Matching the Competition? How about going beyond!

I have written about this before, but it bears repeating. I am not offering smoke and mirrors here, but just straight up information. There is a competitor’s ad campaign that has garnered considerable attention and it promises to get a bankruptcy started for $78.00. The ad goes on to note that certain restrictions and qualifications apply to this offer. And, I am sure they do explain those once your come in to meet with them. I have not interviewed my competitors on this issue, so I cannot say with certainty, but I can only contemplate one way that they can actually get a bankruptcy started for $78.00 and that is in a Chapter 13. It just so happens that you can pay the $310.00 filing fee that the court charges for a Chapter 13 (or the $335.00 for a Chapter 7) in four monthly installments. Each installment for the Chapter 13 would be $77.50 and thus we have you entering into a Chapter 13 paying only that first installment (and rounding it up gives you the $78).

I can do this for you also. However, I would need to figure out how much of a plan payment you would be able to afford because paying payments each month makes up a Chapter 13 in contrast to a Chapter 7. That would be the restriction. The Chapter 13 can run as short as 36 months or as long as 60 months depending on your household income. Attorney fees run higher in a 13 than a 7 but those higher fees can be paid through the plan itself. I only recommend going this route if it is the only way you can get into a bankruptcy and get the relief you need. You must qualify for a Chapter 13 which includes having a regular source of income and that income must be sufficient to pay enough in a plan payment to cover the attorney fees, trustee commission, certain tax debts, and certain secured debt arrears. The hitch with going this route is that the less your pay up front on attorney fees, the higher the plan payment has to be after filing. That may be perfectly fine and work well, I just want you to know that in advance rather than when I have you already in my office. There is also a credit counseling course that must be done through a third party prior to filing and this can run anywhere from $10 to $25 directly to that company. This a legal requirement of the law and not something that can be circumvented.

How would I be able to go beyond a firm that can get you into a bankruptcy for $78.00?  Well, I do all the work myself. From the initial phone call to the initial meeting all the way through to the discharge order being issued at the end of the bankruptcy – it is all with me personally. That is to say, you will not be interacting with secretaries, paralegals or other attorneys (unless there is a true emergency); you will be interacting with me. I will be the familiar face that shows up with you at the meeting of creditors and the same voice on the phone who helps explain things along the way. That is simply how I chose to practice law, by keeping overhead low and doing it myself rather than shooting for high volume. That competitor does a fine job from what I can tell; it just done using lots of staff. If my individualized and personal approach appeals to you, then come in to see me and I will see if I can match any competitors’ offer for a bankruptcy or even go beyond what they have to offer. There is no charge for that initial consultation and I do NOT limit it to 1/2 an hour.

Keeping the Homestead Safe in Bankruptcy: Chapter 13

Bankruptcy continues to evoke this notion of getting something for nothing. For some,that results in feeling a bit of judgment or disdain towards the whole idea of filing bankruptcy or the people who end up there. To that I say, “There, only by the grace of God go I”. Others see it with a bit of a glimmer in their eye as a great way to get free stuff. Both views are askew. Bankruptcy is a tough process to go through that is humbling and often anxiety provoking which is why people prefer to hire a lawyer than attempt it pro se. Few people actually abuse the system; most who file have tried everything they could think of to avoid it, but life’s curve balls and the accumulation of mistakes here and there just prove too daunting without assistance. For those hard working folks who end up in a bad spot, I do what I can to make the process smooth and effective so they can get on rebuilding their lives financially.

One of the things I do to ease the way is to stress the imperative in Chapter 13 bankruptcies that if you want to keep it, you must pay for it. This applies to bigger ticket items with a loan secured against it like a house or a car. Many people opt for a Chapter 13 because they fell behind in their house payments or their car payments but they do not want to lose that property. Well, a Chapter 13 can certainly make that happen, but they must still pay for the house or the car. There are NO free houses out there – and the only free cars are ones your would not want to drive.

Chapter 13 only halts the secured lenders collection process (and helps reduce interest costs in certain ways). That means that foreclosure proceedings for a house are stopped and repossession of a car is nixed. Then, the arrears that had accumulated must still be paid through the Chapter 13 plan payments as well as each ongoing payment as it comes due. Unfortunately, many home owners had the pre-bankruptcy experience of months going by without making house payments before the bank took legal action. That will NOT be the experience in the bankruptcy. The secured lenders are much quicker to file a Motion for Relief from the Stay (the automatic collection halting part of a bankruptcy). This motion allows them to then resume the foreclosure in state court if it is granted.

Often, this motion is filed by the lender quickly after a payment or two is missed as a wake-up call to the debtor. They really just want the debtor to get caught up on their payments and so they typically will enter into an agreed order with the debtor to do just that over the next few months rather than force their motion through. However, this is an exceedingly expensive process. The lenders insist on getting reimbursed for the hundreds of dollars they spent on an attorney and filing fees for that motion. So, you may have used that $1,000.00 house payment or two to buy Christmas gifts or cover an unexpected medical bill, but you will end up eating around $600 or $700 on top of catching up those missed payments.

To make it through your Chapter 13 smoothly and retain your house and car, those payment simply have to be a non-negotiable. There is no wiggle room on secured debt payments in a Chapter 13. If you want to keep it, you must pay for it.

Who wants to file bankruptcy right before Christmas!?!

Well, no one does. That is a given. However, there are a few things to remain aware of if bankruptcy is something you have been contemplating here recently:

1) Any gifts you receive of substantial value at Christmas are going to have to be listed in your bankruptcy on Schedule B and exempted on Schedule C. You will need to individually identify any particular item you received that is worth hundreds of dollars.

2) Any expensive item you purchase, whether keeping it in house or giving it away to someone else, will have to be reported as well. If it is a luxury item, that is something costing more than $650.00, you will be raising red flags and risk losing the discharge of that debt.

3) Your right to receive a tax refund arises on December 31st of each year if you overpaid your income taxes. This is true whether you file a tax return right away or wait until the last minute. That tax refund is an asset of the bankruptcy estate upon filing your petition and must be listed on Schedule B and exempted on Schedule C even if you do not know the exact amount you will be receiving.

If you own a home and have a large amount of equity in that property (equity meaning value minus secured debt), you may have a very limited amount of exemption to put towards these assets mentioned above. Consulting with a bankruptcy attorney prior to Christmas may be a wise gift to yourself.

February Bankruptcy Fees Experiment

An online marketing firm recently approached me about sending me potential bankruptcy clients for a fee per call. It really is an intriguing notion except for one thing. I keep my overhead EXTREMELY low. Because I keep my overhead extremely low, I am able to offer consistently low fees on Chapter 7s and pre-petition fees on Chapter 13s (most post petition fees are paid through the plan). Since part of keeping the overhead low is that I do my own petition preparation rather than a paralegal or secretary. This also eliminates mistakes and quality issues because the work is all done by an experienced attorney – namely myself. If I went with this online marketing option, I run the risk of significantly increasing my overhead.

So, I wanted to conduct an experiment for the month of February to see if I could garner more interest from you, the potential bankruptcy client, while minimizing the impact on my overhead. Anyone who calls, comes in for an initial consult, and retains me to file a bankruptcy in the month of February, 2013 will receive either $50.00 off of their Chapter 7 attorney fees or $100.00 off of Chapter 13 attorney fees. The only other caveat is that the bankruptcy must be filed by the end of March, 2013. While I do not have bargain basement fees for good reason, I do already keep them very lean. I hope to hear from you if you are struggling with debt and believe that you are approaching the bankruptcy as your best option stage. If the experiment goes well, I will be looking at putting certain incentives in on a more permanent basis.

Chapter 13 Plan: What’s in, what’s out?

In a Chapter 13 bankruptcy, everything is driven by the Debtor’s proposed plan. The plan determines payment amount, treatment of secured debts and the assets to which they attach, and a number of other items. You may hear your bankruptcy attorney use the phrases, “pay inside the plan” and “pay outside the plan”. To pay inside the plan means that part of your payment to the Trustee is distributed to that creditor or class of creditors by the trustee. To pay outside the plan simply means that you, the Debtor, must continue to make payments directly to the creditor for that specific debt in addition to your plan payment.

The reason why it may be valuable to you to pay some debts outside the plan is that the Chapter 13 Trustee earns their money by receiving a commission from your payments. This percentage is different from State to State or District to District. In the Eastern District of Kentucky, the Chapter 13 receives around 5.4 or 5.5 percent of each payment. So, the lower your payment, the less you pay in Trustee’s commissions. Likewise, the Trustee has some motivation to get the highest plan payment possible within the structure of the bankruptcy. It is also beneficial, though, to the Chapter 13 to have a successful Chapter 13 – one which the Debtor is able to see through.

Generally speaking, it is in the discretion of the Chapter 13 Trustee what can be paid outside the plan because they are the gatekeeper that recommends approval or rejection of the plan (confirmation or not). In the Eastern District of Kentucky, it is routine for secured debts that will mature (need to be paid in full) later than the end of the plan to be paid outside of the plan. So, ongoing house payments are best paid outside the plan.

Some attorneys prefer to have car payments made outside of the plan even though they will be paid in full before the close of the Chapter 13. This results, though, in having to do a “step-up” of payment amounts when the car is paid off. My recommendation is to pay all car payments inside of the plan. Usually this draws out the payments, allows for a lower interest rate, and possibly a reduction in the principal (this depends on when the debt was incurred). I often find the plan payment actually ends up being really close to what the ongoing car payment was and sometimes even less.

If the interest rate on the car loan is below 4.25%, and the car was purchased within 910 days of the filing date, then paying it outside the plan would be best, even if a step-up payment has to be built into the plan. The step-up payment basically takes whatever that car payment is and adds it to the plan payment the month after the car loan is paid in full.

It is very important that Debtors the importance of remaining current on payments to be made outside of the plan. Failing to make a few payments to a creditor outside the plan can probably be remedied, but the Debtor needs to quickly advise their attorney of the circumstance. Eventually, though, if missed payments are chronic, it will go beyond the point of remedy within the Chapter 13 and the lender will take steps to foreclose. That usually results in changing the Chapter 13 to a Chapter 7 or it means modifying the plan to surrender the house.

Attorney fees in a Chapter 7 or 13

Times remain tough all around despite pronouncements of recovery. It is always true that folks looking to file Chapter 7 or Chapter 13 bankruptcy have a hard time affording legal help for the process. This has become even more difficult in recent times. This can often be worked around in a Chapter 13 where attorney fees can often be paid through the plan itself. However, in n0-asset Chapter 7s, if attorney fees are not collected up front, then they are discharged with every other unsecured debt.

Often, Debtors have continued paying debts that will be included in the bankruptcy and discharged. So, if time permits before filing, those funds can be directed instead toward attorney fees. It can also help to pay the court filing fees ($306) in four installments rather than all at once. This works because the court has the power to dismiss the Chapter 7 if all fees are not paid.

I have also taken the step of reducing my Chapter 7 attorney fees down to rock bottom while still providing all the same services. I have not done a survey and I suspect that if folks call around they may find someone who will quote less, but I was recently told by one client who had called around that my fees were the lowest. I am able to do this because I do not have an elaborate marketing campaign and I keep all my other overhead items low. Even though my Chapter 7 fees are so low, I still do all the work myself.