13.10.11

Credit After Bankruptcy

There is life after bankruptcy!
Although we hope you will live on a cash basis and avoid credit after your bankruptcy you can often get a good interest rate on a home purchase two years after your Iowa bankruptcy and most people get credit card offers a lot sooner than that. See Moran on Credit after bankruptcy and MSN on Credit After Bankruptcy.

Jeff's Credit After filing Bankruptcy Video

Recent Client Comments

"OH MY GOD!!! What can we say to you except ..OH MY GOD..THANK YOU JEFF!! It is a fantastic feeling being debt free!! You are totally awesome at what you do!! I can only imagine how other attorneys must envy your practices!!! Please know this...we will never forget you and if anyone we know ever needs your help...I will personally deliver them to your door myself!! THANK YOU..THANK YOU..THANK YOU!!"

-February 2012 Clients

"Thank You!!!!, I will admit that I was VERY nervous about fileing bankruptcy. You made the whole process go smooth and easy. I will be sure to refer everyone I know to you in the future."

-February, 2012 Client

"To anyone reading this..STOP.. and review Jeff's videos.. and then e-mail Jeff!! I'm excited for you because you will be elated you did!! Jeff is always there ..not to judge you...but to help you become debt free!! To quote Jeff," No Worries!" Forever and always, Thank you Jeff!!!"

-January, 2012 Clients

"You rock!! Thank you so much!" -December, 2011 Client

"Jeff...Thanks for our hearing today..you made everything so easy and comfortable for us. Please know that we are very grateful for all you have done and thanks for putting up with my panic attacks!!" -December, 2011 Clients

"Everything you did from beginning to end was fantastic. Not to mention your laid back personality sure helps. I figured if you were so calm I needed to calm down too! Thank you for taking the pain of this whole ordeal away...it was a very hard thing for us to do. We just knew there was no way out..so again thank you,"-December, 2011 Clients

"You were very accommodating and treated us with dignity & respect. Your subtle sense of humor made us feel at ease."

-Dec, 2011 Clients

"We truly appreciate your help with our case you was amazing. Thanks" -October, 2011 Clients

"Man, you are a rock star!! Your turn around time on emails is amazing. :)" -Sept. 2011 Client

"Thank you very much for your representation of us thus far in our case before the US Bankruptcy Court. You have probably heard many stories from many people who have one way or another arrived at a financial place in their lives where bankruptcy was the best alternative for their situation. Being two of these people we want to say to you that we are very grateful that you have understood the emotional reality of what bankruptcy can produce. I say this meaning that you are professional, following the guide lines of the law, defining them to your clients in a way that is palatable and understandable to the lay person. Also, you have empathy, understanding the trauma that is brought about by a financial crisis and you have the ability to calm the stress that is present. We believe that you have refined your practice through the years and continue to do so as each year passes. Your practice has made our experience with bankruptcy one that has allowed us to learn and take this knowledge we have been given and put it into practice for the betterment of our lives. For this and all of the above, thank you, we are very grateful." November, 2011 Clients

"Get over it. If you are in the hole, or staring into the abyss, you will know it. The most desperate situation to be in is one where you have no control and no safety net. If you wait that long, it is unrealistic to expect any person or any process to bail you out and make you whole. So, don’t wait too long. The best time to pull your parachute ring is at the beginning of the free-fall, not at the end."

-Client comment from online bankruptcy forum

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Email Jeff Mathias

Should I file Bankruptcy?

I never feel comfortable answering this question. I think it is a personal decision. If you have a reasonable alternative like repayment via Consumer Credit of Des Moines, selling valuable assets to pay off debt, a family member who will pay off your debt or borrowing from family at no interest I would take that option and not file bankruptcy.

By the time they get to me most people do not have any reasonable options left. Some people feel better about their decision to go forward with bankruptcy if they try repayment first. Whatever you do, don't fall for a distant online debt settlement company. If you are going to try and pay your debt, do it through a reputable, local firm like Consumer Credit of Des Moines.

Jeff's Video on Bankruptcy Alternatives

Avoid Debt Settlement Firms. See NY Times, Debt Settlers offer Promises, but little help. Also see Moran on Alternatives to filing bankruptcy.

Can I be arrested for a debt?

Although debtors prison was abolished long ago, we are starting to see aggressive collection activity that results in arrest.

When a judge issues a judgment against a debtor, the debtor is supposed to complete a financial disclosure form that will provide the information a creditor needs to collect his debt. If the debtor fails to do this, the creditor can obtain a court order compelling the debtor to show up in court to explain why he hasn’t. If the debtor fails to show up for this hearing, a judge can issue a contempt of court order and a warrant for the person’s arrest.

Sometimes this happens without the debtor having any knowledge of the proceedings since they were never properly served. Fortunately we have not seen much of this in Iowa yet but it is happening in Minnesota and Illinois. Bankruptcy & Arrests.

Filing bankruptcy stops this by discharging both debts and judgments.

Unpaid Bills Land Some Behind Bars

NPR, December 12, 2011

Millions of Americans are struggling to pay off debts. And debt collectors have found a modern way to employ a very old tactic. Debtors prisons were abolished in this country well over a century ago. Yet some of today's debtors are shocked to find themselves in jail. Susie An reports from member station WBEZ in Chicago.

SUSIE AN, BYLINE: Imagine you're driving home and an officer pulls you over for having a loud muffler. But instead of sending you off with a warning, you're arrested and taken right to jail. That's what happened to Robin Sanders in Illinois.

ROBIN SANDERS: That's when I found out I had a warrant for failure to appear in Macoupin County. And I didn't know what it was about.

AN: Sanders owed $730 on a medical bill. She says she didn't even know a collection agency filed a lawsuit against her.

SANDERS: They say they send out these court notices and nobody gets them.

AN: Sanders spent four days in jail waiting for her father to raise $500 for her bail. That money was then turned over to the collection agency. Robin Sanders' story is an increasingly common one across the country - in Indiana, Tennessee and Washington.

Here's how it happens. A company will often sell off its debt to a collection agency, often called a creditor. That creditor files a lawsuit against the debtor requiring a court appearance. A notice is supposed to be given to the debtor. And if they fail to appear in court, a warrant is issued for their arrest.

Beverly Yang is a legal aid attorney with Land of Lincoln Legal Assistance. Yang says most debtors don't know their rights. In fact, she says some judges don't even know the debtors' rights. That could result in the debtor being intimidated into a pay agreement.

BEVERLY YANG: And I've seen this even when I'm standing in the courtroom as the legal aid attorney. The judge will ask if they can pay - how about $150 a month? How about $75 a month? How come you can't even pay $50 a month? Did you apply for a job last week?

AN: The Federal Trade Commission received more than 140,000 complaints related to debt collection in 2010. That's nearly 25,000 more than the previous year. Yang says some creditors are eager to use harsh tactics.

YANG: Whatever the creditors, or the creditors attorneys, can do to leverage some kind of payment, it will help their profits enormously because they have literally millions of these.

KEVIN KELLY: There's an assumption in what you're saying is that we would rather throw them in jail than work with them. And I don't find that to be true at all.

AN: That's Kevin Kelly, president of the Illinois Creditors Bar Association. He says members of his organization only issue warrants in extreme situations. Kelly says sometimes it's the debtor who's keeping information from the collectors. That prevents important documents from getting to the right place.

He says most collectors want to make reasonable arrangements, but it's difficult when the vast majority don't even respond to any notices sent to them. Illinois Attorney General Lisa Madigan thinks more can be done. It's illegal in Illinois for people to be sent to jail because they're in debt. But Madigan thinks some creditors are abusing the law.

LISA MADIGAN: You wouldn't be in that predicament if you didn't have debt. I mean, you know, but for being in debt you wouldn't be in prison. And that essentially equates to being thrown in jail, you know, debtors prison.

AN: Madigan says courts need to be certain they have correct information to serve notices. She also says judges need to be properly educated in these proceedings to prevent a debtor from needlessly going to jail. Madigan says the state is also investigating agencies that it thinks are abusing the law. As for Sanders, she has a remaining balance of about $160 on her medical bill. But at least she now knows she won't have to go to jail for it.

For NPR News, I'm Susie An in Chicago.

Will I ever get credit Again?

Boston Globe- Study says bankruptcy can bring more loans

Boston Globe
NEW YORK - Personal bankruptcy may increase the amount of revolving credit, such as credit cards, that debtors can access, according to a study by economists at the Federal Reserve Bank of Boston.

It found that those who are poor and have low credit scores are quickly able to borrow again, and frequently end up with higher loan limits.

The results run counter to a widespread and long-held assumption that bankruptcy punishes debtors by cutting off access to credit for some period of time, the authors said. The study found 90 percent of individuals have access to some sort of credit within 18 months of filing for bankruptcy protection, and a quarter of those get more credit.

More on Credit After Bankruptcy. Bounce Back- Getting credit after Bankruptcy.

Can my wages be garnished in Iowa?

Iowa Code Section 642.21 spells out when and to what extent wages can be garnished.

25% of Disposable (after tax) Income
Section 537.5105 generally limits the Iowa wage garnishment to 25% of disposable (after tax) earnings per payday.
Code section 642.21 addresses how much of your wages can be garnished annually based on your income level.

Annual Limits
Wages under:
$12,000/year- $250
$16,000/year- $400
$24,000/year- $800
$35,000/year- $1500
$50,000/year- $2000
Over $50,000/year-10% of Wages

Note: These creditors can also garnish your bank accounts. I have had many many clients shocked when a creditor removes all of the money from their account causing their outstanding checks to bounce resulting in big overdraft fees.

Filing bankruptcy stops both wage and bank garnishment.

Cornell Law on property Exempt from Levy. Exemptions include Unemployment Benefits, Workers Compensation & Child Support.

For student loans, wage garnishment is limited to 10% of net income.

There is some small comfort in the federal regulations which restrict the amount of a student/borrower's wages that can be garnished to repay a student loan to 10% of the borrower's take home pay. See Student Loans and Bankruptcy 59 Fed. Reg § 22473.

Of course, the lender also has the right to intercept tax refunds and apply them to the loan. There's more at the Student Loan Assistance Center

Are my taxes discharged?

If all four answers are YES the taxes should be dischargeable.

1. Are they income taxes?

2. Was the tax return due more than three years ago? (returns are due on April 15th of the following tax year)

3. Was the return filed more than two years ago?

4. Was the tax assessed by the IRS more than 240 days ago?

(see your tax transcript)

Note- Property taxes assessed before bankruptcy, sales taxes and withholding taxes are never dischargeable.

Also- Debt discharged in bankruptcy is not taxable, even if you receive a 10-99. See bankruptcy and taxes owed.

Is it best to file bankruptcy before or after Divorce?

Because 11 USC 523(a)(15) excepts from discharge debt ordered in a divorce decree, it is normally better to file your bankruptcy before your divorce decree is entered.

11 United States Code 523(a)(15): Iowa Bankruptcy & Divorce
(Bankruptcy does not discharge debt ordered paid) to a spouse, former spouse, or child of the debtor and not of the kind described in paragraph (5) that is incurred by the debtor in the course of a divorce or separation or in connection with a separation agreement, divorce decree or other order of a court of record, or a determination made in accordance with State or territorial law by a governmental unit.

Bankruptcy and Divorce.

NY Times- Debt Relief firms Victimize Debtors

June 18, 2010

Peddling Relief, Firms Put Debtors in Deeper Hole

By PETER S. GOODMAN

PALM BEACH, Fla. — For the companies that promise relief to Americans confronting swelling credit card balances, these are days of lucrative opportunity.

In the Kansas City area, Linda Robertson, 58, rues the day she bought the pitch from a debt settlement company advertising on the radio, promising to spare her from bankruptcy and eliminate her debts. She wound up sending nearly $4,000 into a special account established under the company’s guidance before a credit card company sued her, prompting her to drop out of the program.

By then, her account had only $1,470 remaining: The debt settlement company had collected the rest in fees. She is now filing for bankruptcy.

“They take advantage of vulnerable people,” she said. “When you’re desperate and you’re trying to get out of debt, they take advantage of you.” Debt settlement has swollen to some 2,000 firms, from a niche of perhaps a dozen companies a decade ago, according to trade associations and the Federal Trade Commission, which is completing new rules aimed at curbing abuses within the industry.

See the full New York Times bankruptcy article.

Read the real story on Debt Settlement

Debt Settlers Offer Promises but Little Help

By DAVID STREITFELD, NY Times

Tyna Carter, burdened with $25,000 in credit card debt, did not want to be a deadbeat. After looking for help on the Internet, Mrs. Carter, a West Virginia homemaker, wound up in the hands of a sweet-talking “credit specialist” from Texas.

He claimed his company, Credit Solutions of America, could set her on the road to a debt-free life. But what really happened, Mrs. Carter says, is that Credit Solutions pocketed nearly $4,000 of the couple’s income, a little bit each month. Now they are in a deeper hole than ever.

New York Times- Debt Settlers Offer Promise but Little Help

NY Times: "Debt Relief" Headaches

Travis Plunkett, legislative director of the Consumer Federation of America in Washington, said distressed borrowers who cannot produce lump sums to settle with creditors were the most vulnerable to dishonest companies. In some cases, these companies tell consumers to stop paying monthly minimums, explaining that they will negotiate a settlement when borrowers have saved enough. Meanwhile, they take hefty monthly fees directly from clients’ bank accounts.

New York Times: Debt Relief Can Cause Headaches of it's Own

Also Note: Negotiated debt reduction may be taxed as income by the IRS while debt discharged in bankruptcy is not taxed as income.

Wall Street Journal on Pre-Bankruptcy Planning

Rethinking Bankruptcy

Bankruptcy is a key component of this country's safety net. If you plan ahead, it doesn't have to wipe you out.

By BRETT ARENDS

There's a surge in personal bankruptcy filings at the moment, for obvious reasons. Some 30,000 Americans are filing each week, and the figures could top 1.4 million for the year.

But too many people are talking about bankruptcy as if it's a sign this country's social safety net has failed.

It isn't. Bankruptcy is part of the safety net. Other countries have welfare states, America has bankruptcy. And so long as you plan ahead, it doesn't have to wipe you out.

Read Wall Street Journal Bankruptcy Planning Article