, Debtors appeared first on Bankruptcy Attorney in Brooklyn, New York | Rosenberg Musso Weiner.
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Bankruptcy is a technical process that assumes everyone working within it is mostly rational. To the extent that it expects parties to deviate from irrational behavior, the Bankruptcy Code and its accompanying rules include incentives to keep parties in line. Creditors are usually large and impersonal, and they rarely care if their debtors file bankruptcy. They just write off the losses and move on. Trustees, too, aren’t so motivated to hunt for assets that they’ll boil the oceans looking for things debtors clearly don’t own. That isn’t always true, however. Sometimes creditors are not so rational, and in those circumstances New York bankruptcy may not save debtors from vicious personal disputes involving debt. In those cases, not filing bankruptcy might be the best course of action.
To be clear, in many circumstances personal debts cause the opposite problem. Debtors owe money to people whom they want to repay. In those situations, the solution is to simply try and repay them after bankruptcy. The debt may have been discharged, but that doesn’t prevent the debtor from repaying the creditor. What sometimes happens is debtors try to repay those creditors before bankruptcy, creating preference payments that the trustee can avoid.
But sometimes the debt originates in a personal dispute. Often it’s a business partnership that’s failed, but there can be other causes, like family obligations or even fights between neighbors. The creditor sues the debtor, obtains some kind of judgment, possibly after a trial, and then demands payment just like any other creditor. The difference though is that while most other creditors are deterred by a bankruptcy filing (certainly by the automatic stay), the hostile personal creditor simply takes the dispute into bankruptcy court and keeps the pressure on. If the creditor is already well heeled, then the legal expenses are no obstacle.
The creditor will use all its means to frustrate the debtor’s bankruptcy, chief among them being a challenge to the dischargeability of the debt. Even though the creditor might be aggressive, that doesn’t mean he or she doesn’t have a case. For example, if the creditor’s judgment is based on willful and malicious conduct, a bankruptcy judge will simply adopt the facts underlying the state-court judgment because of the doctrine of “collateral estoppel,” which means courts won’t rehash issues that were validly decided by other courts. Then the bankruptcy court will rule that the debt is nondischargeable.
Thus, while a simple chapter 7 bankruptcy case can only cost several hundred dollars, a contested one can easily rack up attorneys’ fees as one party tries to bleed the other dry in adversary proceedings.
The moral is that bankruptcy is often no refuge from creditors who are no longer rationally concerned with minimizing their losses. If they no longer care about money, they may be perfectly willing to bankrupt themselves to prevent you from using bankruptcy protection. Consequently, if you are considering bankruptcy and you have a difficult personal creditor, then it is especially important to discuss your situation with an experienced New York bankruptcy lawyer because bankruptcy might not be a good option.
For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced Brooklyn bankruptcy attorney Bruce Weiner for a free initial consultation.
The post Bankruptcy May Not Rescue You From Vicious Personal Disputes appeared first on Bankruptcy Attorney in Brooklyn, New York | Rosenberg Musso Weiner.
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Do you have financial problems? Do you tend to ask your friends for advice? Is one of your friends an experienced New York bankruptcy lawyer who will explain the process for you? Are your friends otherwise knowledgeable people? The answer to these questions may be, “Yes but you don’t know it.”
Although many bankruptcy lawyers stress that debtors may be too embarrassed to consider bankruptcy when it might help them, the opposite may also be true: They’re more than happy to confide in their friends, who promptly give them bad advice. This can be especially true when those friends have gone through bankruptcy themselves. They know quite a bit to be credible but not enough to know where the holes in their knowledge are. If you’re the type of person to ask your friends’ bankruptcy advice, here are a few tips to bear in mind when evaluating their nuggets of wisdom.
If they’ve gone through bankruptcy themselves they may not realize just how significantly their situation differs from yours, particularly if they filed in chapter 13 rather than chapter 7. It is true that debtors with no assets, low incomes, and unsecured debts will probably have similar bankruptcy outcomes in chapter 7. But it only gets more complicated from there.
One way debtors’ cases may differ is in their assets, and thus their available exemptions. New York State’s exemptions offer homeowners a substantial homestead exemption, but it differs by county. Debtors in some counties may be able to exempt more than in others, and of course they may owe more or less on their mortgages than others. Once there’s nonexempt equity, then debtors may end up losing their houses in chapter 7 when chapter 13 was a better fit.
Relatedly, as time goes on, asset values fluctuate. That friend who filed bankruptcy in 2010 may not have had any nonexempt equity to worry about in chapter 7. What could have been an easy chapter 7 filing years ago might be much more complicated today (which is a reason to not wait on considering bankruptcy but that’s a topic for another day).
On the other side, you may have more options than your friends had several years ago. If a friend of yours tells you that student loans are hopeless weight because they couldn’t discharge them a decade ago or more, perhaps you’re easily eligible for a federal income-driven repayment plan that slashes high monthly payments to something that better suits your earnings.
Ultimately, bankruptcy is all about the details. The system had to be designed with that in mind to accommodate the myriad financial situations debtors and creditors present. If your financial situation is precarious, then talking to an experienced New York bankruptcy lawyer can help you assess the best course of action better than your friends can.
For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced Brooklyn bankruptcy attorney Bruce Weiner for a free initial consultation.
The post Non-Lawyers’ Explanations of Bankruptcy May Be Wrong appeared first on Bankruptcy Attorney in Brooklyn, New York | Rosenberg Musso Weiner.
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Leaving your case to an experienced New York bankruptcy lawyer is not the only step on the to-do list before filing bankruptcy. There are many things debtors should do (and not do) before they file, and the more organized and mindful debtors are, the easier the process will be and the more effective the result. Here are six steps debtors can take before filing that don’t include talking to a lawyer.
(1) Waiting can be worth it. Understand that filing bankruptcy sooner, particularly chapter 7, is not necessarily as advantageous as delaying filing. One reason is to not rush the process, for example, ensuring you have enough time to take the required pre-bankruptcy debtor-education course. Another is that filing later can help keep your average monthly income beneath the means test threshold or ensure that large purchases are outside the windows for luxury purchases or cash advances.
(2) Don’t make any large purchases. Speaking of luxury purchases and cash advances, don’t make those or any other irregular purchases. The look-back window for each is 70 days for cash advances over $950, and 90 days for consumer debts greater than $675. Even if debtors stay below these levels, they might still trigger scrutiny by the trustee. Needless to say, scrutiny is not something you want in your bankruptcy. Even ceasing all credit-card use is a good idea.
(3) Don’t write checks immediately before filing. Also, if you pay for anything by check, then it’s a good idea to file bankruptcy after they clear or use cashier’s checks instead. Your account balance needs to match what your register and bankruptcy forms say.
(4) Look at your bank’s policies regarding bankruptcy filing. You signed many documents before opening a bank account, and undoubtedly they included (or referenced) what the bank would do to your accounts or credit-cards if you filed bankruptcy. Some banks will freeze accounts; others won’t. It’s best to know up front, whether by checking its Web site or by calling.
(5) Consider changing banks. Relatedly, if your bank will freeze your account, then you might want to deposit your money at one that will not. Be sure to update your direct-deposit information for your income.
(6) Check your automatic withdrawals. If you pay bills automatically, then some of them might not be worth continuing, particularly if they’re for debts you intend to discharge in your bankruptcy. Disabling these features or closing your account at that bank can prevent needless withdrawals for debts you don’t intend to pay later.
The steps are among the easiest to take before a bankruptcy, so doing them or being mindful of them will help you avoid some of the most preventable problems in a bankruptcy. Talking to an experienced New York bankruptcy lawyer will help ensure that your case goes smoothly.
For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced Brooklyn bankruptcy attorney Bruce Weiner for a free initial consultation.
The post 6 Steps to Take Before Filing Bankruptcy appeared first on Bankruptcy Attorney in Brooklyn, New York | Rosenberg Musso Weiner.
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A question that’s commonly asked about New York bankruptcy is whether a debtor needs a Social Security number to file. Debtors ask because they sometimes run across the bankruptcy form title, “Your Statement About Your Social Security Numbers” (B 121), which asks debtors to list their current and prior Social Security numbers. The new bankruptcy form B 101, the voluntary filing petition that nearly all debtors complete, also asks for Social Security numbers. As a result, it’s unsurprising that debtors without Social Security numbers might be anxious about filing New York bankruptcy, and it’s a common situation because so many New Yorkers are immigrants.
The good news is that a Social Security number isn’t necessary to file bankruptcy. Moreover, debtors should also be aware that the forms ask for Individual Taxpayer Identification Numbers (ITINs) as well. The bankruptcy forms cover the vast majority of debtors by these options, even non-Americans.
Non-citizens are free to file bankruptcy, including debtors who do not legally reside in the U.S. In fact, the legality of a debtor’s residency isn’t even questioned. Non-citizens can also rest assured that filing bankruptcy in itself will not affect their immigration status, although the same cannot be said about the circumstances giving rise to their filings. However, unauthorized immigrants are more likely to run into trouble because of the documentation they do have, not what they don’t, e.g. fraudulent Social Security numbers. Providing such information to a bankruptcy court is perjury and therefore grounds for dismissal.
The part of the Bankruptcy Code that’s relevant to nationality and residency here is section 109(a), which states, “[O]nly a person that resides or has a domicile, a place of business, or property in the United States, or a municipality, may be a debtor under this title.” The only caveat here is not in the Bankruptcy Code but in the parts of federal law that determine the appropriate venue for bankruptcy cases, 28 U.S.C. 1408(1), which requires debtors to reside for the previous 180 days in the federal district in which they intend to file.
Bankruptcy’s identity requirements are usually fairly easy to meet, and they will be verified at the 341 meeting. Debtors who are concerned about establishing their identities would be wise to consult with an experienced New York bankruptcy lawyer beforehand.
For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced Brooklyn bankruptcy attorney Bruce Weiner for a free initial consultation.
The post Social Security Number Not Necessary for Bankruptcy appeared first on Bankruptcy Attorney in Brooklyn, New York | Rosenberg Musso Weiner.
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