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09 Feb 2014

Money may not buy happiness, but the lack of it can certainly inspire negative emotions. When we lack financial stability it often causes sadness, grief, and shame, but these are just the beginning when it comes time to file for bankruptcy. There is something about admitting defeat and formalizing that defeat in a court of law that makes a financial disaster even more palpable.

The most common form of consumer bankruptcy in America is Chapter 7, which involves handing over one's non-exempt assets to a trustee, who liquidates them to pay the filer's creditors. This normally eliminates all or most of their debt. Another form of bankruptcy, Chapter 13, is where one's debt is paid off through a financial reorganization, with the goal of preserving certain assets. People who file for Chapter 7 are usually in such a state of financial ruin that it's not worth filing for Chapter 13.

While we often focus on the financial consequences of bankruptcy and the damage it does to one's credit score, the mental burden can be more overwhelming. In fact, its far-reaching effects can become psychologically burdensome, causing undue stress on important family relationships. It is important to acknowledge this and be proactive about preventing permanent damage because family support is so important during this process.

Focus on finances and emotions simultaneously

It is important to take the appropriate financial steps when facing bankruptcy, such as compiling a list of debts and hiring a bankruptcy lawyer, but try not to neglect your emotional well-being. Many people find that by the time the file for bankruptcy they have juggled debt for so long that they are emotionally spent. According to one financial counselor, "In many cases, a person's self-esteem takes a stronger hit than their finances."

As more people cope with the fallout from a struggling economy, the financial therapy industry is gaining a foothold. People are in need of emotional support when they go through a monetary crisis, and while many general psychologists offer treatment, it might not address all the concerns involved with bankruptcy. Financial therapists can help address a patient's worry about their family's anger, as well as their anxiety and fear about the future. Bankruptcy may present some obstacles in life, but for many people it is also a great relief. Even the black marks on a credit report will eventually disappear, and in the long run people look back and realize it was their only option.

Bankruptcy attorneys will often provide solace to their clients by telling them they are not alone; that in fact there are plenty of other people who have fallen into bankruptcy and it is not the end of the world. Statistics prove this out, and it's important that people realize this. In reality, filing for bankruptcy gives them the breathing space to make a fresh start. Oftentimes, once the decision is made to file for bankruptcy, clients are in a much better frame of mind than they were at the first meeting with their attorney.

According to a recent article in U.S. News and World Report ("Surviving the Emotional Toll of Bankruptcy"), many perceptions about bankruptcy are falls. Financial therapists say that while many general psychologists offer help in this area, it is not always the right kind of support. Some bankruptcy filers often worry that they have accumulated so much debt that even a bankruptcy won't be enough. Others worry that the poor economy will continue to get worse, or that their credit score is permanently destroyed. Such misguided fears only make the process of bankruptcy more disturbing. In reality, no matter how much someone owes, bankruptcy is always a viable option, and the effects of it will eventually be erased.

Blame is another part of the grieving process. While many people know that the poor economy caused their situation, they still must take ownership of what things they did have control over. In this case, a financial therapist will try to help a client separate their own worth from their personal worth. This can be difficult for many people, who have been trained to believe that their financial success is the only success that matters.

Ultimately, relief from the mental burdens of bankruptcy is dependent upon how well a person prepares to handle finances in the future. Setting smaller, achievable goals can be a great way to rebuild confidence because individuals can celebrate minor victories along the road to recovery.

24 Sep 2013

We've all heard the statistics about job loss and credit card spending, and many believe these are the main roads to bankruptcy. During the recession, many families faced extended unemployment, which led to foreclosure and enormous debt loads. Perhaps this explains why unemployment is often touted as an obvious bankruptcy culprit. Many people are surprised to learn that the most common cause of bankruptcy in America is not unemployment or credit card spending; it is medical debt. When an unexpected emergency comes up and a family is uninsured, medical debt is enough to wipe out their assets immediately. A recent report from the American Journal of Medicine said more than 60% of bankruptcy filings were directly resulting from unforeseen medical bills. Not only are these bills expensive; they also involve long-term costs that can push a family's finances over the cliff.

Is all medical debt incurred by the uninsured?

Surprisingly, many of the recent bankruptcy filings were from people who had some form of insurance, but not enough. As if the hospital bills are not enough, serious illnesses often require missed time at work for the family breadwinners, which can be debilitating all by itself. Many of the more affordable insurance policies have high co-payments, exclusions and deductibles, plus other coverage loopholes.

If you are struggling under the weight of overwhelming hospital charges, doctor bills or any other kind of medical debt, bankruptcy may be the only reasonable solution. Depending on the type of bankruptcy you choose, your bills could be eliminated entirely or significantly reduced. Of course, bankruptcy is not without its challenges. It can have a long-lasting impact on your creditworthiness and it could complicate many areas of your financial life.

Hiring a bankruptcy lawyer

There are few legal petitions that require the use of an attorney; so many bankruptcy filers feel confident representing themselves. While this may seem like the more practical choice, it is not recommended for bankruptcy. Bankruptcy needs to be handled by someone with experience handling Chapter 7 and Chapter 13 petitions. An experienced attorney will be able to show you the best way forward and protect your interests in bankruptcy court. When a medically-related bankruptcy is complete, you may find that your medical bills are either eliminated or significantly reduced.

Chapter 7 or Chapter 13 bankruptcy

Filing for Chapter 7 bankruptcy usually wipes out all unsecured debt, which includes medical debt. However, it is important to note that once you have filed for bankruptcy you may not do so again for another six years. This means that should you get sick during that time period you may be more vulnerable to legal issues and liable to pay all related bills. Most bankruptcy lawyers will recommend a post-bankruptcy strategy that includes maintaining medical insurance with full coverage.

Filing for Chapter 13 bankruptcy is another option when you are "under water" with medical bills. This type of filing will consolidated all of your debts into a manageable repayment plan. Similar to business reorganization, this option allows you to repay the bills over a 3 to 5 year time frame. While it may not be as forgiving as the Chapter 7 model, Chapter 13 allows you to hold onto most of your property. In many cases, this option is only viable for individuals with a stable discretionary income. The key benefit is the extra time it allows individuals to overcome their financial burdens.

As hospitals and providers raise their prices each year, medical bills are becoming a major issue for thousands of households. The high cost of health care continues to be the most stressful financial burden for United States citizens. If you find yourself in a predicament with excessive medical debt, a Colorado Springs bankruptcy attorney will be able to help you eliminate or reduce the amount of your bills. Contact an experienced bankruptcy lawyer for more information.

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29 Aug 2013

As a Colorado bankruptcy attorney, I am often asked if bankruptcy rates are going up or down, and if the demographic makeup of bankruptcy filers has changed. Over the past few years, as the U.S. has gradually emerged from the recession, the number of people filing for bankruptcy has decreased, but there are a few trends that have little to do with the economy.

Many people who file for bankruptcy are lower-income individuals who simply cannot afford to pay for unexpected major expenses. A job loss or a major illness might be just enough to push them into financial ruin. While peaks in petitions are a sign of economic downturn, filings will also increase in states with fewer consumer-friendly laws

2005: A record year for personal bankruptcy

Among the patterns revealed by recent research, the number of bankruptcy filings has steadily risen over the past century, particularly within the 25 year period between 1980 and 2005. In fact, bankruptcy filings hit an all-time high in 2005 when a record of two million cases was filed. In that year, an astounding one out of every 55 households filed for bankruptcy. Interestingly, in 2006, bankruptcy filings dipped to the lowest point in twenty years.

Consumers outpacing businesses

In 1980, businesses accounted for 13% of all bankruptcy filings, but today they only account for 3 percent. The vast majority of bankruptcies are now filed by consumers. But these statistics are by no means consistent across the country. The number of bankruptcies varies widely from state to state, partially because the policies surrounding bankruptcy differ in each state, but also because of the number of people who live there.

States with highest number of bankruptcies

As of 2011 the state with the most bankruptcy filings was California, with more than 240,000. The number was so large it accounted for 17% of all the nation's bankruptcies that year. The five states with the highest number of petitions in 2011 were responsible for 38% of all the nation's filings that year.

These are the top five states and their number of declared bankruptcies in 2011:

  • California (240,151)
  • Florida (94,815)
  • Georgia (73,852)
  • Illinois (73,210)
  • Ohio (58,754)

Why are people filing for bankruptcy?

A study from 2005 revealed that 46 percent of bankruptcies were related to medical expenses from a serious illness not covered by insurance and the resulting loss of income. However, shortly after this study was completed, drastic changes in the economy caused bankruptcy from unemployment, underemployment and credit card debt.

Demographic changes in bankruptcy filers

Over the past few decades, researches have noticed some key differentiators among the "typical bankruptcy petitioner." For example, the average filer is older and married, has a high school education with no college, and earns less than $30,000 per year.

At the time of bankruptcy, the age of the petitioner seems to be getting older. Since the early 90's more senior citizens are declaring bankruptcy while fewer filers are under the age of 25. In fact, since 2007 those under 25 made up less than 2% of all filers. During that same period of time, the percentage of older petitioners more than doubled, now accounting for nearly 20% of all filers.

As a result of these fluctuations, the median age of a bankruptcy-seeker has increased from 38 to 45 years of age.

What about repeat filers?

Recent data suggests that 8 percent of those who seek bankruptcy protection have filed at least once before. Repeat filers are now responsible for 16% of all bankruptcy cases.
Some experts point to these repeat filings as proof that bankruptcy laws are exploited, but new laws have been enacted to curb abuse of the bankruptcy system. However, these recent policy changes have little effect on who files for bankruptcy and when.

Gender and marital status

Contrary to what one may believe, the gender distribution of bankruptcy filers is roughly equal parts men and women, and the gap seems to be shrinking. As of 2010, more than 64% of all bankruptcies were filed by married individuals, with only 17 percent of the debtors single, 15 percent divorced and 3% widowed.

Level of education

In 2010, about 20% of all bankruptcies were filed by people with a bachelor's degree or higher, while 36% have a high school education level and 29% have some college education.

Income Level

A study from 2011 found that 60% of bankruptcy seekers earned less than $30,000 per year, a decrease from 66% four years earlier. During the same period, a higher number of filers reported earning more than $60,000 per year.

While it's true that there is a "typical profile" for someone who is likely to file for bankruptcy, certain life circumstances increase the possibility. No one is immune to having serious financial trouble. If you find yourself struggling financially, it may be time to contact a bankruptcy law professional who can help you understand your option.

31 Jul 2013

If you've watched any late night television lately, chances are you've seen former U.S. Presidential candidate Fred Thompson out there pitching reverse mortgages. Many seniors are enticed by these very noteworthy spokespeople as they explain the process of cashing out their home equity. While it's not necessarily a bad decision to do this, it is important to be aware of fraudulent companies looking to capitalize on cash-poor retirees.

On the FTC's web site, a variety of consumer data is available for the individual who wants to learn more about unusual consumer credit offers. The site explains that if you are 62 or older, a reverse mortgage can help you finance a home improvement, pay off your current mortgage, supplement your retirement income, or pay for healthcare expenses. It works by converting part of the equity of your home into cash without the need to sell the home or make payments on a second mortgage. Unlike a traditional equity loan, the reverse mortgage is repaid only when you die, sell your home or the home is no longer your primary residence. Many companies don't have income restrictions for these loans and they are generally tax-free.

With a traditional mortgage, you make monthly payments to the lender, but with a "reverse" mortgage, you receive money from the lender, and generally don't have to pay it back for as long as you live in your home.

Types of Reverse Mortgages

There are three types of reverse mortgages:

  • Single-purpose reverse mortgages: Offered by some state and local government agencies and nonprofit organizations
  • Proprietary reverse mortgages: Private loans that are backed by the companies that develop them
  • Federally-insured reverse mortgages: Known as Home Equity Conversion Mortgages (HECMs) and backed by the U. S. Department of Housing and Urban Development (HUD)

Single-purpose reverse mortgages are the least expensive option. Most homeowners with low or moderate income can qualify for these loans.

HECMs and proprietary reverse mortgages may be more expensive than traditional home loans, and the upfront costs can be high. This is an important consideration, especially if you plan to stay in your home for just a short time or borrow a small amount. HECM loans are widely available, have no income or medical requirements, and can be used for any purpose.

Before applying for an HECM loan, counseling is required by the lender. Their counselor is required to explain the loan's costs and financial implications, and possible alternatives to a HECM, like government and nonprofit programs or a single-purpose or proprietary reverse mortgage. He or she also should be able to help you compare costs for various types of reverse mortgages and explain the different payment options, fees, and other costs affect the total cost of the loan over time.

The amount you can borrow with a HECM or proprietary reverse mortgage depends on several factors, including your age, the type of reverse mortgage you select, the appraised value of your home, and current interest rates. In general, the older you are, the more equity you have in your home, and the less you owe on it, the more money you can get.

The HECM lets you choose among several payment options. You can select:

  • Term option – fixed monthly cash advances for a specific time.
  • Tenure option – fixed monthly cash advances for as long as you live in your home.
  • Line of credit – this option lets you draw down the loan proceeds at any time in amounts you choose until you have used up the line of credit.

Other important facts from the FTC web site about reverse mortgages:

Lenders generally charge an origination fee, a mortgage insurance premium (for federally-insured HECMs), and other closing costs for a reverse mortgage. Lenders also may charge servicing fees during the term of the mortgage. The lender sometimes sets these fees and costs, although origination fees for HECM reverse mortgages currently are dictated by law. Your upfront costs can be lowered if you borrow a smaller amount through a reverse mortgage product called a "HECM Saver."

The amount you owe on a reverse mortgage grows over time. Interest is charged on the outstanding balance and added to the amount you owe each month. That means your total debt increases as the loan funds are advanced to you and interest on the loan accrues.

Although some reverse mortgages have fixed rates, most have variable rates that are tied to a financial index: they are likely to change with market conditions.

Reverse mortgages can use up all or some of the equity in your home, and leave fewer assets for you and your heirs. Most reverse mortgages have a "nonrecourse" clause, which prevents you or your estate from owing more than the value of your home when the loan becomes due and the home is sold.  However, if you or your heirs want to retain ownership of the home, you usually must repay the loan in full – even if the loan balance is greater than the value of the home.

Because you retain title to your home, you are responsible for property taxes, insurance, utilities, fuel, maintenance, and other expenses. If you don't pay property taxes, carry homeowner's insurance, or maintain the condition of your home, your loan may become due and payable.

Interest on reverse mortgages is not deductible on income tax returns until the loan is paid off in part or whole.


29 Jul 2013

Any decent financial advisor will be careful to warn clients against the perils of taking on too much debt. Not only will a heavy debt load damage your credit score, it will put you at a much higher risk for bankruptcy, especially if you suffer a job loss.

Bankruptcy presents some major challenges for individuals and families, who may need to give up some major assets in exchange for a "clean slate," so one would expect them to do everything possible to avoid a second bankruptcy. But old habits die hard, and without good financial counseling a person remains vulnerable through poor decision-making.

After interviewing several financial consultants and bankruptcy attorneys, it is obvious that something needs to change. One bankruptcy should be enough for anyone's lifetime, so be sure to make these lifestyle changes immediately.

Four changes to make after bankruptcy:

Live within your means. This statement has different meanings to different people, but in an effort to keep it simple; "living within your means" is spending only the money you have coming in currently. This means no purchases on items you cannot afford, and paying the full balance of any credit card purchases every month.

Begin rebuilding credit scores only by purchasing what you know you can afford. While it may be true that buying a car, getting credit cards or renting an apartment will speed your post-bankruptcy rebound, it can be dangerous to take on too many obligations too quickly. Be smart about the method you use to rebuild your credit score, and keep your monthly payments affordable.

Build an emergency fund. This will help in many ways, but first and foremost it will keep you from incurring unnecessary debt. Examples include unexpected medical bills, job loss, or replacing major appliances. When the cash is in the bank, there is no need to pull out the credit card.

Create an honest budget. Start by knowing exactly how much you bring home each week or month. Be sure all your expenses and bills can be paid through this income. Only then will you be able to avoid racking up more debt and falling into a dangerous financial situation.

Other important changes to make right away:

  • Make a very specific monthly budget that includes all of your expenses as precisely as possible, making sure to account for everything that is coming in and out of the household. For subjective expenses, such as food, be realistic and don't underestimate spending.
  • Don't compare yourself to others. Looks can be deceiving; it's hard to figure out people's financial situations just by looking at them. People will often spend needlessly and buy a bunch of luxury items only to find they don't have any money left over at the end of the month.
  • Avoid credit cards unless you are using them to rebuild creditworthiness. If you must make a purchase on a credit card, paying it in full should be counted within your monthly budget.
  • Practice restraint. If you fell into bankruptcy because of careless spending, realize that you are going to have to constantly resist the urge to buy things. Don't make large purchases you can't afford.
  • Get organized. Have your budget and documents neatly filed away and easily accessible. This can help you adjust your budget accordingly.

The best way to avoid a second bankruptcy is to properly deal with the habits that got you into bankruptcy in the first place. You need to train yourself to recognize your own behaviors and make an immediate plan to combat them. However, if you still find yourself in a desperate financial situation there are things that can be done right away. A Colorado Springs bankruptcy attorney can help get you back on track.


03 Apr 2013

If you plan to file for bankruptcy in Colorado Springs you will no doubt meet with an attorney who will walk you through all your options, but most people want a little preview before they visit a law office. Unless you've been through the bankruptcy process before it's likely you have a long list of questions, such as "will I go to court?" or "will I be able to keep my house?"

In an attempt to prepare for the inevitable it is better to seek the advice of an experienced bankruptcy lawyer and avoid the temptation to just "Google it." While there is plenty of data available about different types of bankruptcy, few online sources will accurately summarize what to expect/

Below are five things you can expect when filing for bankruptcy in Colorado:

1. You will have to go to court. Before you start worrying about a long, drawn-out court process, in most cases you will only need to attend one hearing, known as the "meeting of creditors." This is a short and simple hearing where the trustee will ask you a few very basic questions. Creditors are also allowed to attend and ask questions but they must abide by certain state bankruptcy guidelines.

2. Your case will be complete within 4 to 6 months from the date of filing. This doesn't mean you should just go ahead and file right away. While bankruptcy can be very helpful in resolving financial woes, it is not always the best solution for everyone. In addition, it's important to choose the right time to file for bankruptcy relief. Most experts recommend you wait as long as possible to file because you can only do so one time every six years. Saving this option until you absolutely need it, but you may not even need to file. For example, if you have no "non-exempt" property or wages, there is nothing that the creditors can take from you.

3. There are some very specific things that bankruptcy can do. One of the most important things is the "discharge" or elimination of debts. It can stop a home foreclosure and allow you to catch up on missed payments, and it can stop the repossession of automobiles or other property, sometimes even forcing a creditor to return property that has already been repossessed. If your wages are being garnished or a creditor is harassing you for payment, filing for bankruptcy will put a stop to that right away. It can also prevent the termination of utility services.

4. There are some very specific things that a bankruptcy can't do. One of these is the discharge of debts that arise after the bankruptcy filing. It also cannot eliminate certain rights of secured creditors, particularly with car loans and a home mortgage, which means payments must be made on a regular basis in order to retain ownership of the property. In addition, certain types of debt are never discharged in a bankruptcy. These include alimony, child support, most student loans, criminal fines or restitution, and most taxes.

5. You will need to decide between Chapter 7 and Chapter 13 bankruptcy. It's not enough to show up a bankruptcy attorney's office and just "file for bankruptcy." You must know the differences between Chapter 7 and Chapter 13 as well as which one you prefer. Below is a description of each type of bankruptcy.

  • Chapter 7: Also known as a "liquidation," or "fresh start" bankruptcy, Chapter 7 will discharge your debts on the condition that you relinquish any nonexempt property to the trustee. The proceeds from selling your nonexempt property will be used to repay your creditors but you hold onto secured property if you stay current with the payments.
  • Chapter 13: Commonly known as a "reorganization" or wage earner plan, Chapter 13 lets you keep valuable property such as a car or home, which might have otherwise been lost because of past-due payments. In a Chapter 13 reorganization you will have between three and five years to repay the arrears from your lapsed payments, but you must also continue to make regular payments.

Is bankruptcy an option for you? Only you know the honest state of your finances and whether you are being threatened with foreclosure, repossession or garnishment. Bankruptcy is a great way to proactively deal with these problems, but everyone's situation is different. If you have questions about filing bankruptcy in Colorado, talk to a professional bankruptcy attorney at the Colorado Springs law offices of Stephen J. Swift.

Photo Courtesy of Ponsulak /

02 Mar 2013

As a Colorado bankruptcy attorney, one of the most common questions I’m asked is, “How much control will creditors have over my personal possessions?” It is rarely a surprise when creditors seize automobiles, boats or other expensive luxury items, but do they really want your clothes and furniture too? Good news: unless you happen to have a collection of valuable jewelry or brand new designer clothing, those items are usually exempt from seizure and liquidation.

Every state has different laws governing bankruptcy so it is always better to ask your attorney, but there are a few major things to know prior to filing. Once you file, a trustee will be assigned to your case, and he or she will have a particular interest in certain issues. Some of the biggest issues include:

Transfer of assets

Before filing for bankruptcy, it may be tempting to transfer assets out of your name, but this may actually put the property more at risk. For example, in most cases an attorney can easily protect a vehicle that is fully paid off and registered in their client’s name. But if the client had recently transferred the vehicle to a family member or friend, or even a stranger, it may be difficult to protect that vehicle from being scrutinized.

State legislatures and courts don’t want people to file for bankruptcy after they’ve transferred all of their valuable assets. If it were that simple, many people would take advantage of bankruptcy laws to discharge bad debt and hold onto their assets. People who live in states that don’t allow protection of many items must take steps to responsibly plan for bankruptcy. In Colorado, an experienced bankruptcy attorney will know the legal ways to protect assets without transferring them out of your name just before submitting a bankruptcy filing.

Cash advances

After you file for bankruptcy, each creditor will want to look closely at your account. If you have recently taken large cash advances from a credit card it could be viewed as fraudulent behavior, but even more importantly it could mean you have to pay back some or all of that cash after the bankruptcy filing.

Payments to family

Remember, if you borrowed money from your parents and siblings they might also be considered creditors. Just because you feel obligated to pay them back doesn’t mean the court considers their debt to be more important than other creditors. It is best not to make any payments to family members until your bankruptcy attorney recommends it.

Pending or current lawsuits

Bankruptcy filers who are in the midst of a current or pending litigation may not think the two cases are related, but lawsuits are also considered “assets” and must be disclosed. Your trustee might not have an interest in the suit, but you must still provide the trustee with the first opportunity to review the litigation.

Disclose any potential inheritance

If you are about to receive an inheritance of any kind, it is important to communicate this to your trustee. There are some time limits involved when an inheritance is due to you, so it would be important to mention this to your attorney.

Bankruptcy before foreclosure

If you plan to file for bankruptcy to slow down a foreclosure, this can be done. There are a few exceptions, but as long as you have other debt, such as a second mortgage or credit card debt it is legal to file before a foreclosure. Every state has different laws concerning bankruptcy and foreclosure, but filing just beforehand should buy you some time.

Bankruptcy and credit scores

Of course, one thing that bankruptcy can take from you is your good credit rating. Just like any other negative mark on your credit report, a bankruptcy filing stays on there for seven years.

What property will you be able to keep in a Colorado bankruptcy?

In a Chapter 13 bankruptcy, you won’t be forfeiting any assets because this type of bankruptcy repays your debts, but in Chapter 7 bankruptcy you may be asked to surrender some assets in exchange for paying off unsecured debts. In this case, a trustee will liquidate these assets and use the proceeds to pay your creditors.

In general, the following assets are exempt in Chapter 7 bankruptcy:

  • 100 percent of retirement funds in qualified plans
  • $5,000 in equity in a vehicle, or $10,000 if you are disabled or over 60
  • $60,000 in home equity, or $90,000 if you are disabled or over 60
  • $3,000 in furnishings
  • $2,000 in watches and jewelry

Sometimes, exceptions may be doubled for married couples, and there are dozens of exemptions and exceptions to the rules. A good bankruptcy attorney should not submit your bankruptcy petition until he or she has protected as many of your assets as possible.

Which Assets Are Not Exempt?

In most bankruptcy filings, the following assets are not exempt from seizure: non-homestead property (e.g., vacation homes), cash savings, tax refunds, recreational vehicles, boats, fine jewelry and firearms. It will become necessary to surrender these assets to the trustee or make arrangements to “buy them back” through a financial agreement with your trustee.

If you have property, which is non-exempt, you could sell it before filing bankruptcy and use the money to purchase things which are exempt; such are food, furniture, or clothing. However, you cannot give property away to friends or relatives, and have them give it back to you after the bankruptcy. Any transfers of property without receiving fair value for it within one year before filing bankruptcy are considered a “fraudulent transfer.” The property could be taken by the bankruptcy court and sold to pay some of your debts. If the bankruptcy court finds you have been dishonest in your filing, your discharge could be denied and you could be charged with state or federal crimes.

11 Feb 2013

Let's face it; no one envisions a future that includes a bankruptcy filing.  But that shouldn't dissuade you from considering it when it is necessary.  As a Colorado bankruptcy lawyer, there is one question I hear almost every day, "Is there any way I can avoid filing for bankruptcy?"  And while this question is answered on a case-by-case basis, there are some ways to look at it objectively.

How complicated is it to file for bankruptcy in Colorado?

Generally, individual filings are rarely challenged by creditors and they won't require a lot of time in a courtroom.  In fact, once you file the forms and the state appoints a trustee, the process usually follows a certain pattern:  either a court-monitored repayment program or a process of asset recovery and distribution.  However, if you own a business filing for bankruptcy, courtroom litigation will be quite common.

How to hire a bankruptcy attorney

You may be wondering how someone who is obviously out of cash can afford to hire a lawyer, but a better question is can you afford not to?  As with any type of litigation, bankruptcy filings are full of details and defined by state and federal laws.  In the event that a creditor challenges your bankruptcy filing, it is important to be working with an experienced attorney.  Look for a bankruptcy lawyer with experience in litigation and one who can help you defend yourself against claims, or even countersue when necessary.

As a Colorado bankruptcy lawyer, I'm often asked if an attorney is always necessary, especially when so many filings are relatively simple transactions.  When a business goes bankrupt, it's not uncommon for creditors to seek contest the filing as an effort to recover payments.  Many attorneys recommend resolving outstanding debts whenever possible, prior to the bankruptcy because this will limit the number of claims filed prior to and during the bankruptcy.

If there's anything worse than filing for bankruptcy, it's having to do so and then hiring the wrong attorney for the job. For many lawyers, bankruptcy filings have become a volume business, and debtors facing bankruptcy sometimes unfortunately obtain inferior legal services. For this reason, you'll need to do some research before hiring a bankruptcy lawyer.

Twelve tips for finding the best attorney for your bankruptcy filing

  1. Avoid procrastination whenever possible.  While this is certainly not going to be a pleasant experience, putting it off will make it even more complicated.  Start looking for your attorney as soon as you realize you will need one.

  2. Spend a day in bankruptcy court.  Watching bankruptcy attorneys in their natural environment will help give you a better picture of what kind of lawyer you want representing you.

  3. Seek advice from legal professionals.  Do you have any business acquaintances in the legal profession who might know a good bankruptcy attorney?  Bankruptcy law is a specialty, so avoid using your family lawyer or personal injury specialist.  Be sure that the counsel you choose knows his or her way around bankruptcy court.

  4. Visit law offices.  Just walking in and appraising the law firm will clue you into how well organized they are.  If it's neat and tastefully decorated, it's safe to say that they are true professionals.  But if you see piles of coffee-stained folders stacked in piles on the floor, run in the other direction.

  5. Find a list of your local bankruptcy court panels.  The only attorneys who will sit on these panels will be well-respected and highly regarded within bankruptcy court.

  6. Ask a lot of questions.  Once you've narrowed down the list to a few candidates, ask them about their certifications, the number of bankruptcy cases they've handled, and how many they handled in a year.  Find out how many of their cases are business filings and how many are individuals.  Many firms will have a partner interview you, only to shift your case to a less experienced attorney, so make sure you are interviewing the person who will actually handle your case.

  7. Don't hire the cheapest lawyer.  Under the circumstances, it might be tempting to cut corners and save some cash, but you will get what you pay for.  Look for a lawyer who knows the system and who comes recommended by the local bar association.

  8. Ask for specifics on their fees.  You will want to know upfront what your lawyer considers "part of the package."  For example, if they need to outsource some work to a forensic accounting, how will you find out about additional fees?

  9. Stay involved. Once you hire a lawyer, don't be content to let him or her handle it alone. Double-check all filings. Did any of your creditors get dropped off the list? Staying on top of your bankruptcy filing will help ensure that the proceedings go smoothly and will keep your lawyer on his or her toes.

  10. Interview prospective lawyers in-person.  It may take a bit longer, but once you have narrowed down your list of potential bankruptcy law firms, take the time to get to know each one of them.   Not only will this help you discover which one is the best match for your case; it will help you learn about their personal style and courtroom demeanor.

  11. Be prepared to present your case.  Even the best bankruptcy lawyer cannot help you if you cannot give them accurate information. This means you will have to gather your paperwork and financial information ahead of time and share it with your attorney.

  12. Finally, educate yourself as much as possible about the process.  Most people who initiate a bankruptcy filing have very little knowledge about the law.  Your attorney can give you an overview, but it is better for you to do some investigating on your own.  Before making a final decision to file, find out how a bankruptcy will affect your credit rating, family members and lifestyle.

26 Nov 2012

Having lenders forgive debt can be a godsend for those who are unable to pay their bills; however, depending on when this debt forgiveness occurs, borrowers may find themselves having to deal with some negative consequences when it comes to paying taxes. Also referred to as “cancellation of debt” (COD), debt forgiveness can translate into taxable income.

Specifically, when a lender discharges a borrower's debt, the lender is required to report the monetary amount of this discharge as cancellation of debt income to both the borrower and the IRS (Form 1099-C is the tax form used to report COD income to the IRS); in many cases, the borrower may have to pay taxes on this COD income.

Nevertheless, there are some exceptions to when forgiven debt qualifies as COD income, and these can include:

    • When COD income is declared during a Chapter 7, Chapter 11 or Chapter 13 bankruptcy proceeding
    • When the borrower's debts are significantly greater than his assets just before the lender forgives the debt (i.e., the borrower is considered to be “insolvent” just before the debt is canceled); however, if the debt cancellation makes the borrower “solvent” again, then the forgiven debt will become taxable COD income to the degree of solvency that the borrower has regained.
    • When home mortgage debt incurred from 2007 through 2012 meets specific qualifying factors
    • When certain deductible interest has been added to the principal of a loan

Given how complex the tax repercussions of debt cancellation can be, it's critical that those who are facing overwhelming debt and/or considering filing for bankruptcy consult with a skilled bankruptcy lawyer at the Law Office of Stephen H. Swift, P.C. Our trusted financial and legal professionals have extensive experience handling various matters of bankruptcy, debt consolidation, debt cancellation and other matters of debt relief. We can help borrowers in serious debt resolve their financial struggles in the most appropriate manner that will minimize future repercussions associated their taxes, as well as their credit score, remaining assets, etc. For more professional advice and an assessment of your best options, call us at (719) 520-0164.

15 Nov 2012

Approximately 1 in every 5 Americans older than 65 years old have been victimized by some sort of financial fraud, according to a 2010 report issued by the non-profit Investor Protection Trust (IPT). This translated to about $2.9 billion lost by the elderly in 2010, which had increased from the previous year by about 7 percent. What is possibly even more shocking than these statistics are the facts that such financial abuse in the elderly community is continuing to grow, many of these cases result in the victims being depleted of their life savings, and the elderly are the least likely to seek out legal help for their impoverished situation after such financial abuse occurs.

The most common way for the elderly to be victimized by financial fraud occurs when their assets are somehow misappropriated or stolen by loved ones or care providers, such as in-home nurses.  Another manner in which the elderly fall susceptible to financial abuse typically occurs when strangers outright scam the elderly through, for example, Nigerian letter fraud, telemarketing fraud, mail fraud, Ponzi schemes and other types of financial fraud.

While there may be an opportunity for criminal justice proceedings to prosecute the individual who had scammed or stolen from the elderly victim, the chances for the elderly to retrieve their lost money or assets can be slim, especially if the financial abuse occurred at the hands of an unknown and unidentifiable stranger; as a result, the elderly will need to seek legal help if they find themselves facing insurmountable debt and they are unable to pay their bills.

In these cases, the trusted Colorado bankruptcy lawyers at the Law Office of Stephen H. Swift, P.C. can help advise financially strapped elderly individuals on their best options for getting and staying out of debt. While bankruptcy may be the best option for some victims of financial fraud, for others, the better choice may be in debt consolidation. Regardless of your situation – even if you have previously filed for bankruptcy, our skilled financial professionals can help you financially rebuild your life.

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