Cheap Bankruptcy Attorney


You are searching for a cheap bankruptcy attorney.  I get it.  Money is tight.  You need those garnishments to stop right now but you can’t come up with the money to file bankruptcy. All bankruptcy attorneys do the same basic function, so why not hire the cheapest guy out there?

In fact, there is some truth to this thinking.  All bankruptcy attorneys do perform the same basic function.  They list your debts, property, income and expenses on the bankruptcy petition and attend the court hearing with you.  So why not hire a cheap Omaha bankruptcy attorney?

In my experience, the most expensive you will ever hire is a cheap bankruptcy attorney.

Cheap bankruptcy attorneys work alone.

Cheap attorneys can’t afford to pay rent at a decent law office, so they wind up isolated in a cheap office suite or they work out of their home.  They are isolated.  They lack colleagues to talk to and therefore they don’t get the chance to talk about your case before filing it.  Great bankruptcy attorneys work in teams.  They help each other, they teach each other and they have their buddies review cases before the pull the trigger and file a case. Older colleagues share their horror stories and help young attorneys avoid the same mistakes they made.

Cheap attorneys take wild risks and are often clueless about the risks they take.  They lack experience and are desperate for money, so they cross their fingers, say a prayer and file the case hoping everything “works out.”  At the other end of the line is the experienced and aggressive Chapter 7 Trustee who is paid on a commission when he finds unprotected assets, tax refunds, voidable payments to family members, and unprotected business assets. The cheap attorney is no match for the experienced Trustee.

Cheap bankruptcy attorneys lack resources.

Great bankruptcy firms share overhead and they are able to hire the best staff, the best computer technology and legal research resources.  They purchase specialized credit reports to ensure all creditors are listed and they pay for expensive online court subscriptions to search for lawsuits, garnishments, judgments and liens.  They purchase specialized background reports to ensure all assets and property transfers are reported on the bankruptcy schedules.

Cheap attorneys cut corners to save costs.  They often report only the debts provided by their clients and fail to pay the additional expense to acquire credit reports, asset reports and legal research.  They are frequently surprises in court when the Trustee asks questions about asset transfers they failed to uncover.

Cheap bankruptcy attorneys lack quality-check systems.

Great firms spend years training their attorney and paralegal staff.  They establish standard procedures to ensure that every case is prepared correctly. They hold regular meetings to review procedures, new cases, and they use quality control checklists. They continuously attend and sponsor legal education courses and share their knowledge with their team.

Cheap attorneys frequently lack any staff let alone an experienced one. They do much of the paperwork themselves and they have nobody to review their work.  They never bother to establish quality control systems since there is no team to manage.  In the process, they overlook small details that turn into big problems.

Cheap bankruptcy attorneys lose assets.

About 30 days after the bankruptcy case is filed you must attend a meeting with the bankruptcy trustee.  The meeting is held at the federal courthouse, and the meetings are public.  We all get to watch each other in this profession.  We see who does good work and we witness those cheap attorneys who basically run their clients into a grinder.  Cheap attorneys lack experience and training.  They constantly lose tax refunds because they fail to anticipate the amount and timing of the refund.  They loose vehicles because the file to properly value the vehicle.  They fail to ask their clients important questions and the bankruptcy trustees often uncover voidable transfers to family members and business associates.  Bankruptcy trustees know who these cheap attorneys are and they instinctively attack their cases because they know the attorney did not perform a detailed investigation of the debtor.

Cheap bankruptcy attorneys often lack insurance.

Nebraska does not require attorneys to purchase professional insurance  Cheap attorneys frequently cannot afford the premium. Cheap attorneys often lack significant personal assets so they are not worried if they make a big mistake–they have nothing to lose.

Want to hire a cheap bankruptcy attorney?  Think again.  The most expensive attorney you will ever hire is the cheapest one out there.

Image courtesy of Flickr and Eric E. Castro.

Posted in Chapter 7, Fraudulent Transfer, Garnishment Tagged with: , ,

Will Filing Bankruptcy Stop an Eviction in Nebraska?


My Landlord is trying to evict me because I defaulted on my payment arrangements.  My hands were tied because I didn’t get a paycheck for 2 weeks in a row.  Will filing bankruptcy stop the eviction?

The short answer to this question is Yes, filing bankruptcy will stop an eviction.  But what happens next? Is it worth the cost? How long does it stop the eviction?

When a bankruptcy case is filed a federal order immediately comes into existence that stops all collection action, including evictions, garnishments, repossessions, creditor phone calls, etc.  We call this order the Automatic Stay because it automatically comes into existence when the case is filed.

Evictions in Nebraska can completed within about 3 weeks!

In Nebraska, the eviction process is very swift.  When a payment default on a lease agreement occurs the landlord will send the tenant a Three Day Notice to Quit.  If the delinquent rent is not paid within three days, the landlord has the right to file an eviction lawsuit (called a “Forcible Entry & Detainer”) .  Once the eviction lawsuit is filed, the court will schedule an eviction hearing, typically within 14 days.  On the day of that hearing the court will sign an eviction order (called a Writ of Restitution) and the sheriff will then be called to carry out the eviction.  So, evictions in Nebraska can completed within about 3 weeks.

Filing Bankruptcy Before the Landlord Obtains a Judgment of Possession.

If a bankruptcy case is filed before the eviction hearing is held, the eviction is placed on hold.  However, the landlord may file a motion with the bankruptcy court to obtain permission to continue with the eviction and the bankruptcy court will typically grant this request unless the tenant is able to cure the default quickly. If the landlord files this motion the bankruptcy court will scheduled a hearing within 30 days on average.

How quickly must the past due rent be paid?  It varies from case to case, but more than likely the tenant will be required to pay future rent on time and then cure the existing default within a short period of time.  The court will take into consideration many factors such as the length of the tenancy, the frequency of default, the debtor’s current income level and job tenure, whether minor children or elderly persons reside in the home, and the likelihood of the default being paid quickly.

As a practical matter, you must take into the consideration the cost of filing bankruptcy.  To file a Chapter 7 case the entire court fee and legal fee must be paid in advance.  The typical chapter 7 case costs $1,200 to $1,500 in Nebraska.  So, if a tenant is behind $800 on rent, it would be wiser and cheaper to pay the rent than to file bankruptcy.  Chapter 13 cases are 3 to 5 year repayment plans and the cost of filing is much less, typically around $400.

Filing Bankruptcy After the Landlord Obtains a Judgment of Possession.

Nebraska law does not permit a tenant to cure a rent default after an eviction order is entered, so filing bankruptcy after a judgment of possession is entered is not helpful.  Unless the eviction judgment allows for the curing of the default (something I have never seen in Nebraska) filing bankruptcy after the Writ of Restitution is entered will not stop the eviction.

Will filing bankruptcy wipe out the debt to the landlord?

Yes, bankruptcy will discharge the debt owed to a landlord for past and future rent.  If a judgment for money has been given to the landlord, the bankruptcy will be able to discharge that judgment as well.

Will bankruptcy allow me to terminate my lease early?

Bankruptcy will discharge any unwanted executory contract, such as a rental agreement or vehicle lease. So, if you wish to terminate your lease, even if you are current on the payment, the bankruptcy will discharge the lease obligation.  If the landlord has been provided notice of the bankruptcy, the lease agreement is discharged and the agreement is basically converted to a month-to-month tenancy.  If you continue to pay rent and the landlord accepts the payment you may continue to reside in the property until you or the landlord elect to end the relationship.  To end a voluntary month-to-month rental agreement usually requires 30 days written notice to the other party.

Legal Aid Landlord & Tenant Handbook.

Legal Aid of Nebraska has written a wonderful handbook regarding landlord and tenant rights.  The handbook has lots of useful information on how to respond to an eviction lawsuit.  If you are being evicted or if you are just having problems with a difficult landlord, this handbook is a must read.

Image courtesy of Flickr and Mark Turnauckus.



Posted in Chapter 13, Chapter 7, Eviction Tagged with: , , , ,

Lawsuit Served on 10 Year Old Daughter


The Constitution guarantees certain rights, one of them being due process of law. And a large part of the process requires that each party to a lawsuit be given notice.  The legal process is designed to be an open process were everyone is given an opportunity to be heard.  To deny someone notice of a legal proceeding is to deny their right to due process guaranteed under the Constitution.

When a client complained about a judgment entered against her without her knowledge we checked the court record to see if she was correct.  We hear this complaint all the time, and it usually means the client moved and the court summons was sent to a former address.  This case was different.  She owned her home and had lived there for years.  Why didn’t she receive notice?

The court records indicated that a copy of the summons was left with the client’s daughter. The only problem was, the daughter was 10 years old and she tossed the lawsuit on top of a stack of her mother’s papers and forgot to tell her mom. Oops, the kid forgot to let mom know that she had just been sued.  Kids are so forgetful!

You can guess the rest of the story.  Since mom didn’t know she had been sued there was no written reply made to the lawsuit. After 30 days the creditor filed a motion for a Default Judgment and the next thing you know a Judgment Lien was slapped against mom’s home.

Can the Sheriff serve a summons on my kid when I’m not home?

It depends. Nebraska law indicates that the Sheriff may leave the summons with a person of suitable age and discretion who resides in the home.  Is a 10 year old a person of suitable age and discretion?  My guess is no.  If the kid were 16 or 18 that would be a different story, but a 10 year old clearly lacks sufficient age and discretion to understand the consequence of being served with a summons.

Can a judgment based on faulty service be set aside?

Yes, the judgment may be set aside if the court approves a Motion to Vacate Judgment.  In a recent Nebraska Supreme Court case of Capital One Bank vs. Lehmann the court indicated that a judgment based on lack of proper service may be set aside at any time.  If a judgment was based on defective service or if service was never made because you moved to a different address, a motion to vacate the judgment should be filed.

What should I do if I receive a Summons?

In short, if you are sued a written answer must be filed with the Clerk of the Court within 30 days of receiving the summons.  This article explains the process of filing a written response.

Image courtesy of Flickr and Jolante van Hemert.

Posted in Default Judgment Tagged with: ,

How Much Can The IRS Garnish?

IRS Garnishments Omaha, NE

The maximum amount a judgment creditor may garnish from a paycheck is 25%, but the IRS is not subject to state exemption laws and they may garnish almost all of a person’s paycheck.

In fact, IRS wage garnishments are not really based on what they can take as much as it is on what the taxpayer is allowed keep.

For example,  in 2015 a single parent of two kids who files as Head of Household may protect only $409 of wages per week. If they earn $1,000 per week, the IRS garnishes $591.  If that same parent earns $2,500 per week, the IRS garnishes $2,091.  Instead of placing a limit on the percentage of wages the IRS may take, the federal tax laws simply establish a flat amount they IRS cannot take.

What should you do if you receive an IRS Wage Levy?

Fill out an IRS Collection Statement.

The IRS can reduce the amount of the wage garnishment if you complete an Collection Information Statement, IRS Form 433-A.  Until you complete and submit this form, the IRS has no clue if you are single or married or a parent or disabled.  This form allows you to enter your monthly income and expenses.  The IRS will set your monthly deductions based on your income level and the number of people in your household for most expenses, but certain expenses, such as medical expenses, will be allowed in full if you can document the expense.

Call the IRS to set up an Installment Agreement.

After completing form Form 433-A, call the IRS to set up a payment agreement.  Hopefully the amount Form 433-A says you have to pay is less than what the IRS is currently garnishing.  If you are unable to complete the form the IRS will work with you over the phone to complete the schedule.  Call the IRS at 1-800-829-1010 to set up the payment agreement.

What if you call a crabby IRS agent who makes you uneasy?  Just hang up the phone and call back a few minutes later.  A different person will answer the phone.  In life, some people are nice and helpful, and some are . . . something else.  Find a nice person who will help you.  Most folks at the IRS are nice and helpful.  Some are . . . something else.

File Chapter 7 Bankruptcy.

Individual income taxes that were filed by you more than 3 years ago can probably be discharged in a Chapter 7 bankruptcy case.  It is important to know when the taxes were filed, whether an extension to filing the taxes was filed, and whether the taxes were filed by you or by the IRS.  If the IRS filed a substitute return because you did not file a tax return, the bankruptcy will not discharge he tax.

File Chapter 13 Bankruptcy.

In cases where your income is too high to qualify for chapter 7 or in cases where the taxes cannot be discharged in chapter 7, you may want to consider filing chapter 13.  In a chapter 13 case the tax debt that cannot be discharged may be paid back at a minimal interest rate (3%) over 3 to 5 years.  Filing Chapter 13 will stop the wage garnishment and a monthly payment to the court trustee will be based on your real living expenses instead of the IRS budget guidelines.

Get a Transcript of the Taxes You Owe.

Nebraska bankruptcy attorneys must be certain of what type of tax you owe, the day the tax was filed, the assessment date of the taxes, and the identity of the person who filed the taxes.  To verify this information we obtain an Account Transcript from the IRS.  You can get an Account Transcript by the calling the IRS and requesting an account transcript of each year you owe taxes or you can complete IRS Form 4506 and fax or mail that to the IRS.

In the Omaha area the IRS office is located at 16th & Capital Street and in Lincoln, Nebraska the IRS is located at 15th & O Street.  These forms may be obtained for free at either location and you may speak with an IRS Revenue Officer to establish a payment plan.  Don’t be afraid, they are nice people.

Image courtesy of Flickr and Ryan.

Posted in Exemption, Garnishment, Tax Debt Tagged with: , ,

How do I take my primary residence out of a chapter 7 bankruptcy?

Chapter 7 Bankruptcy Omaha, NE
My husband and I filed Chapter 7. Our primary residence was supposed to be excluded from the bankruptcy, but 2 years later we realized it had been included. How do I fix this and what issues would this cause should I decide to sell the property?

Can you exclude a mortgage from the bankruptcy?

In a word, no.  You can never exclude a mortgage or any other debt from the bankruptcy.  All debts must be listed and when you file bankruptcy you sign a document stating that you have, under penalties of perjury, listed all of your debts.

What people mean when they want to exclude a debt from bankruptcy is that they want to continue to pay the debt and keep in good standing with the creditor.  Typically, debtors wish to keep their mortgage and car loans out of the bankruptcy process.

Reaffirmation Agreements are legal agreements that are filed in Chapter 7 bankruptcy cases to essentially pull out a debt from the bankruptcy discharge.  The agreement is signed by the debtors, the creditor, the debtor’s attorney and is approved or disallowed by the bankruptcy judge.  Once approved by the bankruptcy court, a reaffirmation agreement removes the debt from the bankruptcy discharge.

If a Reaffirmation Agreement is not filed, is that fixable later?

The bad news is that this problem is not fixable.  Once a Chapter 7 case closes it is impossible to file a Reaffirmation Agreement, even if the case is reopened.  Although you may keep a home even if a reaffirmation agreement is not filed, the bank will no no longer report to the credit bureaus if the loan is paid on time.  That can cause dramatic problems when you attempt to refinance a mortgage loan when interest rates drop.  Debtors find it extremely difficult to refinance a mortgage loan that is not reaffirmed.

Is my bankruptcy lawyer at fault for not filing a reaffirmation agreement?

Although some lawyers may be at fault, the majority of the problem lies with the mortgage company.  Most banks simply do not offer reaffirmation agreements to their customers unless the customer demand the agreement.  We request that the bank send our clients a reaffirmation agreement in every single case we handle, but it seems like we receive agreements in less than 25% of the cases unless the client consistently calls the mortgage lender for the agreement. Reaffirmation agreements are voluntary.  Neither the bankruptcy lawyer nor the bankruptcy court can force the bank to offer an agreement.

Does this problem occur in Chapter 13?

This problem does not occur in chapter 13 since reaffirmation agreements are only used in chapter 7 cases. In a chapter 13 case the mortgage loan is reinstated at the end of the case so this problem never occurs when a debtor makes all required payments.

Can I sell my home if I do not reaffirm the mortgage?

Yes, you can sell the home even if the mortgage loan was not reaffirmed.  You may also keep the home and pay off the mortgage with the normal monthly payment even if the loan is not reaffirmed.  A reaffirmation agreement has only one benefit: continued credit reporting.  There really is no other benefit to reaffirming a mortgage loan.   However, that good credit reporting is darn important when refinancing the mortgage or when trying to buy a new home without the prior mortgage payments being reported.  Most clients prefer to reaffirm the mortgage.

For more information on this topic, contact our Omaha bankruptcy attorneys or Lincoln bankruptcy attorneys.

Image courtesy of Flickr and Wonderlane.

Posted in Chapter 7, Reaffirmation Agreement Tagged with: ,

Title Loan Before Filing Bankruptcy?

Title loans before bankruptcy in Omaha NE

I’m contemplating filing Chapter 13. I really need money immediately for bills. Is it okay to get a car title loan if I may file for bankruptcy soon? I don’t necessarily want the title loan to go into the bankruptcy if I decide to file. I just want to know if it’s okay to do so-legally. Is it frowned upon on in court?

There are so many things wrong with this question that it is difficult to figure out where to start.  First, it is never possible to exclude a debt from bankruptcy.  All debts must be listed. If a balance is owed on the day the case is filed the debt must be listed.  You are signing a document that says “under penalties of perjury I have listed all my debts.”  Title loans must be reported, even if you intend to pay it back.

Is it okay to get a car title loan when you plan to file bankruptcy?

The short answer is no.  It is never permissible to incur debt when you plan on filing bankruptcy.  In fact, when you incur new debt shortly before bankruptcy you cross a line.  Creditors may object to the bankruptcy discharge if they can prove you knew you were going to file bankruptcy when he debt was incurred.  Once you meet with an attorney about filing bankruptcy, stop all use of credit.

Do I have to repay Title Loans after bankruptcy?

As a general rule, bankruptcy wipes out debts but not liens.  So, in many cases you must pay off the title loan to keep the vehicle. However, there is a special exception.

If your vehicle is used in your business or trade beyond merely traveling to and from work, the title loan lender will probably have to release its title lien.  For example, if you must use your vehicle to deliver supplies or meet customers or perform any other job function, then a special Tool of the Trade Rule comes into play that can void title loans.

For this reason, if you have a car title loan it is very important to tell your bankruptcy attorney how the vehicle is used on the job beyond merely traveling to and from work.

Chapter 13 allows a debtor to pay back car title loans at 5.25%.

File Chapter 13 to Rewrite the Title Loan.

Unlike a chapter 7 case, Chapter 13 allows a debtor to rewrite the terms of a the title loan.  Most title loans come with steep interest rates of 300% to 400%.  Chapter 13, however, allows a debtor to pay back car title loans at 5.25%.  (The rule in Chapter 13 is that secured debts must be repaid at Prime Rate (currently set at 3.25%) plus 2%.)

If you have questions about title loans in bankruptcy, contact our Nebraska bankruptcy attorneys for more information.

Image courtesy of Flickr and Sleep.

Posted in Chapter 13, Chapter 7, Fraud, Title Loan Tagged with: , , ,

Debt Settlement Taxes


Debt settlement is a popular alternative to filing bankruptcy.  It avoids the public embarrassment associated with filing bankruptcy and entanglement with the court system.  However, debt settlement can create tax problems if you receive tax form 1099-C: Cancellation of Debt.

When a debt is settled for less than the balance owed, the creditor frequently files Form 1099-C with the IRS and sends the debtor a copy, although many clients claim they never receive the notice.  In most cases the settlement of a debt is not taxable, but the IRS will not know if it is taxable or not unless you file IRS Form 982 with your tax return.

Generally speaking, a debt settlement is not taxable if you are insolvent when the debt is forgiven (i.e., you have more debt than property).

The Internal Revenue Service has published a helpful video on this topic below:

Posted in Debt Buyer Lawsuit, Debt Settlement, Tax Debt Tagged with: , , , ,

Nebraska Fraudulent Transfer Act


A great question was posed on our Nebraska bankruptcy attorney listserv this morning:

Dear list-mates:  I have a older couple wishing to file bankruptcy who approximately a year ago transferred their house (which qualified then and now as their homestead valued at less than $60k) to their daughter retaining a life estate in themselves. My first instinct was that they don’t have to worry about the trustee trying to avoid the transfer because it was a transfer of exempt property – no harm no foul.  Now I’m wondering whether this will be seen as a constructively fraudulent transfer. The transfer was less than 2 years ago. Was for essentially no value. The debtor was insolvent at the time of the transfer, and certainly would have been as a result of it. There is no mortgage on the house. Any insight is appreciated.

He was right to be concerned about a fraudulent transfer.  Chapter 7 bankruptcy trustees have the power to reclaim property transferred out a debtor’s name that have occurred within four years of filing bankruptcy when property or services of equal value were not transferred back to the debtor.

The Nebraska Uniform Fraudulent Transfer Act states that “[a] transfer made or obligation incurred by a debtor is fraudulent as to a creditor whose claim arose before the transfer was made or the obligation was incurred if the debtor made the transfer or incurred the obligation without receiving a reasonably equivalent value in exchange for the transfer or obligation and the debtor was insolvent at that time or the debtor became insolvent as a result of the transfer or obligation.”

In the above example, the children of the debtor received the home, subject to a life estate in favor of the debtor, without exchanging anything of value.  It was a one-sided gift.  In this case the debtor seems to have transferred the home for Medicaid planning purposes and was not attempting to defraud his creditors, nevertheless the transfer would be deemed a fraudulent transfer since equivalent value was not exchanged.  Had a bankruptcy been filed the Chapter 7 trustee would have taken the children’s interest in the home.

What if a fraudulent transfer has occurred but you still need to file bankruptcy?

  • Reverse the Transfer.  The problem above could be fixed if the children were to convey their interest back tot he debtor prior to filing bankruptcy.  The value of the home was clearly less than the Nebraska homestead exemption protection ($60,000), so the home would have been fully protected if the debtors reversed the transfer.
  • Wait 4 years to file bankruptcy.  Most fraudulent transfers become protected after 4 years, but there are a few dangerous exceptions to this general rule.
  • File Chapter 13 Bankruptcy.  It really should not make a difference whether a chapter 7 or chapter 13 case is filed since unsecured creditors should receive equal treatment, but a key difference between the chapters is that the trustee in a a chapter 13 case does not have the power to go after fraudulent transfers.

Another important factor to consider with fraudulent transfers is that they must be reported on the bankruptcy schedules. Many bankruptcy attorneys wrongly believe that only transfers that occur in the preceding 2 years must be reported, but some courts and the US Trustee’s Office believe that all fraudulent transfers that are voidable must be reported on the asset schedules.

Image courtesy of Flickr and Mark Hillary.

Posted in Chapter 7, Fraudulent Transfer, Homestead Exemption, Uncategorized Tagged with: , ,

Home Foreclosure: How to determine when your home is being sold.

Stop Foreclosure

I still get a sick feeling in my stomach when I recall the lady who called me to say that her home was in foreclosure but her husband new nothing of it because she paid the bills.  She was hiding her gambling problem and the unpaid mortgage from him.  I told her that she needed to speak with him and then come see me immediately to stop the sale.  About a month later she called again saying she finally got the courage to speak to her husband.  He said he loved her and just wanted to stop the foreclosure, so they wanted an appointment.  I looked up her case and again and verified the foreclosure sale date.  My heart sank as I told her the home was sold the day before and there was nothing I could do to save the home.

How can this happen?  Why don’t homeowners know if their home is in foreclosure and when the sale will occur?  The reason is both appalling and common.  Under the Nebraska Trust Deed Act the homeowner receives notice of the foreclosure and sale by Certified Mail.  There is no requirement that a Sheriff personally deliver the notice.  There is no requirement that the homeowner sign for the certified mail.  The only requirement is that the notice be sent by certified mail.

Under postal regulations, if a person is not home when the certified mail is delivered the mailman should leave a postcard in the mailbox advising that they attempted to deliver a certified letter and that the homeowner has a certain number of days to go to the post office to get the letter.  The problem is, lots of unpleasant news comes via certified mail.  Some folks refuse to get their certified mail because they believe it may be a lawsuit and they don’t want to accept service of summons.  Many people say that “nothing good comes from certified mail” and they just ignore it.  Some clients complain that are working when the mail arrives and they never received a postcard telling them that certified mail arrived.

If you are seriously behind on the mortgage payment and have the nagging feeling that the home is in foreclosure, here are some ways to determine when the home will be sold at foreclosure:

  1. Call the Mortgage Company.  This seems obvious, but the best source of information is your mortgage company.  If you are in foreclosure the bank should be able to give the name and phone number of the law firm handling the foreclosure.  The bank may not actually know the date of sale date since the attorneys handle the legal proceedings, but if the loan is in foreclosure they should be able to prove the attorney’s name and phone number.  Call that attorney to check the status of the sale.
  2. Check Online Foreclosure Sales Listings.  There are only a handful of attorneys that handle foreclosures in Nebraska.  Some of these law firms, such as Kozney-McCubbin and South & Associates, have websites listing the upcoming foreclosure sales.
  3. Call Local Foreclosure Attorneys.  Most law firms that handle foreclosures will verify if a sale date is scheduled.  Call these law firms and ask their foreclosure departments to see if they are handling the foreclosure.  Some of the more common firms handling foreclosure matters include Eric Lindquist PC,   Steffi A. Swanson PC, and Walentine, O’Toole, McQuillan & Gordon PC.
  4. Check the Local Newspaper Legal Notices.  A Trustee Sale must be published in a legal newspaper in the county of the sale for five consecutive weeks.  Some of these newspapers are somewhat obscure, such as The Daily Record, that only publish legal notices.

When it comes to stopping  a foreclosure sale, time is of the essence.  You don’t have time to wait.  Filing chapter 13 bankruptcy is one way to stop a sale.  Under a chapter 13 case a homeowner is given 3 to 5 years to pay back the delinquent mortgage payments.  The moment a chapter 13 case is filed a federal court order automatically stops all pending foreclosure sales (with some exceptions for serial bankruptcy filers).

Bankruptcy attorneys need time to prepare a case, so if a sale is pending it is imperative that you make an appointment as soon as possible.  Prior to filing bankruptcy the homeowner must take a credit counseling class and provide their attorney with a certificate of credit counseling.

Another option to request a Loan Modification.  However, if a sale date is pending it may be too late to file an application.  Sometimes the wiser move is to file a chapter 13 case to stop the sale and then file the Loan Modification application so that the process may be completed in an organized fashion.  You can get a loan modification even if you are in the middle of a chapter 13 case, and the bankruptcy case can be dismissed if the loan modification is successful.

Image courtesy of Flickr & Fibonacci Blue.




Posted in Chapter 13, Foreclosure

Debt Settlement Program Not Working?

Credit Cards

A recent client asked the following question:

“I am unable to make the payments on my credit card accounts due to my wife’s income dropping, and I am currently working with a debt relief company that negotiates with the credit card companies to reduce the amount I owe.  Unfortunately, I am having a hard time setting aside enough money to escrow for settling even the reduced amounts. I also recently learned that in most cases the IRS will tax me on the amount that is forgiven by the credit card companies, which negates some of the savings I would realize. I would like to know what the advantages of bankruptcy are over the method I am currently pursuing.”

I meet new clients every week with this exact same story.  They come see me when they have been sued despite the fact that they had hired some agency to settle the debts.

The facts are, most debt settlement programs do not work.  Why?  Because to settle debts you need cash in hand.  Almost every debt can be settled for less than what is owed, but you need cash to settle.

As a general rule, you need about one-third of what you owe in cash within 6 months of stopping payments to creditors to effectively settle debts.

Debt settlement companies advise that you stop paying all your credit cards and instead that you start paying them money into an “escrow account” so they can settle the debts.  The programs are really attractive since the settlement payment tends to be much lower than your current credit card minimum payments.   That’s the hook–it seems so much more affordable than your current plan.  The problem is, most of the negotiation plans are doomed from the start because there is not enough money saved in the settlement fund quickly enough to effectively settle the debts.

Here are some examples of debt settlement programs I have seen:

 Monthly  Income  Amount of Debt Monthly Debt Settlement Payment Funds Available in Six Months Percent of Debt Saved in 6 Months
                     2,495             74,178                         1,000                               6,000 8%
                     3,350             51,673                            942                               5,652 11%
                     2,200             17,500                            317                               1,902 11%
                     3,900             46,518                         1,078                               6,468 14%
                     2,900             36,712                            517                               3,104 8%
                     4,240             49,798                            740                               4,440 9%
                     1,200             24,434                            400                               2,400 10%
                     1,540             38,867                            868                               5,208 13%
                     2,800             31,222                            470                               2,820 9%
                     4,600           100,159                         1,539                               9,234 9%
                     4,000             96,313                         1,237                               7,422 8%
                     3,000             22,432                            499                               2,994 13%
                     3,300             84,498                            383                               2,298 3%

Do you see the problem here?  There is only about 10% of the debt balance saved in cash after six months of not paying creditors.  That is not enough to settle the debts.  You need about 33% of the debt balance in cash within six months of stopping payments to creditors in order to be able to effectively settle the debts.  10% is a joke.  The program seems like it is working at first because the agency has settled a few smaller balance accounts, but eventually you get sued and realize the program is not going to work.  The success rate of debt settlement programs is probably less than 10%.  It may be less than 5%, but the industry does not report this statistic so it is hard to estimate.

“The success rate of debt settlement programs is probably less than 10%.”

Tax Consequences of Debt Settlement.

There can be income tax consequences to debt settlement.  The credit card companies may send you IRS Form 1099-C: Cancellation of Debt for the amount you did not pay.  If you receive such a form, you will need to complete IRS form 982 on your tax return.  Here is a video on this topic.

Final Thoughts.

Does debt settlement work?  Yes, it works for some people, but not many in my opinion.  We settle debts for clients every day.  Debt settlement can be a smart way to avoid bankruptcy, but you need cash.  A lot of cash within 6 months.  If you can raise the cash this might be an option.  Instead of hiring an unknown company located in a distant state, contact a licensed attorney in Nebraska with experience in settling debts.

Have you tried debt settlement?  Share your experience here.

Image courtesy of Flickr and 401(k) 2012

Posted in Debt Buyer Lawsuit, Debt Settlement Tagged with: ,

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