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

 

 

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.

Can I Keep My Car if I File Bankruptcy?

Generally speaking the answer is “Yes you can keep your car if you file bankruptcy.”  With a few exceptions that will be discussed later, you can keep your car if you file bankruptcy provided you have the means to continue making payments and pay for your basic living expenses.  Most people still have a loan against their car that is close to the amount the car is worth.  In Ohio, you have an exemption in the amount of up to $3,450.00 for one car.  What does this mean?  If you own a car free of any loans or your car is worth more than you owe on it, you can claim as exempt from the trustee an amount up to $3,450.00.  Keep in mind that the trustee represents your creditors and is trying to find assets that he can sell and turn into cash to pay your creditors.  The trustee has to decide if he can take your car and sell it for a profit above and beyond the amount you owe on it if you have a loan plus your exemption of $3,450.00.  The trustee will also incur expenses trying to sell your car that he has to take into consideration, such as appraisal fees, storage fees, and auction fees.  So generally speaking, most people who file bankruptcy get to keep their car.

There are a few exceptions.  If you cannot afford to continue making payments on the car, then your car loan company will be the one who tries to take your car because you cannot afford it.  If you own your car free and clear of any loans and it is worth a significant amount more than your exemption of $3,450.00, then chances are good the trustee would be interested in taking your car and selling it.  You still get your exemption amount of $3,450.00.  If you have more than one car per debtor titled in your name, and they are worth more than the loans, the trustee may pursue the car you cannot apply your exemption too.  The scenarios are many and the best solution is to call an attorney to discuss your individual situation to find out if you will be able to keep your car if you file bankruptcy.