Most people encounter financial difficulties from time to time, but what happens when the debt becomes overwhelming? Robert H. Solomon, a bankruptcy attorney on Long Island, NY, lists the following warning signs of serious financial problems.
Ø You use credit cards to pay for groceries, utilities, rent or other necessities.
Ø You struggle to make the minimum payments on credit cards.
Ø You borrow money from one card to make the payments on another card.
Ø You let your phone go to voice mail in order to avoid creditors.
Ø Your credit cards are maxed out.
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The days of easy bankruptcy filing passed with the Bankruptcy Reform Act of 2005. While consumers are still allowed to represent themselves in court, they are strongly encouraged to seek assistance from an attorney. In order to reduce the number of bankruptcies the law now requires debtors to explore other financial alternatives first. Failure to do so will result in your petition being denied. NY bankruptcy assistance also includes providing access to the type of credit counseling required by the court before a person can file for relief.
Understanding Bankruptcy Options
Another change made by the Bankruptcy Reform Act of 2005 was adding the “means tests”, or income limits, to Chapter 7 bankruptcy. Chapter 7 is a complete discharge of your debts without any repayment to your creditors. People who file for bankruptcy are hoping to get all of their debts canceled while retaining all of their assets. However, if your income exceeds certain minimums, you may not to file Chapter 7. Instead, you may qualify for Chapter 13 protection. Chapter 13 is a court ordered debt consolidation, which provides the protections of Chapter 7 and discharge, but requires repayment of a portion of your debts over a 5 year period with no interest. A bankruptcy attorney in NY will assess your income and expenses and show you what you qualify for under the law.
While bankruptcy is a federal issue, individual states have set up their own asset exemptions. An asset exemption protects property from being taken in Chapter 7 to pay debts. For example, if you are in a trade the courts cannot take the tools you need in order to continue working. In addition, a certain dollar amount is allowed for home equity, a vehicle, and some other items. The exemption amounts vary between jurisdictions, so it is important to seek NY bankruptcy assistance in order to take advantage of all of the protections provided for in your area.
What Not to do Prior to a Bankruptcy
When a person is struggling to make ends meet, balance transfer offers appear tempting. The consumer is given a new credit card and encouraged to transfer other card balances “interest free” for a limited period of time. The prospect of paying off a high interest balance with a lower payment loan is inviting, but what frequently happens is that the consumer begins to charge up the card they just paid off in a frantic effort to keep up. When a bankruptcy court sees this pattern it may suspect you of trying to defraud creditors and deny your petition.
Other behaviors which raise red flags include giving one creditor preferential treatment while ignoring other obligations or transferring property to family members in order to protect it from being sold by the court to pay debts. Unnecessary credit card purchases and large cash advance loans acquired within the months leading up to bankruptcy filing can also result in a fraud charge.
Another mistake sincere debtors make is to empty their 401Ks and other retirement accounts to pay off consumer debt. If a person is headed for bankruptcy there is no reason for them to use all their retirement money which is generally considered exempt property. Before doing something like this speak with a bankruptcy attorney in NY to determine what decisions will leave you in the best financial situation.