Name: Attorney Mark Buckley, CFP
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Pros and Cons to Consider Before a Providence Bankruptcy Filing

Providence, Rhode Island — Providence River

When is a Providence bankruptcy filing the right choice for your debt problems? For each person, the answer is different.

Some debtors are so overwhelmed with credit card debt, it affects their health. Others experience strained family relationships, or difficulty concentrating at the workplace.

They feel as though they were treading water in the middle of a great ocean; sinking fast with no land in sight.

Although a Providence bankruptcy filing is not typically anyone’s first thought, the majority of clients make the bankruptcy decision after running out of options. They can’t improve their income, or cut their living expenses any further. There is no “extra money” to cover anything beyond the basics: shelter, food, transportation, medicine, etc.

Aggressive debt collection and lawsuits often force a debtor to calling a Providence bankruptcy lawyer. I have helped 100’s of clients with debt problems in the greater Providence area who were tired of the phone calls and legal threats.

Bankruptcy can really turn things around for someone who wants to improve their overall financial health. It worked for Walt Disney, H.J. Heinz, Milton Hershey and Henry Ford. Each allowed bankruptcy to solve their financial problems and each later achieved spectacular success.

As you determine the best path to deal with your debt situation, consider the following pros and cons to filing for bankruptcy relief.

Possible Disadvantages to filing bankruptcy

1 – You have to stop living on credit cards

Most people prefer to have a safety net when doing something dangerous. And life can be dangerous, or at least dangerously expensive. Ideally, 6-8 months of our fixed living expenses should sit in a bank account ready to act as our safety net. Without such savings, however, people often rely on costly credit cards as a substitute. As you would guess, all credit card accounts will be closed when you file bankruptcy; even accounts that have a zero balance.

2 – One bite at the apple . . . . At least for now

After a Providence bankruptcy filing, you would be unable to file another Chapter 7 bankruptcy case within 8 years of receiving a discharge. A second Chapter 13 bankruptcy case has special waiting periods as well. A qualified bankruptcy lawyer can explain important factors to help you determine if it is better to file bankruptcy now, or to wait.

3 – Who will find out about your bankruptcy

Your Chapter 7 bankruptcy filing will be on your credit report for as long as 10 years. It also becomes searchable in the federal court case register. Unless the searching party has special access to search these records, however, the general public won’t know you filed.

4 – Not all debts are dischargeable

The majority of consumer debts, if incurred in good faith, are dis-chargeable in a Providence Chapter 7 bankruptcy. These debt problems include medical bills, unsecured loans, credit cards, payday loans, car repossessions, and mortgage foreclosures. As a reminder, if you elect to keep your house and car, the creditor has a security interest in the property until the loans are paid in full. In other words, you will keep making these payments for as long as you wish to retain the house and car. Most student loans, child support, alimony, most taxes, and debts incurred in bad faith, car generally not dis-chargeable in bankruptcy.

Benefits of Filing for Bankruptcy

1 – You can protect your property from creditors

Rhode Island bankruptcy exemptions protect as much as $ 500,000 of equity in a house that is your primary residence. It also protects generous amounts of equity in cars, household goods and furnishings, retirement accounts, jewelry, etc. There is even a “wildcard” exemption that can be used to protect a certain amount of cash, money in the bank, income tax refunds and personal injury settlements. Because these exemption laws are so powerful, most people who file a Chapter 7 bankruptcy are able to keep 100% of their property.

2 – You may eliminate old income tax debts

Old income tax debts may be dis-chargeable in bankruptcy, if they were due more than 3 years ago, you filed your tax returns accurately and on time, and you meet a few additional requirements. Although a Providence bankruptcy filing may help with old income taxes, it does not discharge sales taxes, payroll taxes, or recent income taxes.

3 – Your Credit Score can recover fast

Your FICO credit score is based on several factors, including payment history, credit utilization rate, age of credit accounts and your debt to income ratio. Bankruptcy will help get you back on your feet fast because it will close out the damaged accounts and stop the downward spiral of late payments and defaults. After you receive your bankruptcy discharge, positive steps to rebuilding your credit can help you obtain a 720 FICO score in as little as 12-18 months. While I don’t encourage taking on new debt too fast, I have seen clients get approved for a new credit card within 3 months, a car loan in 6 months, and a mortgage in 2 ½ years.

4 – You receive an honest “fresh start”

When your financial picture looks like it was drawn on an Etch a Sketch, you would do anything to get a fresh start, or a do-over. A Providence bankruptcy can do just that. You can actually wake up from the financial nightmare and begin to chart a new course. You can start focusing again on the future and develop financial goals for your kid’s education, buying a home, or saving for retirement. But first, you should set up a savings plan to build an important safety net in order to avoid future debt problems.

5 – You can stop harassing debt collectors, lawsuits, and wage garnishments

Not all debt collectors are bad. Some follow the law, while others simply don’t. The ones who violate the Fair Debt Collection Practices Act, will harass you at work and home until you reach your breaking point. Here is some good news. The instant you file your Chapter 7 bankruptcy petition, all collection activity stops. Everything gets real quiet.

If you have been struggling with debt for years and it is not getting any better, now may be the time to consider a Providence bankruptcy filing. Read reviews from clients who trusted Attorney Mark Buckley, a CFP® professional, to solve their debt problems and call 467-6800 for a free bankruptcy consultation. Serving clients in Providence, Pawtucket, and Warwick.

Debt Settlement Lawyer

by Mark Buckley

Debt settlement can be the right solution in certain situations. Its a matter of knowing when its appropriate and how to do it effectively.

I’m not talking about the typical debt-relief advertisements you hear on radio and television. You know the ones. They instruct you to stop paying your bills and send them your money instead. Usually to some address outside of Rhode Island.

After starving your creditors for 6+ months, the theory is that there should be a pool of money big enough to offer settlements to your desperate creditors.

These programs usually fail because they are not a good fit for most people drowning in debt. If you owe a lot of money and are dealing with too many creditors, it isn’t likely that everyone will agree to negotiate.

Will you be satisfied if you can only settle some of your accounts, while the remaining debt is unpayable? You might create a tax liability on the forgiven debt, and a possible lawsuit on the unpaid debt.

To make matters worse, debt settlement companies are paid-in-full long before you realize its a losing battle. You could waste thousands of dollars and be left with a problem that still requires filing bankruptcy.

So when does debt settlement make sense? Answer: When you have a pile of money, under your own control, that can be used to offer lump sum settlements.

Effective debt settlement works best when you have cash in hand and can afford to pay income tax on the amount of debt forgiven. Money talks.

A few times each year, I encounter such a person. Someone who has immediate access to money, but wants to pay as little as possible to settle old credit accounts. If this describes you, I can help.

I had a client who owed $ 60,000 in old debt and now could afford to pay the debt in full. Wanting to avoid the interest and penalties that accumulated over many years, he asked me to contact each creditor and settle for the smallest amount possible. I negotiated settlement for less than $ 8,000 and he was more than happy to pay the income tax owed.

If bankruptcy is avoidable, and you have the money to make it work, a debt settlement may be an option to consider.

As your debt settlement lawyer, I can be the go-between to negotiate a low settlement. I can explain that unless we receive a good offer, the creditor will likely get nothing in a bankruptcy.

Disclosing All Property When Filing Bankruptcy

by Mark Buckley

In Rhode Island, are you required to disclose all of your property when filing for Chapter 7 bankruptcy?

In a word: Yes.

A Chapter 7 Bankruptcy exists to protect you and your property. However, to receive a discharge of debt, you must disclose all of your assets.

During the bankruptcy process, a debtor will be asked if he is telling the truth. Bankruptcy lawyers will even use the phrase “under penalty of perjury” to remind a client that hiding assets is a violation of federal bankruptcy law punishable by jail.

You see, under Rhode Island bankruptcy law, it makes no difference if:

Your property came as a gift or through inheritance
Someone else paid for it
It is easily hidden and there is no paper trail

Your bankruptcy petition must fully list all of your property.

Understand that the US Trustee has many tools to discover hidden assets. Even calls from “anonymous tipsters” help trustees make sure that a debtor is not attempting to conceal assets.

Disclosing all property to your bankruptcy lawyer is actually in a debtor’s own best interest. Telling your lawyer the complete truth will help him protect you and your property.

Common property interests that require complete disclosure in your Rhode Island bankruptcy petition:

Any claims you have for money, including personal injury claims and potential lawsuits
Gifts you may have received
Assets you disposed of in the last 4 years
Possible inheritance interests after someone has died
Bank accounts/ real estate owned by parents with your name on it
Property you may receive in a divorce settlement
Personal debts owed to you by a friend or family member

Most who file bankruptcy are honest, hardworking people who have run out of options. Having a debtor list all his property in a bankruptcy petition makes the system fair for everyone.

Bottom line: your bankruptcy petition must be complete, accurate, and truthful. Don’t leave out any property.

Health Care Costs and Filing For Bankruptcy

America may be a world leader in many areas, but healthcare affordability is not one of them. According to a recent survey conducted by Health Affairs, American adults, more than the citizens of any other industrialized nation, avoid critical healthcare because of the high cost of coverage.

This comes as no surprise to bankruptcy lawyers, and certainly not to those who have filed for Chapter 7 bankruptcy relief due to unavoidable medical bills.

Health Affairs’ survey revealed several interesting facts—

one-third of American adults neglected recommended medical care when obviously ill (whereas in Germany, only one quarter of adults went without care.)
one-fifth of Americans reported having trouble paying off medical bills (barely 10% of Europeans and Canadians cited similar troubles.
almost one-third of Americans surveyed agreed on the confusing nature of insurance policies and documentation.
America reported the widest margins relative to available healthcare between income levels, with the poorest citizens receiving the least care.

Most of my clients have at least some medical debt at the time I file their bankruptcy petition. For some, it is the primary reason they need to file for bankruptcy relief. Many had either no health insurance, or poor coverage, at the time of a major illness or accident. I’ve seen medical bills range from a few thousand dollars, to hospitalizations costing over $ 100,000.

If you face a mountain of unpayable medical debt, give me a call. I can advise whether it makes sense to file for bankruptcy in your particular situation.

RI Bankruptcy Law: Median Income Figures Change Again

RI bankruptcy lawyers have new income guidelines to determine who qualifies for Chapter 7 bankruptcy relief. On November 1, 2012, the US Census figures became effective for all new consumer bankruptcy filings. Other than for 3-person households, it became slightly more difficult to qualify for Chapter 7 bankruptcy relief for every other household size in Rhode Island.

Below are the median income figures that I use for my Rhode Island clients who need to file for bankruptcy protection:

1 person household $ 45,945 (down from $ 47,798)
2 person household $ 60,538 (down from $ 61,506)
3 person household $ 75,306 (up from $ 68,909)
4 person household $ 82,086 (down from $ 88,990)
Add $ 7,500 for each additional household member above a 4 person household

As a reminder, these are gross income figures. To determine whether you qualify for Chapter 7 bankruptcy relief, we take your trailing 6 months of gross income from all sources (except Social Security and unemployment benefits), multiply it by two and then compare it to the chart above.

While its easier to qualify for a Chapter 7 bankruptcy with gross income lower than the median, in many cases, you may still qualify with income slightly higher than the median.

Bottom line: Its impossible to forecast whether it will become easier or more difficult to file your Chapter 7 case in the future. Even if you are not ready to file your case now, I can run an analysis on your family’s income to see if your income is presently low enough to qualify for debt relief.