2. Why do they just want your money? Because that is how they get paid. They get a percentage of what you pay.

3. You already feel bad for not paying the bill, (if you owe it) and they will play on that. They will tell you that only “bad” people do not pay their bills, and you are not a bad person, are you?

4. You already feel bad for not paying the bill, (if you owe it) and they will play on that. They will tell you that only “bad” people do not pay their bills, and you are not a bad person, are you?

5. Some of my favorite bankruptcies are those that I file for bill collectors. Do you really think that jerk that is trying to intimidate you into paying your bill, has never had a bill that he could not pay? He probably has a terrible credit score!

5. Bill Collectors are almost certainly collecting this debt for another entity who sold your debt to them for pennies on the dollar. In other words, they may have bought your $10,000.00 credit card balance for $500.00. In this example, anything you pay them over $500.00 is pure profit.

6. Even if you “settle” with them, they will issue a 1099 debt forgiveness form to the IRS on the debt that they forgave and place dings on your credit. So, how does that “settlement” help you…….? Debt consolidation almost never works either. If you owe five creditors $1,000.00, and you consolidate those bills so that you owe one creditor $5,000.00, what have you saved besides postage?

7. This debt they are collecting may be totally uncollectable in court because it is barred by the statute of limitations. That means, it may be too late for the actual creditor to sue you in court. It may still be on your credit report, but you have a valid defense in court for not paying if it is barred by the statute of limitations.

8. Do not believe anything they say about bankruptcy, or any other law. Debt collectors are not attorneys and can not give you legal advise. If they try to give you legal advise, they are practicing law without a law license. If an attorney representing a creditor contacts you, he can not give you legal advise if he is representing the creditor.

9. You cannot go to jail for not paying a bill. In Texas, you can go to jail for not paying child support. You can not go to jail for not paying a bill.
hughes_zoo: 10. A “Pay Day” loan is dischargeable in a bankruptcy case. Pay Day loans can be “included”, in fact must be included, in all bankruptcy filings. You will not go to jail for not paying a Pay Day loan. A Pay Day Lender can not put you in jail. The only individuals who can prosecute you for a crime are a U.S. Attorney or a District Attorney, not a Pay Day Lender.

If you have debt and are being harassed by bill collectors, contact our office for a free initial consultation. Learn the truth about how to resolve your financial problems.

When you file a bankruptcy case,  you must list all of your assets and all of your debts. Unsecured debts are discharged giving you what is often called a “fresh start”.  Pay Day loans are a form of unsecured debt, and are completely dischargeable in your  bankruptcy case.

Pay day lenders will tell customers that they will go to jail if they don’t pay their Pay Day loans.  This is not true.  Telling someone that they will be prosecuted or go to jail for not paying a Pay Day loan is a lie. To be guilty of writing a worthless check, the person writing the check must have written the check with the intention of defrauding the party receiving the check. Since the Pay Day lender knowingly accepts post dated checks when the Pay Day loan is made, the Pay Day lender knows that the check is not good at the time it receives the check.  If the customer had the money, the customer would not need the Pay Day loan…..right?!

However Pay Day loans, while marketed as a loan to be used on a one-time basis, are in reality taken out by people when they are very vulnerable and desperate.

Here are the facts:

●    The high interest rates (usually shown as a fee for borrowing the money) make it difficult for borrowers to repay these loans. I personally have seen potential clients come in with fees that equate to interest rates of 475% to 650%.

●    Because they are difficult to repay, many consumers end up paying additional “fees” and rolling the loan over.  This causes the Pay Day loan to increase dramatically.

●    Many consumers end up very much more than the amount that they originally borrowed, putting them into much worse financial shape.

Many Pay Day loans state that their interest rate is 18%.   That does not sound horrible, until you consider  the term (length) of the Pay Day Loan is usually only two weeks! Since there are 52 weeks in a year, a simple estimate of the annual percentage rate (“APR”) would be at least 26 x 18%-or 468% (not including any late fees or any compounding of interest)!

Say I borrow $300.00 from you (a Pay Day lender)  and we agree to a 18% interest rate.  Assume further that every two weeks you add a $15 late fee after every missed payment. Now assume I am not able to pay you back in time, but six months after you make me that $300.00 loan, my grandmother dies and I inherit $3,000.00.  Surely I now have enough money to pay back that $300.00 loan…..Nope!

Here’s how the debt for that Pay Day loan would be calculated:

- 2 weeks – $300 x 18% = $354 + $15 (late fee) = $369.00

- 1 month – $369 x 18% = $435.42 + $ 15 = $450.42

- 3 months – $793.65 x 18% = $936.51 + $15 = $951.51

- 6 months – $2,710.27 x 18% = $3,198.12 + $15 = $3,213.12

Sounds like a loan shark…..doesn’t it?…..and we have gutted our usury laws and so this is not a usurious loan!

Many payday lenders actually discourage customers to pay on time. Can you now see why?  However, the effect is a cycle of debt that is hard to escape leaving many people with no alternative but to file bankruptcy.

It’s easy for those of us who don’t need to resort to Pay Day loans to say “don’t do it.” But the reality is that in this economy many people are desperate for money and so resort to this kind of vicious lending. It’s a matter of getting the Pay Day loan or facing  eviction, or perhaps getting a Pay Day loan or losing your car.

Pay Day loans are financial heroin. They result in the borrower being caught in a never ending cycle of debt. If you believe that you have to borrow money from a Pay Day lender because of your debt, this is a sure sign that you are experiencing financial problems. If you are caught in this financial trap, seek advice from a bankruptcy lawyer who can evaluate your entire financial situation.

Bankruptcy may be the right choice for you, especially if you are drowning in Pay Day loans. Bankruptcy is a legal honest way to give you a financial fresh start.

Make sure and tell your bankruptcy lawyer about all of your Pay Day loans so that all of your Pay Day loans can be included and discharged in your bankruptcy case.

If you have contacted another law firm and they have quoted you a very low fee for a bankruptcy, for example $200.00 or something like that, they are quoting you the fee for a Chapter 13 three to five year wage garnishment bankruptcy.  After all, the filing fee that all law firms have to pay to file a Chapter 7 or Chapter 13 bankruptcy case is approximately $300.00, so obviously that law firm would have to charge you more than the filing fee in order to  represent you for three to five years while you are in bankruptcy.  That low fee indicates that they were quoting you a Chapter 13 and they would actually charge you more that we charge for a Chapter 7 because the remainder of their $3,000.00 in court ordered fees, plus expenses, would be paid by you through a wage garnishment over a three to five year period.  Remember, what Mama used to tell you, “If its too good to be true, don’t believe it”.  As you consider bankruptcy relief, make sure and ask the most important question to the law firm you are consulting with – “Are you quoting me a fee for a Chapter 13 wage garnishment, or a Chapter 7 which never has a wage garnishment.  Again, we believe our clients are best served in a Chapter 7, 98% of our clients file Chapter 7, and you are in and out of bankruptcy in less than four months with no wage garnishment.

The Trustee has a duty to administer non exempt assets if those assets are worthy of administration. For a tax refund to be worthy of administration the refund must be large enough to justify the time and effort to take and distribute the money to unsecured creditors

If the debtor can wait to file his bankruptcy, then often the simplest solution to the problem is to have him file the return and then receive and use the refund.

However, this is not always possible.

If the debtor is having his wages garnished or a garnishment is scheduled to begin, it may be necessary to file before a refund can be received. Timing issues will also occur if a house is in foreclosure, or a car is about to repossessed.

If the debtor cannot wait for whatever reason, the following factors will determine whether the refund will be taken:

1) As previously discussed, is the amount of the refund worthy of administration? This is an issue of local practice and will often vary from court to court.
2) Is any portion of the refund for Earned Income Credit. It is necessary to check state law on this issue. In Louisiana, Earned Income Credit is specifically exempt, so a debtor with Earned Income Credit keeps it.
3) Does your State have a “Wild Card” or “Cash” exemption? Some states allow a certain amount of cash to be treated as exempt from creditors, other states have what is refereed to as a wild card exemption that will allow a debtor to exempt an item that is otherwise not exempt. Louisiana has no such exemptions.

As can be seen the timing of a bankruptcy when a tax refund is expected depends on many factors. Local practice and State law being the major considerations.

There are three major problems for home owners in a short sale of their residence:

1) A short sale, that does not pay all debt against the property, may still leave a balance due that can be collected by the creditor.

2) A short sale can result in a debt cancellation income that is reportable on the homeowner’s tax return.

3) A short sale resolves no issues other than the ownership of the home.

While there may be some benefits of a short sale, in many cases, if not handled carefully, it can do more harm than good.

Lender will often release their secured interest to permit the sale of a home with too much debt. However, unless it is required by the borrower, lender paperwork often leaves the issues of the unpaid balance unresolved. If the borrower is not released from the debt and the unpaid balance is not extinguished, the note can be transferred to a collection agency or other party for collection. This is particularly true in cased where there is a second lender that is paid nothing to release its lien on the home.

If the short sale occurs before December 31, 2012, and the loan for which a part was extinguished without payment was used exclusively for purchase or improvement of the home, The Mortgage Forgiveness Debt Relief Act of 2007 will exclude cancelled home loan debt from income. That law, originally scheduled to expire December 31, 2009, has been extended by congress through the end of 2012. It protects a homeowner from up to $1,000,000 in debt cancellation income or up to $2,000,000 if a married couple. The property must be the primary residence of the borrower.
The fact remains that many homeowners who fall behind on their home loans or who face home loan debt that substantially exceeds the value of their home have other debt problems. A short sale of the personal residence only relieves them of the debt associated with the home. It does nothing to address other consumer debt that may be draining family financial resources.
While bankruptcy is not a solution to all problems, it resolves most consumer debt problems at the same time. It also eliminates the problem of tax on income derived from cancelled debt and prevents holders of unpaid notes from later collecting the balance that remains unpaid. Those notes can still be collected in many cases along with interest and attorney fees or other collection costs.
A Chapter 13 bankruptcy can be used to bring a defaulted home loan current and rescue it from foreclosure or even remove a second loan from the home under the right circumstances. Only an experienced bankruptcy attorney can properly advise you as to the best course of action.

CANCELED DEBT SOUNDS GOOD  

We all know that wage income is taxable.  Take a look at your latest pay stub and remind yourself just how much the government actually takes.

But what are the tax ramifications of canceled debt? Is canceled debt treated the same way as regular income?  Will you end up owing the IRS because of a debt settled or canceled by a creditor?

By a “canceled debt” I mean that portion of a debt that a creditor is unable to collect from you and is latter “written off”.  Its that pile of bills you have no ability to repay and is basically not collectible.

First, lets consider some examples.  What if you borrow $100,000.00 from a bank and then default after only repaying $20,000.00?  How should the $80,000.00 unpaid portion be treated by the Internal Revenue Service?  Here is another example.  If you owe $8,000.00 on a Visa credit card and stop making payments, how should the creditor’s loss be treated on your federal income tax return?

Generally, a creditor’s loss is your income gain. When a creditor loses hope of collecting a debt, they may cancel the debt and report the amount canceled to the IRS using form 1099-C (Cancellation of Debt).  Then, when tax season arrives, the creditor sends you and the IRS a 1099-C form which reports the canceled debt to the IRS as income

That is why may debt management, or debt consolidation programs are dangerous. While they may be marginally successful in getting your phone to stop ringing from the debt collectors, they cannot prevent the IRS from knocking on your door wanting to tax you on the canceled debt.

BANKRUPTCY DISCHARGE IS MUCH  BETTER 

This is not to say that a creditor won’t still attempt to send a debtor with a bankruptcy discharge a Form 1099-C.  The solution for one who has filed bankruptcy, however, is to file IRS Form 982.  This can exclude the amount of discharged indebtedness from your gross income.

CHARGE OFFS 

Don’t confuse “canceled” debt with “charged off” debt.  A “charge off” means the creditor has removed the account from its active books and likely sent the account for collection or sold the account to a debt buyer.  You may see “charge off” on your credit report, but that does not mean you don’t owe the debt.  You still owe the money unless the debt was canceled with a 1099-C or the debt was discharged in bankruptcy.

As a Killeen Bankruptcy Attorney and a Waco Bankruptcy Attorney, I  have found that not to be the case.

We have many clients who come to us for repeat bankruptcy filings because we discharged their debt in one bankruptcy case, they obtained credit again, and now need to file bankruptcy again.  We certainly do not recommend multiple filings.  However, the fact that this happens proves to us that people do receive credit after bankruptcy.

If you are contacting a bankruptcy attorney, you probably have a serious debt problem that needs to be addressed.

Many clients with massive amount of credit card debt tell us, “I have a great credit score!”  That doesn’t mean that they have good credit…..that just means they pay their bills on time!

And, they might be current by making just minimum payments on their credit cards and  their credit score is still high.  However, a job loss, layoff, divorce, illness, puts them in the unexpected position of not being able to pay their bills. The money just isn’t there to continue this juggling act any longer.

After Bankruptcy, Restoring Credit Rating

Remember a few key points:

1. It is not bankruptcy that wrecks your credit, it is not paying your bills.
2. People who cannot pay their bills are the ones who file Chapter 7  bankruptcy or Chapter 13 bankruptcy.
3. If you do not file a Chapter 7 bankruptcy case or a Chapter 13 bankruptcy case,  you still will not have the money to pay your bills, and will still have a bad credit score.

A good credit rating comes from paying your bills on time.  That is the only way.
Watch out for the scam companies with the magic formulas, who say they can get bankruptcy off of  your credit report.  They are truly scams.

You will still pay for your vehicle and home mortgage after you have filed for bankruptcy, if you want to keep these assets.  You will also continue to pay your  gas, electric, phone, cable, and internet bills if you want to keep these services. Paying these bills on time will help restore your credit.

Will you keep paying on a vehicle or mortgage after you have filed a Chapter 7 bankruptcy case or a Chapter 13 bankruptcy case?  Yes.  Also, after your bankruptcy case is filed you have a right to examine your credit report and make any changes to it to make it correct.  This can help your credit score.

If you are renting, paying your rent on time that will help your credit score.

Yes, you pay higher interest for credit cards  after filing a Chapter 7 bankruptcy case or a Chapter 13 bankruptcy case.  However, after all of  your credit card debt is discharged in a Chapter 7 bankruptcy case we advise clients to not incur large debt to credit card companies again.  If you don’t have those large balances, you won’t have those high interest rates!

Most of our clients are offered credit cards while they are still in their Chapter 7  bankruptcy case.  Its not a bad idea to accept one of those cards, charge a tank of gas on the credit card, and pay that debt off each month.  Continue to make those small charges and pay the balance off each month.  This will help improve your credit score  and will teach the discipline of living on a monthly budget.

To learn more about filing a Chapter 7 bankruptcy case or a Chapter 13 bankruptcy case, please feel free to visit our website at www.centraltexasbankruptcy.com.

However, as a Waco Bankruptcy Attorney and a Killeen Bankruptcy Attorney, I find that most of my clients that file a Chapter 7 bankruptcy case want to keep their home. Obviously, you must to be able to make the monthly mortgage payments on your home after you file your  Chapter 7 bankruptcy case if you want to keep your home. You must also keep the home insured, and keep the property taxes on the home paid, just like you were required to do before you filed your Chapter 7 bankruptcy case.

When you file a Chapter 7 bankruptcy case, you are discharged from the debt owed to your home mortgage company.  Their lien or mortgage on your property is not discharged and if you want to keep the home you must keep making your monthly mortgage payments.  If you move, get fired, get divorced, get sick…..or experience anything that renders it impossible or too difficult to make your mortgage payments, you can stop making the mortgage payments and let your mortgage company foreclose on your home.  If the home is sold at the foreclosure sale for less than you owe against it, you are not liable for that deficiency.  Continuing to make the mortgage payments after the bankruptcy discharge is received does not reinstate your personal liability on the home mortgage.

Mortgage companies sometimes send us “Reaffirmation Agreements” and we are asked to sign them and have our clients sign them when the clients are in a Chapter 7 bankruptcy case.  A Reaffirmation Agreement “reaffirms” or “reinstates” your personal liability on the home mortgage as if there was no bankruptcy case filed.  If you reaffirm the debt during your Chapter 7 bankruptcy case and then do not pay it, you owe that debt as if you never filed bankruptcy.  If you do not or can not make your mortgage payments, your mortgage company will foreclose on the home and then attempt to collect from you the deficiency after the foreclosure sale.

Do you have to reaffirm your mortgage debt in order to keep your home? Do you have to reinstate that personal liability on your home as if there was no bankruptcy order to keep your home?  The answer is simple….no.

I have yet to see a mortgage company in Texas foreclose on someone’s home, after a Chapter 7 bankruptcy case is filed who was keeping the payments, home insurance and property taxes, just for not signing a reaffirmation before the Chapter 7 discharge.

Chrysler and Ford Motor Credit will repossess your car or truck that you are financing with them if you do not reaffirm their debt.  These companies lobbied Congress in order to get special provisions in the Bankruptcy Code that only apply to car lenders in Chapter 7 bankruptcy cases.  Therefore, many times we do reaffirm debt owed to these lenders if the clients want to keep their cars after their Chapter 7 bankruptcy case is filed.

Home mortgage debt is different. I look at the upside versus the downside. I see no downside to not reaffirming. Some  banks and mortgage companies say they will not inform the credit reporting agencies that you are current on the payments unless you reaffirm their debt. However, you have the right to include accurate information in your credit report. You can add you correct information to your credit report  at least once a year, yourself, without them. They are required to give you at least annual statements reflecting your outstanding mortgage.

The downside?  Big .You reaffirm, something else goes wrong, and you cannot stay current, they foreclose for the $100,000 the house is worth, and chase you for the $40,000 difference. Unless you are getting some fantastic modification, we typically advise our clients not to reaffirm their home mortgage debt.

To learn more about options under Chapter 7 bankruptcy and Chapter 13 bankruptcy, please visit our website at www.centraltexasbanrkuptcy.com