WHAT DOES THE BANKRUPTCY PROCESS LOOK LIKE?

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Filing bankruptcy is an important decision. Bankruptcy is designed to give you a fresh start by resolving overwhelming and stressful debt—So you can get on with your life!

The process usually takes around three months from beginning to end. The first step is to make a free consultation appointment with one of our attorneys. Bring along some financial information for our attorney to review. Eventually, in order to file your case, we will need a complete list of your assets and debts.

Our attorney will discuss with you exemptions that allow you to keep equity in your home, cars, retirement accounts and other items.

Once we have all your documentation and your costs and fees are paid, we will file your case. A meeting with the United States Trustee is scheduled about 30 days after filing. These meeting are currently being held by Zoom or telephone. You and your attorney will meet at OUR office to meet together with the trustee.  There is no need to go to court or drive downtown!

Chapter 13 bankruptcy is a repayment plan which protects wages and assets from attachment while completing the plan.

Not all people qualify for a Chapter 7. The criteria to qualify is based on your income, family size,debts and other financial information.

In a Chapter 13 case, clients pay a percentage of unsecure creditors’ debts. Depending upon the circumstances, sometimes the amount repaid is as low as 1%. We will need your income for the last six months to formally evaluate whether you should do a Chapter 7 or Chapter 13 case.

Our office does no charge for the initial consultation. Your attorney will quote you a flat rate after evaluating your case. The more detailed income and debt information you provide at the intial consultaion, the better we can properly advise you on your legal rights. Call 513-752-3900 to schedule an appointment at one of our convenient locations.

 

COVID 19 AND MY BANKRUPTCY

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There is no doubt that the recent pandemic of Covid-19 has hit many families physically, as well as financially. As businesses adjust to the rise and fall of new cases of infection, the certain thing seems to be uncertainty. Federal and state governments have put in place measures to protect the health and financial lives of families, while businesses have responded with varying options to delay the payment of mortgages, car loans and credit card payments.

Federally, the U.S. Congress has passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Among other relief, this act has deferred the payment of some government backed student loans, delayed the foreclosure of many government backed mortgages, provided added unemployment compensation, and expanded current bankruptcy relief. Among the relief provided, many are aware that special temporary provisions have been made that allow forgiveness of taxes and or penalties on the liquidation of IRA, 401(k), and other retirement funds. Caution should be taken when considering this option, as there might be relief available that allows you to eliminate debt, while preserving your nest-egg for your future. Do not move forward without sound advice.

New legislation is almost a certainty, as the current situation reaches the one year mark. Whether an additional stimulus package involves renewal of the previous federal unemployment subsidy, or checks issued to families directly, we anticipate that previous bankruptcy protections (exemptions) will remain in place, whereby we may protect the funds intended to benefit families directly.

Many families have benefited from mortgage and auto loan forbearances or deferrals. One thing is common among all these forms of relief, and that is they all contain differing details for these loans coming out of forbearance status. Our office has already addressed these issues in bankruptcy, and is familiar with dealing with the lenders, as well as the U.S. Bankruptcy Court, and Trustee as it relates to repayment.

There is a lot of conflicting information regarding the impact of the pandemic on financial decisions. Some who previously might not have been eligible for many protections from the bankruptcy process now find there is a window of eligibility available in the more common chapter 7 bankruptcy. Others will benefit from the potential to seek relief in chapter 13 where bankruptcy plan completion time has been expanded under certain circumstances.

We hear and understand the concerns of individuals and families facing struggles caused directly or indirectly by the current situation. The most common questions we receive revolve around the ability to keep a home, keep or buy a car, keep or lose tax refunds and bonuses, and continue to save for retirement. Each situation is unique. No two cases are the same. Often, bankruptcy is not necessary, or is better held off until circumstance have changed. From the CARES Act, to the HAVEN Act to state law changes and uncertain upcoming acts that provide relief, it is good to consult with a firm that is focused on debt relief law. At Keegan and Co., Attorneys, we understand recognizing and responding to constant change is the key to crafting an individualized approach to debt relief.

Can I Rebuild My Credit after Bankruptcy? Yes You Can!

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Can I Rebuild My Credit after Bankruptcy? The Answer is Yes!

Credit score after bankruptcy is a common and valid concern. Bankruptcy filings can stay on your credit report for long as 10 years, but almost all of our clients have a better credit score within two years and definitely better from prior to filing. The credit score decline due to a bankruptcy is usually minimal. Many of our clients qualify for a home mortgage within two years after filing their case, assuming they can otherwise afford a mortgage payment.

Usually within a year of filing bankruptcy, your credit record will improve substantially. You will become a better credit risk than you were prior to the bankruptcy. For many, a bankruptcy filing can be the first step toward gaining better credit and financial freedom.

Negative credit scores come from missed payments, poor debt to income ratio, and high credit utilization rate. Once the bankruptcy is filed the negative reporting from missed payment stops and credit utilization balances drop. This dramatically improves your debt to income ratio and credit utilization score.

Once you complete your case and your bankruptcy is discharged all of your old debt will be eliminated. You will have a Fresh Start! Most creditors will see this fresh start and lack of other debt as a positive. One Caveat—creditors now want evidence that you can handle credit going forward. For this reason, after you file bankruptcy it will be extremely important that you take some specific steps to begin to improve your credit.

Without the benefit of bankruptcy, bad credit records such as delinquencies, too much outstanding credit, slow pays, etc are all negative marks that will remain on your credit record for 10 years. In most cases, although the creditor may not be actively pursuing your debt, the debt remains valid and open to collection through wage garnishment or bank account seizure. Bankruptcy solves this problem because it eliminates or discharges your debt. After bankruptcy, your financial situation will be far better since you will no longer be shuffling funds in an attempt to cover all the bills. After bankruptcy, our clients get super excited to create a new budget… and that is a budget that includes putting money into a savings account!

After completing your bankruptcy your credit and your life will be on the road to improvement. Initially, the bankruptcy will be a hit on your credit score but in the long run, the notation “discharged in bankruptcy” is much better than having your accounts reported as delinquent by your creditors. We recommend that soon after your bankruptcy discharge you get a copy of your credit report. Review this report carefully, check to make sure that the debts you included in your bankruptcy are reported to be DISCHARGED with a ZERO balance. Dispute any accounts that have not been updated.

Depending on when you file Chapter 7 or 13, a bankruptcy will stay on your credit for 7-10 years. Despite this, you will soon have the opportunity to rebuild your credit. Some companies cater to those who have a bankruptcy by offering secured credit, low credit lines and high interest. If you use this credit wisely and make all your payments on time you will prove that you have become a good credit risk.

What Factors Affect Ability to get Credit?

Four Factors are considered by a lender:

Income              Job History            Credit Score             Debt-to-Income Ratio

As a general rule credit scores are calculated using this approximate formula: 35% payment history. 30% amount owed, 15% length of credit history, 10% new credit or inquires about your credit score, and 10% credit mix.

To Improve Your Credit Score After Bankruptcy You Should: 

Periodically review your your credit report once or twice a year. Dispute any errors or mistakes.

Make “on time” payments.

Maintain a stable job history.

Deliberately and thoughtfully apply for new credit. Many with credit bruises can get secured credit cards, gas or retail cards. If you get turned down STOP, wait 6 months and try again.

Obtain a secured credit card and pay that in full every month.

Keep any old credit accounts that may exists after filing.

Use no more than 10-30% of your available credit.

Are You Ready for a New Start? Our Attorneys Can Help!

Bankruptcy definitely does not mean a zero credit future and usually your first step towards better credit if you have maxed out credit cards, delinquent payments, and high debt to income ratios.

The lawyers of Keegan & Co. Attorneys have over 50 years combined experience helping people just like you resolve overwhelming debt issues. Our attorneys have handled several thousand bankruptcy cases from the simple to the most complex. 

Our consultations are free and at Keegan & Co Attorneys your consultation will always be with an experienced attorney, it will never be with a paralegal or secretary. Call 513-752-3900 to schedule your personal consultation. We look forward to meeting you!

Are You Really A High-Income Debtor?

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Many people assume that if their income is relatively high, they cannot file for Chapter 7 bankruptcy.  Usually this assumption is incorrect.  It is not by any means unusual for a high-income debtor to file under Chapter 7.  In reality, high-income Chapter 7 bankruptcies are filed everyday.

What constitutes as high income is a matter of perspective and depends on many factors, such as where you live, your living expenses, the size of your family, etc.  (A salary of $80,000.00 for a family in rural Ohio goes a lot further than the same earnings in the city center of Columbus or Cincinnati).  With that being said, in the language of bankruptcy attorneys a “high-income debtor” is a debtor with earnings above the state median income for the debtor’s family size.

The Ohio state median income per family size (determined by census figures) as of the date of this post is as follows

Individual Family of 2 Family of 3 Family of 4
52,415 67,059 79,022 96,175

*For each additional family member over four, add $9,000.

WHY IS THE STATE MEDIAN IMPORTANT?

Whether your income is above or below the Ohio state median income determines if you will be able to discharge all or most of your debts in Chapter 7, or will you be required to pay back at least a portion of your debt under Chapter 13.  If your average gross earning for the six months before filing for bankruptcy is at or below the state median for your family size, you may file under Chapter 7 (assuming that you meet the other requirements).  Simple!

On the other hand, if your average gross earnings for the six months before filing is over the median, you will have to takes a “means test” to determine if you qualify for Chapter 7.  This means test considers your income minus certain allowable expenses.  Frequently the results allow a debtor with substantial earnings but high expenses to file under Chapter 7.

ARE YOU REALLY A HIGH-INCOME DEBTOR?

Before jumping to meet the means test, debtors need to determine if they are actually high-income debtors for the purposes of the test.  We often have clients with seemingly high questionearnings who are surprised that they fall below the state median.  Many of these clients have not considered the size of their families.  However, one of the most important factors in determining whether or not you are a high-income debtor is family size.  For example, a family of four making $100,000 would have earnings well above the state median of $96,145 for their family size.  But what if that family making $100,000 includes six members?  Because the median state income medical for a family of six is $114,175, the debtors do not need to take the means test.

Even if the debtor is above the state median, it is often by much less than the debtor presumed.  The closer your overall earnings are to the state median, the easier it is to pass the means test.

WHAT TYPE OF INCOME?

If you appear to be over the median, you may still be able to avoid the means test.  Depending on what type of earnings you have.  Not all sources of money count as income for calculating gross earnings.  For example, under the Bankruptcy Code certain income, primarily social security, is excluded from your gross income for the purposes of the means test.  This exclusion will often bring a debtor’s gross earnings below the state median, thus avoiding the means test.  In addition, because the bankruptcy code focuses on “regular income”, some irregular earnings may not count as “gross income”.

CAN I PASS THE TEST?

Finally, even if you must take the means test, it is still quite possible that you will qualify for Chapter 7.  Very often, high-income debtors have high allowable expenses, including mortgage payments, vehicle payments, etc., that will offset their earnings.  Although the means test is complex and must be handled carefully, it is not at all unusual for high-income debtors to pass the test.  However, failing to list income of any kind can lead to unpleasant consequences.  Attention to detail is the name of the game.

WHAT NOW?

We have spent most of this blog discussing the initial qualification for Chapter 7.  However, it is important to note that even if you pass or avoid the means test, you do not automatically get to file under Chapter 7.  You must meet all other requirements, including a showing that after expenses, you have no significant disposable income to pay your creditors.  In addition, there may be a reason for choosing Chapter 13, such as saving a house from foreclosure or a car from repossession.  In some cases, a non-bankruptcy solution such as debt negotiation may be available.