What is Bankruptcy?

What is Bankruptcy?

Bankruptcy allows individuals, couples, and businesses that cannot meet their financial obligations to be excused from repaying some or all of their debt. Bankruptcy has been in existence since ancient times. In the United States, the rules and procedures for filing bankruptcy are governed by federal law. States are prohibited from legislating in this area of the law.

Generally speaking, there are two types of bankruptcy. In a liquidation bankruptcy, debtors must surrender their property, which is sold, and the proceeds distributed to creditors. In return, all debts are permanently discharged. In a reorganization bankruptcy, debtors are allowed to keep their property. But the debtors must agree to an installment plan to repay creditors a portion of the amount they owe.

Filing for bankruptcy involves submitting a petition and fee to the bankruptcy court. The fee is close to $300 for most personal bankruptcies. The petition will contain sworn statements by the debtors concerning the amount of money they owe, their income and expenses, as well as a complete list of all of their assets. After filing, a court hearing is held to review the information in the petition.

Chapter 7 bankruptcies are by far the most common. These are liquidation bankruptcies in which the debtors must turn over all “non-exempt” property to a supervising officer known as the bankruptcy trustee. Property is exempt if it falls within specific categories of assets that debtors are allowed to keep, such as a certain amount of clothing, household items, tools for work, and in some instances, vehicles and the family home.

The Chapter 7 trustee will take the debtor’s non-exempt property (if there is any), and sell it. The money will be paid to the debtor’s creditors. This may result in creditors receiving a small fraction of their claims. The balance of the debtor’s loans and obligations are forgiven and can never be collected. Creditors who attempt to collect debts that have been discharged face severe penalties under federal law.

Keep Your Property

The fact that a liquidation bankruptcy wipes out debt completely is obviously attractive to anyone who cannot afford to pay their bills. But what about people who have non-exempt property that they do not want to give up? Chapter 13 is a reorganization bankruptcy. It allows debtors to keep their property by agreeing to make monthly payments toward their debt over the course of three to five years.

Chapter 13 bankruptcies offer a number of benefits besides allowing debtors to keep their property. For example, certain types of secured debt, like a car loan, can be restructured by reducing principal to the market value of the collateral, and lowering payments by extending the repayment period to 60 months. Other obligations, like mortgages, student loans, and tax liabilities can be modified as well. Creditors are given no choice in the matter.

Bankruptcy is not available to everyone. Those who have had their debts discharged in a Chapter 7 within the past eight years cannot re-file. For Chapter 13, the waiting period is six years. Too much disposable income is also a problem. Congress has established a “means test” for this purpose. Debtors who make enough money to repay their creditors will be barred from filing a liquidation bankruptcy, though reorganization may be an option.

Businesses that have become insolvent but want to stay in business may be able to file a Chapter 11 bankruptcy. Like a personal reorganization, Chapter 11 allows businesses to obtain protection from their creditors while they put together a repayment plan. Liabilities can be reduced and restructured to give the business another chance at achieving profitability.

Whether a debtor is considering filing under Chapter 7, 11, or 13, they must comply with a vast number of federal laws and regulations. An error at any step of the process can result in the court refusing to discharge the debtor’s liabilities. When the bankruptcy process ends this way, the consequences are disastrous. With so much at stake, hiring an experienced  bankruptcy attorney is a wise investment.

At Fridlin & Associates P.C we have 17 years of experience in Bankruptcy Law.  Please contact our office at 718-372-4400 and find out your rights.

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Characteristics of Debt Free People

Jillian makes $40,000 a year and manages to pay off $35,000 of debt within 2 years. Michael makes $80,000 a year and still owes the same $40,000 in student loans as he did 4 years ago. How does this happen? The answer is simple- Michael has a spending problem. While Jillian primarily makes purchases based on needs, Michael buys anything he wants all the time. Jillian puts a majority of her income toward paying off debt, while Michael ignores his daily compounding interest and continues to attempt and keep up with the Joneses. Why is it that Jillian can make half the amount and yet live debt free? She possesses certain characteristics that Michael does not and is thus able to deny instant self-gratification.

Jillian is clearly goal driven and a self starter, as she continuously focuses on her future and the long term of her life. Jillian is wise as she is able to understand that instant gratification is often times dangerous. Jillian is extremely patient, which allows her to stay on the right track. Jillian is confident and secure in who she is as a person. Jillian is not materialistic; she does not feel the need to keep up with all the world’s trends. Jillian is clearly responsible. Lastly, Jillian understands that a debt free lifestyle requires sacrifice. She is willing to sacrifice constant eating out and weekly movie outings because she understands that these budget cuts are temporary.

Jillian is clearly on the right track, so let’s focus on Michael. The way I see it, Michael has two options- he can either continue the way he is living and end up accruing ridiculous interest that will force him to live paycheck to paycheck for the rest of his life OR he rearrange his priorities and learn to save for a brighter future. While it is difficult to move away from a lavish lifestyle once you’ve experienced it, it is not impossible. If Michael decides to continue living the way he does- he will most likely never be able to truly experience a stress free life. He will eventually realize that he is in too deep and be forced to rethink his finances and possibly have to file for bankruptcy. If he does file for bankruptcy, Michael’s credit history will be ruined for at least 2 years and his financial instability will haunt him for approximately 10 years until his record is completely clean. If Michael decides to marry and create a family, he will most likely spend endless nights arguing about finances and possibly drive away his wife. Even worse- Michael could end up marrying a woman who is just as irresponsible with her finances, which will absolutely force the family to eventually file for bankruptcy. The children will be raised in an angry and stressful environment where they will learn that the way to live is to spend everything on anything. This will continue on for generations until someone decides to break the cycle. And once that someone realizes just how much simpler life is debt free, there is bound to be resentment. If Michael decides to take control of his life and learn how to properly spend and save, he will be able to achieve anything he wishes. They say money can’t buy happiness…That might be true, but money can certainly allow you to do the things that make you happy. Take for example a night out with close friends. If you only have $20 to spend, you will most likely have an average time. However, if you have $1000 to blow on whatever, you will probably order bottle service, get a limo to drive you around, socialize at fancy clubs as VIP guests, and so on. You will absolutely have more fun and worry less with more funds. Thus- save so that you can live without worry.

So, what exactly happens to Michael if he decides to change his lifestyle and focus on paying off debt and saving a majority of his money? There is the good, the bad, and the ugly.

The GOOD– Michael will feel more confident in his ability to control his life as he learns to save money for his future. Michael will be able to afford vacations to beautiful locations such as Paris and Rio de Janeiro. He will begin picking up more educational hobbies, such as reading and writing. Michael will learn the difference between wants and needs and learn how to prioritize. As time goes on- he will be able to slowly start adding fancy activities back into his life.

The BAD– Michael will most likely lose his party friends as he becomes unwilling to go out all the time. This will at first make him feel alone and lame. Michael will have to start over to meet new friends who lead a more modest lifestyle. He will feel weird and not himself at first. Michael will be nervous and afraid because everything will be new and strange.

The UGLY– Michael will realize that many of his friends were not actual friends, which will temporarily break his heart and damage his view of people. This could possibly lead to hatred and discontent.

So what’s the point? If you want to escape debt and live a fulfilling and stress-free life, you have to motivate yourself to change and take the necessary steps to achieving financial freedom. Decide today if you want to change. Make a few short term and long term plans for yourself. Make sure to write these plans down, as this is proven to serve as encouragement and a constant reminder of where you want to be. Confide in someone you trust regarding your plans and ask them to hold you to it. Make it clear to your high-spending friends and family that you are focusing on changing your finances. This way, they will not pressure you to blow all your money. Change your hang out spots and join some sort of a support group to keep you accountable. Lastly, realize that this transformation will not be perfect and you will slip and occasionally over spend. However, it is about how you react that matters. Do not quit simply because it is hard to live modestly. Instead- never cease to remind yourself of where you want to be and focus on the future you always wanted.

If you are struggling with debt and would like to schedule a consultation with Elaine Fridlin, Call Today!

Fridlin & Associates, P.C.

1517 Voorhies Ave, Suite 4

Brooklyn, NY 11235

(718) 372-4400

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What is an Offer in Compromise?

An offer in compromise allows you to pay back your tax debt for less than the full amount you owe. If you are having trouble paying back everything that is owed, or paying back creates a significant amount of financial pressure, you may want to consider this option. The offer in compromise is not guaranteed for everyone. You have to go through a process that takes a hard look at what you are capable of doing financially. The IRS will consider your ability to pay, how much you make, what your expenses look like and how much you own in assets.

If you owe money to the IRS, and are incapable of paying it back, an offer in compromise may be your best bet. Experienced Attorney Elaine Fridlin has handled hundreds of cases concerning offer in compromise and will not let you down. For more information, or to schedule an appointment, call (718) 372-4400.

Source: http://www.irs.gov/Individuals/Offer-in-Compromise-1

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What is Wage Garnishment?

Wage garnishment is a legal order that allows a plaintiff to collect monetary judgment from a defendant. Meaning- if you owe someone money (for child support, student loans, taxes, or unpaid court fees)- the court can legally withdraw a certain amount directly from your paychecks. There are only 4 states in the U.S. that do not allow wage garnishment unless it is tax-related debt.

The most dangerous incident occurs when an individual does not pay taxes on time. The IRS only has a few requirements it must meet prior to having the right to garnish wages. These requirements are:

1. The IRS must have assessed an individual’s taxes and sent a written Notice and Demand for Payment.

2. The tax paying individual must have refused or neglected to pay the ordered tax within the allotted time as described in the written notice

3. The IRS must have sent a written Final Notice of Intent to Levy along with a Notice of Your Right to A Hearing 30 days prior to the hearing.

On top of this- the Final Notice does not have to be received by the offender. So, plenty of individuals are not even aware of the fact that they have been served until they begin experiencing wage garnishment.

What should you, the taxpaying individual, do in such a scenario? Immediately contact an experienced debt attorney who has dealt with wage garnishment. Explain your situation and disclose all information he/ she requests of you. If you or a loved one is facing or experiencing wage garnishment- give us a call today!

Fridlin & Associates, P.C. 

(718) 372- 4400

1517 Voorhies Ave. 4th Floor

Brooklyn, NY 11235

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Top 11 Myths About Bankruptcy

1. Congress ended bankruptcy in 2005

In 2005 the government passed the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA). This new act did not remove the old bankruptcy law, but rather added to and altered the procedures of filing for bankruptcy. The process is now more complex and requires more paperwork, but this is the job of your lawyer- to ensure simplicity and effectiveness.

2. Everyone will know you filed for bankruptcy

This is absolutely not true! Since bankruptcy is public information, if someone specifically searches detailed information on you, they will be able to see your file. Other than that, the only individuals who will know whether you file for bankruptcy is you, your attorney, your creditors, and anyone you choose to disclose such information to.

3. If you file for bankruptcy, you will lose Everything you have

This is the furthest from the truth. Most of the time individuals who file for bankruptcy only lose their debts. There are Federal and state laws in place that exempt and protect certain assets, such as property and 401(K) accounts. We can help you figure out exactly what is exempt for your individual case.

4. You will never own anything again

Following your discharge from bankruptcy, you will be able to own anything you wish. Although bankruptcy stays on your record for 7-10 years, the more time passes, the less important bankruptcy is to lenders. The fact is that lenders have to lend in order to profit. You will be considered a high risk borrower at first, but as time goes on, your past will matter less and less. If you lost your home, you should be able to qualify for a normal rate FHA home loan after 2 years of discharge.

5. You will never get a credit card again

Being as an individual may only file for Chapter 7 bankruptcy once every eight years, once you are discharged from bankruptcy, you are an excellent potential borrower. You no longer have any debt and need credit in order to move forward. This makes you a very attractive loan candidate. On top of this, lenders know you will not be able to file again for almost a decade, so their money is in good hands.

6. Filing for bankruptcy kills your credit

Although bankruptcy remains on your credit for 7-10 years, it does not destroy your credit for this long. Typically, by the time most individuals file for bankruptcy, their credit is already very bad. So, the quicker they file, the quicker they will recover. The only way to kill your credit when it comes to filing bankruptcy is if you miss post-bankruptcy payments. Bankruptcy wipes your slate clean. Your credit is typically restored 2-4 years following a discharge.

7. Both spouses have to file

Although it might make sense for a husband and wife to file for bankruptcy jointly if they have a ton of debt, it is not a requirement. Sometimes it is smarter for just one spouse to file in order to keep the other spouse’s credit in good standing. Even if there is joint debt, so long as the non-filing spouse remains current on payments, the non-filing spouse’s credit will not be affected.

8. Only losers file for bankruptcy

This is an absolute lie! Most individuals who file for bankruptcy are hard working and honest people, who ran out of options. Bankruptcy is a last resort for them. 90% of bankruptcies are the result of uncontrollable events, such as illnesses, divorce, job loss, etc. Only 10% of bankruptcies are the result of financial irresponsibility and lack of intelligence.

9. Chapter 11 is for “Businesses Only”

This is simply not true. The Bankruptcy Code 109 sub-paragraph states that individuals as well as corporations may file for Chapter 11 bankruptcy. In the case you decide to file under Chapter 11, make sure your lawyer is experienced with this type of bankruptcy, as it is the most complex section of the Bankruptcy Code.

10. You must owe a Minimum amount of debt to file

If you are struggling to pay your debt, you may qualify for bankruptcy. Every situation is unique and there is no set minimum to file for bankruptcy. We are here to help you decide whether you qualify and which Chapter best suits your needs.

11. It is super hard and expensive to file for bankruptcy

Different offices charge different fees for filing bankruptcy. Because we understand that filing for bankruptcy is the last resort for you, we offer free consultations for all bankruptcy clients. As far as the difficulty of filing for bankruptcy- do not worry! This is your lawyer’s concern. Our goal is to make this transition in your life as painless and simple as possible.

Contact us today for a free consultation.

Fridlin & Associates, P.C.

1517 Voorhies Ave, Suite 4

Brooklyn, NY 11235

(718) 372-4400

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What is a loan modification?

A loan modification is a change made to the amount that one may have to pay monthly. It is also known as a mortgage modification, a workout plan, and “restructuring.” One may get a loan modification if the borrower is facing financial hardships or has an issue keeping up with monthly payments. A loan modification sets up payments so that the borrower can comfortably pay back what he/ she owes. The lender may let this happen in a variety of ways. Lenders can allow homeowners to pay at a lower interest rate, skip payments, and possibly even extend the term of a plan so that the monthly payments are less.

If you are having trouble keeping up with monthly payments, and want to avoid foreclosure, come in for a consultation. New York Top Attorney Elaine Fridlin may be able to help. Call (718) 372-4400 for more information or to schedule your appointment today.

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The Advantages of Chapter 7 Bankruptcy

If you, the debtor, meet the necessary criteria, filing for Chapter 7 Bankruptcy might be a wise choice. Many debtors prefer Chapter 7 over Chapter 13 because Chapter 7 Bankruptcy discharges a larger number of debts. However, there is a catch. A debtor has to qualify for Chapter 7 filing by making below a certain amount of income. The trustee of the debtor also sells some of the creditor’s property that is not exempt. The money is then used to pay creditors and debt is discharged. Although the debtor does lose some property, Chapter 7 allows the debtor to start over quickly and rebuild credit without losing all future income. Most debt can be discharged, with the exception of some tax debt, child alimony, student loans, and debts acquired via fraud/ illegal activity. Chapter 7 typically lasts a few months when compared to Chapter 13, so debts are discharged quickly.

If you cannot seem to pay off your debt- give us a call today and schedule a free consultation. We will help you achieve the financial freedom you so strongly crave.

Fridlin & Associates, P.C.

1517 Voorhies Ave. Suite 4

Brooklyn, NY 11235

(718) 372- 4400

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