San Fernando Valley Bankruptcy Blog
Not all debt is created equal, according to a recent post on Yahoo Finance. The article explains that your biggest debts aren’t necessarily the ones you want to pay off first. As an example, the author cites a story from a certified financial planner (CFP). A young woman came in to her office, distraught over her debt. She owed $250,000 in student loans and $25,000 in credit card debt. The woman was focused on paying off her student loans first. The CFP explained that she should concentrate on paying off the credit card debt first, because it had higher interest rates. It make sense if you think about it, federal student loans have interest rates of four to six percent while most credit cards charge around 16 percent. Since higher interest debt grows at a faster rate, you’ll want to pay that off first. But there are other factors involved when managing one’s money. For instance, it may not be wise to pay off all your debt before investing in your retirement. You need to take advantage of the tax breaks you get for retirement savings and the matching funds you get with 401(k) plans. This type of knowledge is why you should regularly consult a financial expert. Unfortunately, many Americans don’t take a hard look at their finances until it’s too late. If you find yourself in debt trouble, you may be in need of an experienced debt reduction attorney. The legal team at the San Fernando Valley offices of Nader, Naraghi & Woodcock, APLC has been helping people get out of debt for 20 years. Call them at (800) 568-0707 for a free consultation.
Chapter 7 Bankruptcy will completely relieve a person of all their unsecured debts, with the exception of tax burdens and student loans. But to be able to file for Chapter 7 Bankruptcy, you will first need to pass the “means test.” The means test is designed to determine if you have the means to pay off your debt over a reasonable amount of time. The test takes into account your income, expenses, and the size of your family to determine if you have enough disposable income to pay back a substantial amount of what you owe. The first question on the test is whether you make more or less than the median income in your area. This is important because the median income is going to be quite a bit higher in Beverly Hills than it would be in Sylmar. If you do make less than the median income for your area, you don’t have to take the rest of the test. But if you make more than the median income, you aren’t necessarily relegated to filing for the less forgiving Chapter 13 Bankruptcy.
Most Americans carry a substantial amount of debt, and many let it get out of control. If you find it increasingly difficult to pay your bills, you might want to consider approaching one or more of your creditors with the intention of making a debt settlement. The bottom line is, your creditor wants to get paid; and they would rather receive some of what you owe, rather than nothing. With this in mind, sit down and add up all you owe each month. Compare that with your monthly income and expenses, and figure out exactly how much of your debt you can afford to pay each month. Armed with this amount, contact one or more of your creditors and inform them that you want to arrange a debt settlement. When you speak with a creditor, explain to them that you want to avoid bankruptcy. This will make them aware that, if they don’t try to negotiate with you, they may end up getting nothing. When they agree to negotiate, start by offering about one quarter, or 25 percent, of what you can afford to pay. The creditor will, of course, want more, but you want to start the bidding as low as possible.
Unfortunately, the answer to that question is “yes.” Wage garnishments or attachments are complicated matters. They are complicated for the creditor who is pursuing them, as well as the employer who has to carry them out. With the exception of court ordered child support, unpaid child support, unpaid taxes, and student loan debt, a creditor has to sue you in court and win in order to garnish your wages. This means that the creditor has to weigh whether your debt is worth the cost and hassle of launching such a lawsuit. In a case where you owe a substantial amount of debt, a creditor will definitely take the steps needed to garnish your wages.
Many people consider bankruptcy a symptom of failure, both fiscally and morally. But an article published in The Huffington Post this year seems to suggest otherwise. The article, entitled “Here Is Exactly Why People Who File Bankruptcy Are Smart,” claims that a person’s immediate debt is nowhere near as big a problem as their future debt. That may sound counterintuitive, but think about it, would you rather get rid of your debt now, or have it waiting for you when you reach retirement age? In other words, deal with your debt now, so you don’t have to deal with it in the future. The article even cites a study by the Federal Reserve Bank of New York which found that people who file bankruptcy do better, financially, than those who don’t. If you’re still unsure that bankruptcy can be a positive thing, let’s look at some notable and successful people who’ve declared bankruptcy in their lifetime (hint: they include famous artists, athletes, titans of industry, and four presidents).
The Federal Debt Collection Practices Act (FDCPA) has two purposes: To protect consumers from harassment by debt collection agencies, and to protect law-abiding collection agencies from dishonest collection agencies.
How does the FDCPA do this?
The FDCPA sets strict guidelines for how collection agencies can do their job. First of all, collection agencies are not allowed to lie to debtors. For instance, a collector cannot say “We’re going to garnish your wages!” if they don’t actually intend to do that.
Filing for bankruptcy won’t necessarily make all of your debts instantly go away. The old saying that nothing in life is certain except “death and taxes” has some truth to it. While Chapter 7 bankruptcy can eliminate credit card and other unsecured debts, it won’t get rid of most tax debts you may owe. However, you may be able to get rid of federal income tax debt (not payroll tax debt or fraud penalties) through Chapter 7 bankruptcy IF all the following conditions are met:
If you are struggling with debt, the last thing you want to do is put your job in jeopardy. Employers won’t want you pulled away from your work duties to take collection calls, or have their phone lines jammed up while they’re trying to conduct business. Fortunately, the Fair Debt Collection Practices Act (FDCPA) has established strict guidelines for when and where debt collectors can contact you. First of all, collectors cannot contact debtors at inconvenient times, such as before eight in the morning or after 9 p.m. They also can’t contact you at inconvenient places, like at schools, churches, funerals, hospitals, etc. The FDCPA also forbids debt collectors from communicating with debtors at their place of employment if they know, or have reason to know, that the employer doesn’t want them contacting their employees. Collectors also cannot contact debtors at the workplace if the debtor asks them not to, either orally or in writing. And contacting or communicating isn’t limited just to phone calls, it includes mail, email, faxes, and texts.
If you’ve become overwhelmed by debt, you may find yourself feeling desperate and anxious. But you need to relax, because the bankruptcy and debt reduction attorneys at the San Fernando Valley offices of Nader, Naraghi & Woodcock, APLC have a toolbox full of remedies for your predicament. Yes, both Chapter 7 and Chapter 13 bankruptcy are options, but not the only ones. One option you may want to consider is consumer credit counseling. A consumer credit counselor can help you develop a workable budget and payment plan to follow. The counselor can also reach out to your creditors to see if they’ll reduce interest rates and payment amounts. Creditors are more likely to take such actions if they see you are working to change your debt situation. But be careful, not all consumer credit counseling services are reputable and you may end up in more debt than you started with. Talk with an experienced attorney before you take any action.
For some contemplating filing for bankruptcy in Los Angeles‚ the move is preceded by the ending of a marriage.
It is common for couples who are separating to be faced with a host of money struggles. This is born not only of the fees associated with filing for divorce‚ but also with the new financial reality of maintaining two separate households while still attempting to manage all the same prior debts and obligations. Sometimes‚ the dissolution of the union was predicated on financial disagreements or dishonesty. Read the rest »