Spousal Privilege

I came across a good article about the interactions between spousal privilege and the attorney client privilege.  This issue doesn't come up all that often in a Bankruptcy context but understanding the limitations of these privileges can still be quite useful to the readers of this site.  This understanding can help to ensure that confidential communications between spouses and between attorney and their clients remain privileged.

Jason Miller the author of the article is an up and coming legal superstar.  If you are considering law school it might be worth a look at his book on that topic as well.  

                                                                    

Either way check out the short article on privilege.  

Do I have enough or too much debt for Bankruptcy?

The short answer is if you have debt you have enough and you don't have too much.  In an overwhelming percentage of cases individuals can qualify for some form of bankruptcy.  

I have noticed that a significant percentage of my page traffic results from people attempting to find the answer to some variant of this question. “How much debt do I need to have to file Bankruptcy?” Sometimes it is phrased differently.  They may ask "Is $10,000 in debt enough to file bankruptcy?"  Or they may even ask if $100,000 dollars is too much to file bankruptcy.  It could literally be all sorts of variants on this theme.  In the end though it all amounts to “Should I file?”  or given my situation is bankruptcy a good idea for me?

This is the fundamental question that my book “Should I File: A Definitive Guide to Bankruptcy” attempts to answer and for that reason I think these people would be well advised to take a look at it.  It can be bought by clicking various links on this site or just by going to Amazon and typing it in.

For those of you who aren't sure if you want to buy the book I did address this issue briefly in a previous post entitled “Ok, But do I Qualify? This post answers the basic question of whether or not you qualify. 

Additionally you might want to consider whether or not Bankruptcy is right for you and your circumstances. 

A consult with a qualified bankruptcy attorney should help you to resolve this issue but keep in mind they make money by filing bankruptcies and therefore some of them may be more interested in talking you into filing than actually steering you in the right direction.  I have known many good bankruptcy attorneys but I have also known some that were less than scrupulous.  Be careful when selecting one.  The best thing you can do is educate yourself in advance.  Keep reading this site, consider buying the book which at fifteen dollars is a lot cheaper than being talked into a bankruptcy you don’t need.  

The book will help you avoid making a rash decision and will also help you select a good attorney if you determine that bankruptcy is the right choice for you. 

Bankruptcy can help but it can also be painful particularly if it is not handled competently so make sure its the right choice for you and that you have quality legal assistance before jumping right in.  

Rebuilding Credit after Bankruptcy

The good news is that your credit will take care of itself.  If you pay your bills on time and don’t over load yourself with new debts, your credit will heal itself.  The amount of time it takes to repair your credit is dependent on you.  It takes 10 years for the Chapter 7 bankruptcy to clear off your credit report for good.  So the worse case you wait 10 years, but the good news is that you can repair credit much faster by taking a few simple steps. 

• Pay whatever bills you have on time all the time.  You no longer have any margin for error.  I don’t think that this should be too difficult since you no longer are overwhelmed by debt. 

• Get a small credit card or a store card.  Use it a little but make sure you pay it off every month

            Perhaps buy a single tank of gas a month on it.  Whatever you do make sure you put the cash away to pay it off you can’t afford to fall back into the same situation.  This will take discipline but it is worth the effort. 

            Establishing good credit takes work but it is fundamentally about having a low debt burden relative to your income and paying your bills on time.  Once the bankruptcy is complete you should have already reduced your debt burden.  All that is left is to pay your bills on time.

            You are better off not having credit than abusing credit.  It’s up to you, but if you aren’t sure that you can handle a credit card then don’t get one.  Don’t go finance a car at 18 percent interest.  Make smart decisions and you will be able to buy a car for cash or at the very least get a reasonable interest rate.  If you are considering a big purchase, put the projected payment amount away for a couple of months before hand.  This will do two very important things for you.  One it will show you if you can afford the payment.  If you are having trouble saving the amount of the payment then it is probably too high.   You should also save and put away the amount of an increase in costs associated with the purchase (extra insurance, fuel, etc.)  The second reason to do this is it creates a buffer for you if something changes.  If you keep two months expenses on this purchase in a separate account the money will be there if an emergency occurs. 

            Finally before you buy anything or get any credit, do yourself a favor.  Make sure you understand how much you make and where it goes.  Write a budget, they may not be fun but a good budget is almost guaranteed to improve your credit and your life over the long run.  You will be able to see what you can and cannot afford.  You will be able accurately understand your true financial picture.  This kind of understanding is essential to avoid the mistakes that got you to where you were. 

            You’re done now, you can’t change the past but you can make sure it doesn’t happen again.  I wish you the best of luck and know that you can get through this process.  I have helped hundreds through it and my colleagues have helped millions.  There is no reason that a bankruptcy should ruin your life.  

What is a Discharge in Bankruptcy?

The United States Courts website provides the following description of a discharge. 

“A bankruptcy discharge releases the debtor from personal liability for certain specified types of debts. In other words, the debtor is no longer legally required to pay any debts that are discharged. The discharge is a permanent order prohibiting the creditors of the debtor from taking any form of collection action on discharged debts, including legal action and communications with the debtor, such as telephone calls, letters, and personal contacts.”

             While this description is accurate it can be a bit confusing.  The critical component of the discharge is the release from continuing liability.  This release effectively means that you no longer have a legal requirement to pay the discharged debt. 

            One thing to keep in mind is that a discharge does not eliminate the underlying debt.  It eliminates the filer or debtor’s requirement to pay the debt.  This distinction can be quite critical when considering the effects of security interests (mortgages etc).  

           Barring litigation, or another valid denial of discharge the debtor in Bankruptcy receives the discharge automatically just before termination of the case.  The discharge is ordered by the court in written form and is distributed to the debtor’s creditors and to the debtors themselves.  This order also terminates the automatic stay, of course at this point the auto stay is no longer necessary as it is effectively replaced by the discharge.  Like the automatic stay the discharge prevents creditors from collecting on the debts subject to the order. 

            It should be noted however, that there are certain types of debts that are not dischargeable or that are only discharged in certain circumstances.   The bankruptcy code specifically limits the types of debts that are discharged.  Many of these limits are the result of policy concerns on the part of congress.  This can be most clearly seen in the provision preventing the discharge of debts for personal injury caused by the debtor’s operation of a motor vehicle while the debtor was intoxicated. 

            Other common types of nondischargeable debts include certain taxes, unscheduled or unlisted debts, spousal and child support debts, debts that resulted from willful or malicious injury to another person (i.e. if you hit someone in the head with a bat and they sue you Bankruptcy will not solve it for you), certain debts to governmental units, loans against tax-advantaged retirement plans, (i.e. 401K or pension loans).  In many of these cases the creditor is required to petition the court to except the debt from the discharge if the creditor fails to do so then the underlying debt is discharged regardless of its base dischargeablity. 

            Then there are other debts that are technically dischargeable but only in limited circumstances.  The most notable of these is student loan debt.  Student loans are very difficult to discharge and it is important that if you are considering filing to rid yourself of the burdens of student loans that you carefully consider all relevant case law and the code itself to determine if you will be able to discharge them. 

For more information on this topic check out the book section entitled "What is a discharge and How does it work?"  Which you can buy on Amazon or by clicking the various links found on this page.  

                                                                  

Ok, But Do I Qualify?

            Lots of people have asked me some varient of this question.  What usually happens is I tell them about the advantages of Bankruptcy and they are interested but they honestly do not believe that they can file.  The good news is that if you are reading this you probably can file some form of Bankruptcy.  Below I reproduce a short section of my book that bares the same title as this posting.  



  

                                                                   

            I am tempted to simply say yes, you do.  The reason I say this is because if you are reading this book chances are you qualify.  In fact, if you can read, there is a pretty good chance you qualify.  Technically all you need to qualify is to be a permanent legal resident of the United States or a citizen of the United States.  One would guess that the courts would probably not allow a person with no creditors to file successfully for bankruptcy but I doubt many debt free people are entertaining such a thing.  So I would say yes you do qualify.

            In general a person will qualify for some form of Bankruptcy however in the case of repeat filers there may be limits on their ability to get a discharge and in the case of high income earners there may be limits on the availability of a Chapter 7.  So perhaps a better question would be do I qualify for a Chapter 7 Bankruptcy?  That question will be answered more fully in the section entitled “Types of Bankruptcy/Choosing the Right One for You.”  

            Earlier in this book, I gave a brief description of the difference between a Chapter 7 and 13 Bankruptcy.  A review of that difference leads most people to believe that a Chapter 7 is a much better deal, and frankly all things being equal it often is a much better deal.  However there are cases where a person does not qualify for a discharge in a Chapter 7, and in those cases it is often a good idea to look at a Chapter 13.  As with the underlying “do I qualify” question, this issue will be dealt with much more fully in the section on choosing the right type of Bankruptcy. 

Automatic Adjustments and Amended Dollar Amounts

Automatic adjustments to certain dollar amounts stated in various provisions of the Bankruptcy Code, one provision in Title 28, seven Official Bankruptcy Forms which contain adjusted dollar amounts, and two Director's Forms which include dollar amounts take effect today.

These adjustments will apply to cases filed on or after April 1, 2013.

For more information on these check out the United States Courts site

Also don't forget to check out the book below.  

                                                                     

Bankruptcy Terms

We recently noticed this glossary which may be of some assistance to individuals considering bankruptcy.  Take a look and let us know what you think.

US Courts Glossary of Bankruptcy Terms

for more information check out the book by clicking below.