Bankruptcy for Minnesota Contractors

As most are aware the building trades have been hit especially hard by the economic downturn. Prior to the downturn building trade professionals in Minnesota were having some of the best year in terms of income. What went up came down. The question is what to do about it. Homes are not being built, homeowners are holding back on improvements and even commercial properties are not immune in Minnesota. The end result is framers, finishers, contractors, painters, plumbers, drywallers, painters and landscapers are in trouble. For most in the building trades further credit is not an option. Banks and credit card companies that were friends during the boom years are now enemies; loans are being called in, credit limits are reduced and interest rates are increased.

For those in the building trades facing collections, judgements and garnishments one option is bankruptcy. By filing bankruptcy the debt that is causing stress and the inability to turn any profit can be reduced. The end result is when the economy improves individuals in the building trades will have good financial footing without the debt. Failure to take care of the debt will often mean years (10 or more) working to pay down debt while many creditors collect through judgments and garnishment. Imagine when the economy improves the fruit of labor going into your pocket rather than to satisfy creditors. Taking care of the problem now will create a better future.

Debt Consolidation, Settlement or Chapter 13 Bankruptcy, Your Best Option

Most debtors want to pay back their debts, they do not want to default.  As proof, why else would individuals jeopardize retirement and savings, borrow money from family and friends in an attempt to pay back creditors.  Many of the same individuals will attempt to use a technique called debt settlement or debt consolidation to satisfy their unsecured debt.  The problem with the two options is the way that the settlement occurs and the success rate.  The success rate ranges from 10 to 15 percent.  To put it another way you have a 85 to 90 percent chance of failure.  Part of the reason for the low rate of success is the way that debt consolidation or debt settlement are managed.

Debt consolidation will require a debtor to sign up with a service who takes over, through a power of attorney.  The debt consolidation company then begins receiving of statements, contact from creditors as well as legal notices.  For a while, usually 3-6 months things seem great  because no creditors are calling or sending collection letters.  The problem occurs when during those 3-6 months no payments are being made and interest climbs to 28-32 percent, late fees, and over the limit fees continue to add up.  In many of those cases individuals will end up with debt that started at $10,000 and will have ballooned into debt of $15,000 to $20,000, without the debtor’s knowledge.  Ultimately when no payments are received creditors will sue the debtor, obtain judgment and begin to garnish wages.  The judgment will include not only the nearly doubled bill but also the attorney fees incurred in obtaining the judgment.

Debt settlement involves using lump sums of cash to settle debts.  Creditors at times are willing to take a up front amount rather than wait for payments.  The problem with debt settlement is three fold.  First, all creditors need to agree to a settlement amount.  It does no good to settle with just a few creditors, all creditors must agree for settlement to work.  Second, you must have the cash up-front to settle the debt.  Cash up-front is the catch 22 of debt settlement.  If individuals had cash available they wold not be in debt.  The result of needing cash up-front involves borrowing or cashing out retirement or borrowing from family or friends.  Where as retirement is fully protected up to 1,000,000.00 in chapter 13 bankruptcy, debt settlement requires debtors to withdraw or loan from their retirement.  Third, are also tax penalties for retirement withdrawal and for settling debt.  Many individuals who settle find themselves owing money to the IRS which is a one of the worst creditors.

The problem with both, in addition to the success rate, is that both debt settlement and debt consolidation receive their payments up front regardless of success.  The up front payment also comes at the expenses of funds that would otherwise be used to pay back creditors.  Both business practices routinely are investigated and fined by the Minnesota Attorney General’s Office.  Debt consolidation companies are a multi billion dollar industry.  They exist to make money off of your debts.  Here is a link to the Minnesota Attorney General’s press release on debt settlement companies:

http://www.ag.state.mn.us/consumer/PressRelease/100222UnLicDebtSett.asp

For those individuals who would like to pay back their creditors a chapter 13 bankruptcy is a much better option than debt consolidation or debt settlement.  Filing chapter 13 bankruptcy in Minnesota involves creating a budget that allows for living expenses to be taken out first.  The living expenses include but are not limited to: house payments, car payments, food, gas, car repair, entertainment and clothing.  The difference between net income and your monthly expenses will go to pay back your creditors in 3 or 5 years.  Plans can call for as little as 5 percent to as much as 100 percent.  The other benefit is that no interest is accruing on the debts.  So long as the plan is followed for the 3 to 5 year plan the remaining debt will be discharged.

If you are considering debt consolidation or debt settlement I encourage a review of all options available.  Weigh the cost and benefits of those programs to Chapter 13 bankruptcy.  If you want to pay your creditors back, Chapter 13 is the best option.  Contact me today for a free consultation.

Discharging Student Loans in Bankruptcy

News reports suggest that default rates on student loans rose to 8.8 percent.  With poor job prospects, lower wages for those who have employment and high costs for tuition we have a perfect storm for default on student loans.

The problem is student loans are not dischargeable in bankruptcy except in extraordinary circumstances.  Banks and education loan institutions will fight tooth and nail to ensure that their federally backed loans are not discharged.  Often the cost to discharge the loans could be more than the loan itself.

The best option when facing student loan repayments is to discharge unsecured debts, such as credit card, healthcare and personal loans, by filing bankruptcy and then working out a repayment plan with the student loan provider.  Repayment plans options can include forbearance, deferment, income contingent repayment or income sensitive repayment.

Minnesota Bankruptcy Cost

On a daily basis I receive calls from potential clients who need a bankruptcy but are unsure of the cost.  The price for bankruptcy in Minnesota can range from $1000 to $10,000 or more.  The key to deciding which attorney to hire should be what is the cost, what is included in the cost, the experience of the attorney, and the customer service provided by the lawyer and staff.

The cost can vary widely from attorney to attorney and law firm to law firm.  Large MN bankruptcy firms generally cost more.  Many small solo lawyers charge less in an attempt to undercut the competition.   The difference between the two is  solo lawyers are generally trying to service many clients and therefore have less time for individual clients, and large law firms can create an impression that you are a number.  Try to find a balance between the two.

The answer to what should be included in the paying a lawyer to file bankruptcy should be preparing and filing the bankruptcy petition, along with court appearances and communication.  Usually the biggest problem between clients and bankruptcy lawyers  falls with communication.  The lawyer you choose should be reachable with reasonable questions, after all you have not been through this before.  Two tell tail signs of problems is that you do not talk to an attorney when you initially call bankruptcy’s attorney’s office or you don’t meet with an attorney at your consultation.  The five minute attorney pop in at the end of  your consultation is not enough.
Bankruptcy filing in Minnesota is up right now, many individuals are going through financial trouble.  The result is there is now a lot of  lawyers starting their bankruptcy practice.  Essentially they are practicing on your case without full knowledge of the bankruptcy code.  Often these new bankruptcy  attorneys are general practitioners practicing on criminal, family, business, estate planning and now bankruptcy.  Find an attorney that practices bankruptcy law, they will be more knowledgeable and the process will go smoother.

Many attorneys forget that they are in a customer service job.  Failing to inform clients of what to expect from a bankruptcy at the time of filing and in the future is a common problem.  Your calls should be answered the same day and if an attorney is not available you should expect a return call within 24 hours.  When you interview an attorney at the consultation you should feel comfortable with the attorney.   Did the attorney spend time with you and answer your questions?  If not, it will only get worse after they have been paid.

The basic rule regarding bankruptcy cost and price is to ensure that you are comparing apples to apples.  Do your research, remember there is no free lunch, but the lunch should be reasonable.  Try to find a lawyer that matches the above criteria at a reasonable rate, not necessarily the cheapest price.

Protecting Assets Once Creditors Have Judgements

If you are like most bankruptcy clients you are getting called and harassed by debt collectors. After the calling the creditors will send your file to collection lawyers. The collection lawyers will then take judgements against you after serving you a Summons and Complaint. In most cases people do not answer the lawsuit and the creditor takes a default judgment against them. Once the judgment is entered the creditor generally takes two approaches to collecting the debt, they will garnish banks accounts or wages. In order to protect these assets you should make sure you never tell the collectors where you work. This information will be saved by the creditors to use against you once they have a judgement. The second thing you should do is make sure you do not keep money in bank accounts with your name on the account. The creditors can freeze the money in your bank account and then take the money to pay off your judgement debt. Once the funds are frozen you have a couple of options to get the money back, the first is fill our exemption forms that will get sent after the garnishment. In most cases your funds will not be exempt and the creditor will take the money. The second is look into filing for bankruptcy protection, which will stop all wage and bank garnishments. In some cases you can even get back garnished funds through the bankruptcy process.