Is Bankruptcy Moral?

                                                    Is Filing Bankruptcy Moral?

                                                           
              At least once a week, a client or prospective client asks me if filing bankruptcy is ethical, fair, or moral.  As a lawyer who helps people file bankruptcy everyday, I could never do this type of work if I felt that it was not moral.  In fact, I believe so firmly in the process, and its protections, that I am pleased to represent creditors in cases when I feel the filing debtor is NOT acting ethically, or is trying to take advantage of the bankruptcy laws.

            First, I would point out the two primary sources for the Bankruptcy Laws. It is not Georgia's State Laws, or Judges, or even Federal Laws that created this process.  Instead, we find Bankruptcy mentioned in the United States Constitution, in order to guarantee that this right, like the other constitutional rights, cannot be taken away by mere laws or aggressive creditors. The Bible itself mandates that debts are forgiven. Whatever your religion's leanings or beliefs, the fact that bankruptcy has been around since biblical times suggests a history and credibility to this process that transcends our current legislators.

            One way I explain the morality of bankruptcy is by pointing out what types of bankruptcies are NOT allowed.  Our Federal Laws define the bankruptcy process carefully and limit certain debts that are not dischargeable in an effort to keep the process fair and moral. 

       The following are not allowed:

•             Filing bankruptcy too often or repeatedly.
•             Discharging debts owed to children or to ex-spouses for support or alimony.
•             Discharging debts created by intentional or illegal acts like drunk driving or fraudulent behavior.
•             Hiding or concealing assets that should rightfully be liquidated in a bankruptcy.
•             Charging debts or taking cash advances and then immediately filing a case to erase that debt.

            These controls and limitations, and many others found in the laws, protect bankruptcy for what the Supreme Court calls the “honest but unfortunate debtor”.  In some cases, these controls and limitations would require others debtors to pay back their debts in full.  If you find yourself the unfortunate victim of too much debt, seek out help from an attorney so they can determine if bankruptcy or debt settlement is right for you.   If you find yourself trying to take advantage of the system to escape debts that you either should or can pay back, then perhaps your situation lacks the moral justification of others.

            In most cases, the moral and ethical propriety of a bankruptcy is rooted in the foundation that all people deserve a fresh start at least once when their situation demands it. If you are troubled by the thought of not paying your debts, I remind you that while bankruptcy can excuse your nonpayment, you are always welcome to pay the old debts if and when you are able to do so.  With that in mind, I feel that the honest but unfortunate debtor is also both moral, and ethical.

Can I Keep My Home in Bankruptcy?

Saving Your Home While Filing Bankruptcy

           If you are like most Georgians, your home is valued below the unpaid balance of your mortgage.  If you owe more than the home is worth, we call this being "underwater." While bankruptcy cannot necessarily fix this situation, it does not make it worse, it can make it better, and it definitely does NOT cause you to lose the home.

For underwater homes, since there is no equity, your creditors have nothing to gain from selling the home and therefore the bankruptcy judge and trustee do not make you sell the home. Since the home is has lost its value you have the ability to still live in and sell your home is you so choose.  However, if you have a second or third mortgage, the bankruptcy can help remove that lien which is a great way to immediately pick up equity in your home.  Lien stripping is a very important and valuable tool to a bankruptcy debtor and can be an important piece of your financial recovery.

For homes that are paid off or have equity, clients also have options.  The best is usually to file a Chapter 13 bankruptcy.  This plan allows you to retain the equity in your home as long as you pay at least that much to your creditors over the next three to five years.   Congress has essentially said that we like people to have equity in their homes.  You can use it as a loan to yourself.   Keep the $60,000 equity, but pay your creditors back $60,000 in 60 monthly installments.   This can be a great plan, especially if you owe the creditors $300,000 and effectively get a discharge of all the rest while getting to keep your home equity. Clients get to keep the first $20,000 as an exemption with no strings attached.

Our lawyers can explain this and other options to you.  Clients with equity in their homes have much to lose, so do not want to act without full knowledge.

What Happens to my Tax Refunds in Bankruptcy?

 Looking to Keep Your Tax Refund?



                                        

           In a Chapter 7 bankruptcy, your refunds are generally safe from loss because they do not become property of the bankruptcy estate.  Refunds received before you file can be at risk if they are large (over $5,000) and if they are still in your bank account.  Definitely consult an Attorney before filing on your own.   Refunds received after you file are generally less risky.

            In Chapter 13 bankruptcy, tax refunds are very different.   Your entire budget is carefully analyzed and incorporated into your Chapter 13 plan. Once that is done then all of your “disposable income” is pledged to the plan to pay off your creditors.  If you receive a tax refund, then in the federal district this is considered to be extra income, which adds to your disposable income and must go straight to the trustee.   Your refund is then used to pay your creditors.   This is generally terrible news for Chapter 13 filers all of whom have better and different ideas of how to spend their money rather than paying off a 5 year old credit card debt!    While my firm routinely helps clients retain these post-filing refunds to pay for unbudgeted or unforeseen expenses, the receipt of these refunds poses a trap for unwary Chapter 13 filers.  

Every year many clients have their cases dismissed for failure to turn over their tax refunds.    The bottom line is that tax refunds and bankruptcy are a tricky combination, and legal advice is critical to getting it right and to planning properly.

Do I Need a Lawyer to File Bankruptcy?

Filing Bankruptcy

            The federal law allows individuals to file bankruptcy on their own, without a lawyer.  If you reside in Georgia you can go to the 13^th floor of the Russell Federal Office Building in downtown Atlanta, and someone in clerk’s office can help you.  However, this is almost never a good idea.  If you are going to take the huge step of filing a bankruptcy, then it is critical that you also do it right so as to gain the benefits of the filing.  Proceeding on your own poses great risks.

            First, without a lawyer the timing of your case may be all wrong.  You may fore-go certain rights by filing too soon or too late.   Only a skilled lawyer can help you plan accordingly to maximize the benefit of the case.

            Secondly, without a lawyer, the case may not succeed due to the intricacies of filing a 50-page bankruptcy petition.   Federal laws, state law exemptions, Section 341 meetings of creditors and unfamiliar words and forms await at every turn.

           The final reason to engage an attorney is probably the least noticeable.   In order to succeed in a bankruptcy, you must impress and convince a trustee and a judge that your case is for real.  Experience shows that most pro se (unrepresented ) filers simply do not file the proper papers.   The judges and trustees sometimes make assumptions that pro se filers will probably not succeed, and they create presumptions against them.  However, a firm like the Slomka Law Firm has the opposite effect.   Our cases are carefully researched and filed and the trustees and judges assume that the case will succeed.  By filing with us, you gain the benefit of thousands of prior cases.

Can I Get My Car Back from Repossession?

Repossession?

            YES!   If you were late on payments and a creditor repossessed your car, then in most cases a bankruptcy filing will prevent them from selling or retaining the car.   A Chapter 13 bankruptcy will effectively re-set the debt and allow you to pay the trustee each month who will in turn pay off the car debt.   A Chapter 7 bankruptcy can also stop the repossession, but in order to retain the car long term, a client must become current and stay current in a chapter 7 bankruptcy.

            In certain situations, a car will NOT be returned.  The most common situation is when the car is subject to a Title Pawn instead of a traditional car loan.   Title pawn “loans” are not loans at all and you are not required to repay them.  (This is how they can legally charge 100% interest; because you only pay it if you choose to.)  So, when the title pawn car is repossessed, it already belongs to the creditor, and a bankruptcy will not get it back.  Although sometimes it can, I recommend an attorney consultation.

            Another troubling situation is when you have filed repeat bankruptcies.   Each time you file, the power of the case decreases.  A third case (within one year) carries no bankruptcy stay, and the creditor does not have to return a car; indeed a creditor is even able to go to your home and repossess a car after a third case is filed.

            At the Slomka Law Firm, we help clients evaluate what options are best for them when their car is in jeopardy or has already been repossessed.  In every case, you have more options when you still have the car, so it is best to act quickly and not in response to the loss of the car.  

How Do I Stop a Garnishment?

                                          Ways to Stop Your Wage Garnishment



       Garnishments are devastating to people who earn wages or have money frozen in bank accounts.  In most cases, clients have horror stories about the wrongful debts or inflated figures, or about lawsuits with inadequate notice.   Clients can always choose to fight the garnishments one at a time using legal resources and expensive hourly lawyers.

         My experience shows that when one creditor has garnished you, there are usually several other creditors lurking.  In most cases, but certainly not all, it is more effective to file ONE bankruptcy and wipe out all your debts, including the garnishment, than it is to fight the debts one at a time.  Sometimes one must handle particular debts carefully and methodically (and expensively), but usually wiping them all out is preferable.  At The Slomka Law Firm, we use the free initial consultation to evaluate all options available to fight,contest or reverse a garnishment.