Do I Have Enough Debt to File Bankruptcy

How much debt do you need to file bankruptcy?  I am asked this question quite often.  The answer: “It depends on your situation.”  Everyone’s income and expense situation is different and so is the amount of debt they have.  A single elderly woman with a low fixed income from social security is in a completely different situation than a married couple with 2 or 3 kids and both spouses working.

Bankruptcy is a personal matter.  First of all you need to be comfortable filing for bankruptcy protection so you can receive a fresh start.  Secondly, it needs to make sense financially.

If you are an elderly woman (or man) receiving $1300.00 per month from social security, how much money do you have left over at the end of the month after you pay for the items you need to survive, such as food, shelter, transportation, and medical?  Do you have $50.00 left over at the end of the month?  How about $100.00?  Can you afford to continue making monthly payments on your credit card debt?  The answer is probably no.  You may only have $5000.00 in unsecured debt but you can’t live and make the minimum monthly payments.  Bankruptcy can help you.

Please note, in Ohio your social security benefits are generally protected from your creditors.  Your creditors will continue to call and harass you and they may even file a lawsuit against you in court.  Your social security benefits are still protected, but you have to take steps to ensure they don’t get snatch up in a bank garnishment.  I explain this issue to many clients and most of the time they decide to file for bankruptcy protection for peace of mind.

What if you’re a single parent with a couple kids.  You have a job and your making $60,0000 a year.  Your gross monthly income is $5000 per month.  Your monthly income is significantly more than the elderly woman.  But so aren’t your monthly living expenses.  Children are expensive.  In terms of the amount of unsecured debt that pushes you over the edge, well it may only be five to ten thousand dollars.  After you take care of living expenses can you make the minimum monthly payments on your credit card debt?  If the answer is no, then bankruptcy can help you.

Let’s not forget the married couple.  You and your spouse have two kids, maybe three.  Your gross income is $80,000 per year or $6700 per month, maybe more.  Your living expenses may not seem like they are that much more than the single parent, but you probably have a larger mortgage or rent payment and an additional car.  You possibly have less than $1500 in the bank.  It seems like you never have any extra money.  Here, like the examples above, it really does not take much unsecured debt to make your financial life miserable.  Can you dig out of the debt without filing bankruptcy?  Maybe, but you have to stop using credit cards, go to a cash system, and have enough money left over at the end of the month to pay more than the minimum monthly payments to your credit card debt.

Sometimes it only takes one creditor to file a lawsuit and ruin your finances.  When a creditor wins the lawsuit it can then take legal action to collect on the debt.  That creditor can now garnish your wages and/or garnish your bank account.  Both of these situations will make your life miserable.  In that instance, filing for bankruptcy protection generally makes a whole lot of sense.

So how much debt do you need to file for bankruptcy protection depends on your personal circumstances.  If you live in Central Ohio and are struggling to make end meet, feel free to give me a call.  We will discuss your situation and find out if you have enough debt to file bankruptcy.

ATTORNEY OUTLINES LEGAL OPTIONS FOR FINANCIAL CHALLENGES

Do you need legal guidance regarding your financial challenges? Would you like to know more about bankruptcy and other options? New Directions Career Center, a non-profit organization serving Central Ohio for more than 30 years, invites you to hear Attorney James Jeffery Jackson, a legal expert who specializes in assisting clients address debt issues. This one hour workshop entitled, Bankruptcy: Putting Your Financial World Back Together Again, is designed to educate participants on legal options regarding financial difficulties – and how to recover from bankruptcy. It will be held on Wednesday, June 26th, from 3:15pm – 4:45pm. Made possible by our generous sponsors, the workshop will be held at 199 E. Rich Street. A suggested $10.00 registration fee is payable at the door; however, the Center assists individuals regardless of their ability to pay. For more information, call 849-0028, extension “100”.

Image Credit: Ken Teegardin www.SeniorLiving.Org

 

 

Stop Garnishments by Filing Bankruptcy

Bankruptcy is one of the tried and true methods for stopping garnishments. The minute your case is filed all collection actions, including garnishments, stop. Wage garnishments and bank account garnishments place a heavy burden on your monthly income. Having your paycheck reduced by 25% is not pretty. Filing bankruptcy will protect your income.

I mentioned that bankruptcy is one of the methods for stopping garnishments. There is another way to stop a garnishment. You can pay your creditor. Of course they are going to want a lump sum cash payment. And they are not going to give you a couple of weeks or months to find the money. They are going to want that payment now.

You can try to negotiate with the creditor. But chances are they will not listen and they will not care. Your creditor does not care that you have other bills to pay. They don’t care that you need to pay your utilities and put food on the table. They just do not care about you or your family.

So, you have one creditor that just does not care about you or your situation. What about other debts? When you are losing 25% of your paycheck it is going to be very difficult to pay your other creditors. Your car might be repossessed. Your home may go into foreclosure. Your utilities might be shut off. You may be evicted.

Bankruptcy is a sure bet to stop garnishments. Just one garnishment may start an avalanche that buries you further in debt. Take control of the situation. Contact a bankruptcy attorney and find out how you can stop garnishments by filing bankruptcy.

Creditors Will Put A Lien On Your Property

Many creditors will put a lien on your property.  They are trying to ensure they get paid for the debt you owe.  There are judgment liens when you lose the lawsuit.  And there are tax liens when you don’t pay your income taxes.  A lien against your property creates many problems for you.

A lien can be placed on just about anything you own.  Usually liens are placed on your home and/or cars.  They make it hard for you to sell the property.  They also give the creditor the right to take your property and sell it.

A lien on your house gives the creditor the right to foreclose on your house.  Even if the creditor does not foreclose the lien causes other problems.  If you try and sell your house the creditor gets paid.  If you try to refinance your mortgage the creditor gets paid.

Liens are very costly.  Some creditors obtain the lien and wait.  They sit back until you to try to sell or refinance.  The whole time the debt is getting bigger with interest.  That $5000.00 credit card debt is now $7000.00 five years later.

Chapter 7 Bankruptcy will prevent liens from attaching to your property.  However, once attached liens are not discharged in Bankruptcy.  A lien may be able to be removed during the bankruptcy process.  This generally requires additional procedures.  Creditors will put a lien on your property, it’s a cheap way for them to get paid.

Definition of Creditor

A Creditor is someone you owe money to.  A secured creditor has a lien on your property to make sure you pay the debt.  An unsecured creditor does not have an interest in your property.  An unsecured creditor can become a secured creditor if they sue you and win.

What is Forgiven Debt

Forgiven Debt, or debt forgiveness, is when your creditor gives up.  They charge off the debt and take the loss.  They report the loss on their tax returns.  Their loss becomes income to you.  The IRS will tax you on forgiven debt.

When you settle a debt for less than you owe debt is forgiven.  You will owe taxes on the amount of forgiven debt.

What is a Judgment Lien

A Judgment Lien gives a creditor a right in your property after winning its lawsuit.  It helps the creditor collect what you owe.  If you don’t pay you may lose your property.

A judgment lien is created after you have been sued.  If the creditor wins its case it can obtain a certificate of judgment.  The certificate is filed in the common pleas court.  Your creditor now has an lien on your property.

Your creditor may try and sell the property or foreclose on it.  Your creditor may wait for you to try and sell the property.  When you do try and sell the property the creditor with the lien will need to be paid.

What is a Lien

A Lien is a legal right your creditor has in your property.  It ensures you will pay your debt.  A lien can be enforced (you lose the property) if you do not pay the debt.

The bank you pay your car loan to has a lien on your car.  The bank will repossess your car if you do not pay the loan.

A home mortgage is a lien.  It gives the bank the right to take your house through foreclosure.

Wage Garnishment-How Much Can Be Garnished?

Wage garnishments can be very painful.  They greatly reduce your ability to continue to provide the necessities of life for you and your family.  They are a legal remedy your creditor obtains from the court to ensure they are paid the money you owe them.

In Ohio you typically will receive a notice of wage garnishment.  The wage garnishment will take 25% of your paycheck after taxes have been deducted.  This is a significant amount.  It will put a major strain on your household budget.  It will most likely cause you to fall behind on your car payment, your rent or house payment, or your utility bills.  It may also cause you to not be able to provide the necessities for your family such as food, clothing, and medical needs.

Below is an example of how a wage garnishment will reduce your available monthly income for a person earning $30,000 per year:

.                                                        Before                         After

Monthly Gross Income           $2500                          $2500

Required Taxes                          $500                            $500

Garnishment                                N/A                             $500

Insurance                                    $250                            $250

Available Income                    $1750                          $1250

As you can see, the garnishment for the example above reduced the available monthly income by $500 per month.  If your budget is already tight, that means you will not be able to maintain your household necessities.  You are going to begin to miss payments on your car, rent/mortgage, or utilities.  Your family is going to suffer.  Please contact a local bankruptcy attorney to find out how you can stop a wage garnishment.