Managing Stress During the Holiday Season

While the holidays bring plenty of cheer and laughter, they also tend to bring a great deal of stress. Planning face-time with family, coordinating activities, and managing the financial aspect of the holiday season can often become overwhelming. The following suggestions from the Mayo Clinic aim to reduce holiday-related pressure and anxiety:

Stick to a budget. It might be helpful to decide in advance how much you are going to spend. The trick is to then stick to it. Remember that gifts and presents do not equate to happiness. Do not extend beyond your means. If you have a large family or are traveling, consider other gift-giving arrangements. Some alternatives include donating to a charity in someone’s name or exchanging homemade gifts.

Plan ahead to avoid becoming overwhelmed. Trying to visit all of the family in a single day can be exhausting. Spreading family visits over the course of several days will allow you to make the most of the time you do spend with relatives. If certain relatives drive you crazy, consider activities that minimize the amount of time you spend together, like a cup of coffee or a quick lunch. Establishing some organizational tools can also help minimize unnecessary stress. For example, generating lists can help keep you focused while shopping or planning meals and activities.

Be flexible and realistic. Striving for utter perfection can often lead to disappointment when things do not pan out as hoped. The ability to make adjustments along the way is essential. Do not be afraid to adopt new traditions that better suit your family’s needs. Remember that traditions can grow and change as your family does and not every year has to be exactly like the one before.

Maintain healthy habits. The holidays are full of temptation. Remember to keep everything in moderation. Overindulgence can often lead to feelings of guilt. Try to strike a balance between some indulgence and maintaining your regular habits and routines. Exercise regularly and make sure you get enough sleep. Engaging the family in physical activities together can help make those healthy routines seem a little more fun.

Be aware of your feelings. Holidays may not necessarily be happy and joyous, particularly for those who have lost a loved one. Take the time to acknowledge and work through your emotions. If you are feeling isolated, reach out by volunteering or get involved in community events. When dealing with pushy family members, do not be afraid to say no. At the same time, do not be afraid to ask for help when you are feeling swamped. Openness and honesty can prevent harboring frustration, anger, and resentment. Take some time for yourself and relax as well.

For divorced families, the holidays can often be particularly challenging. The American Psychological Association offers several key pieces of advice for the holiday season, beginning with the importance of setting aside differences and laying down the sword. Put the needs of your children first. Encourage your children to spend time with your former spouse and reassure them that you will be fine when they do. Do not put unnecessary pressure on your children. When visits are not possible, technology like Skype can help facilitate contact between family members during the holiday season.

Sources:

“Stress, depression and the holidays: Tips for coping,” Mayo Clinic, available at http://www.mayoclinic.com/health/stress/MH00030

Dr. Elaine Ducharme, “10 Tips for Managing Family Stress at Holidays,” American Psychological Association, available at http://www.yourmindyourbody.org/family-stress-during-the-holidays/

Contributed by: Kelly Thompson, Law Clerk

If It Sounds Too Good To Be True...

We’ve all seen or heard the commercials offering debt settlement to consumers. They are inundating our radios and televisions constantly. These schemes can be really appealing to someone deep in debt – especially with credit cards. They promise to settle all of your accounts and get you debt free quickly.

This just seems too good to be true, and with reason. According to the National Association of Consumer Bankruptcy Attorneys, government officials estimate that about one in ten debt settlement cases fail. The Better Business Bureau was quoted as saying that debt settlement schemes are an “inherently problematic business.” The New York City Department of Consumer Affairs went on to say that debt settlement is “the single greatest consumer fraud of the year (1).” When a debt settlement case fails, it can leave you even further in debt with additional late charges or over limit fees on top of what you already owed.

If you choose to take the risky debt settlement road, there are a few things to watch for:

• Do they encourage you to fall behind on your payments? 
• Are they a for-profit businesses instead of a non-profit corporation? 
• Do they charge high fees for their services? 
• Are they offering you debt settlement for pennies on the dollar? 
• Have they said that they can remove negative things from your credit report? 
• How is their rating with the Better Business Bureau and your Attorney General’s Office? 

Paying attention to these things can help keep you out of the debt settlement trap. It can help you differentiate a settlement company that is a scheme versus a legitimate company that may be able to help your finances (1).

Getting out of debt, no matter which method you choose, can take a lot of time, effort, and dedication. You can’t expect for a settlement company to get you out of debt quickly and save you tons of money. You need to do some research and consider all of your available options. Research the consumer information on the FTC’s website (ftc.org) (2). Talk to an attorney about Chapter 7 bankruptcy, or consider paying off the debt yourself using Chapter 13 bankruptcy or techniques like the snow ball method or by paying more than the minimum payment each month.

Sources:
“The Debt Settlement Trap: The #1 Threat Facing Deeply Indebted Americans.” National Association of Consumer Bankruptcy Attorneys Consumer Alert. October 2012. 30 October 2012. <http://www.nacba.org/Portals/0/Documents/NACBA%20Docs/NACBA%20debt%20settlement%20trap%20consumer%20alert.pdf>.

Federal Trade Commission. 30 October 2012. <http://www.ftc.gov/bcp/menus/consumer/credit/debt.shtm>.

Contributed by: Kelley Snyder, Paralegal

What happens if I don’t reaffirm my mortgage in a chapter 7 bankruptcy?

A reaffirmation agreement is a document that is executed after your bankruptcy case is filed. It renews your obligation to a secured creditor, who has the right to repossess a vehicle or foreclose on your property if you fall behind on payments post-filing. It also makes you responsible for any deficiency balance after the sale of the property. It basically strips that debt of the bankruptcy protection. However, there are many benefits to reaffirming a debt too, including an easier time refinancing and positive reporting on your credit report.

If you intend to keep a house, vehicle, or piece of property secured by a lien, the creditor may prepare a reaffirmation agreement and forward it to your attorney. It is the Creditor who is responsible for preparing these agreements and they cannot be forced to do to. If you choose to sign a reaffirmation agreement generally your attorney’s office completes the required information, forwards it to you for review and signature, then it gets sent back to the creditor for filing with the bankruptcy court. If your budget (Schedules I and J) shows you can afford the payment and that it is not a hardship, no hearing is necessary (in WDMO and District of Kansas). The creditor files the agreement with the court and you are responsible for that debt regardless of your bankruptcy filing.

Not reaffirming a debt, especially a mortgage can sound like a good idea to you initially. It seems as though you can just pay each month and remain in the property. It is true that state contract law protects you to the extent that if you keep up with payments, the property cannot be taken away. And if something does happen financially in the future, such as illness or loss of income, you can surrender the house or car without having to worry about the deficiency balance. Because if no reaffirmation agreement was filed, it means the debt was discharged. And for the most part, that can be true. But, you need to be sure to speak to your attorney about the best option for you because there can be some consequences to not reaffirming a property in your chapter 7 bankruptcy.

One big problem with not reaffirming is credit reporting. If you don’t reaffirm the mortgage, the creditor will likely stop reporting payments to the credit bureaus even though you are making the payments on time each month. The mortgage debt may appear as being discharged in bankruptcy. So, your credit score may take a hit. This can make getting a new loan difficult. Another major problem can be with refinancing or modification. Many lenders will not refinance or modify a loan if a reaffirmation agreement was never filed. So, you will likely be locked into the original loan terms that you have until you decide to sell the property or let it foreclose. It can leave you with few, if any options if you find that the payments are no longer affordable. At that point your only option may be to surrender the property and walk away. And on that note, there are a few things to keep in mind if you are facing foreclosure. Until the property is transferred out of your name (after the foreclosure sale), you need to keep insurance on the property, keep up with maintenance, winterize and secure the property if vacant, and ensure compliance with city rules and codes. As long as it’s in your name, you are responsible for anything that happens to the property, and those fines and costs imposed by a city code violation, fire, etc. are not dischargeable if they happened after your bankruptcy was filed.

So, overall the best option is to speak to your bankruptcy attorney about your options with reaffirming a debt, especially a mortgage debt. They will be able to give you the best advice for your particular situation.

Contributions by Kelley Snyder, Paralegal

Sources:

http://www.bankruptcylawnetwork.com/refinancing-without-reaffirming-in-bankruptcy/

http://www.bankrate.com/brm/news/bankruptcy/20061121_debts_reaffirmed_a1.asp

http://www.loansafe.org/what-happens-if-you-do-not-reaffirm-your-mortgage-in-bankruptcy

What effect does bankruptcy have on your credit score?

First of all, you should know that bankruptcy can remain on your credit report for up to ten years. Other bad debts are removed after seven, but not bankruptcy. The impact that a bankruptcy filing has on your credit really depends on your credit report and score before filing. Many times people considering bankruptcy already have negative collections or bad debts on their report. So, they may already have a low credit score. Bankruptcy may not affect their credit scores as negatively as someone with a higher score. If you have a fairly high score and little bad debt listed, your score will probably take a quite a hit after filing your case.

How quickly your score improves after filing depends on you. After filing you will probably start to see lots of credit offers in the mail. Many financial advisors and bankruptcy attorneys suggest obtaining a low limit, secured credit card after filing. Use it on small purchases (like gasoline) and pay it off each month. And be sure to make all of your payments on time. This will slowly start to rebuild your credit. You can also look into obtaining a small line of credit from your bank or credit union. For some, the thought of obtaining new debt after filing for bankruptcy may be a scary thing. But, it’s a surefire way to slowly start rebuilding your credit.

You also want to ensure that your credit report is accurate after filing for bankruptcy. You can pull your credit report for free once a year at www.annualcreditreport.com. Pull your credit report and check that all of the debt that was included in your filing is reflected that way on your report. If something is incorrect, contact each of the three credit bureaus and get it corrected right away. You will need to send each of the bureaus copies of your notice of case filing, discharge notice, and schedules from your filed petition showing the debts that were included.

Rebuilding your credit after filing for bankruptcy can be a long process. But you just have to keep in mind that it is achievable. You didn’t get into financial trouble over night, so you can’t expect to dig out of it that quickly. It will take some time, patience, and hard work on your part. The bankruptcy gave you the fresh start that you needed. Now you just have to be willing to put in the work to get you back in a good financial position.

Blog Contributed By: Kelly Snyder

Do You Need A Lawyer To File For Bankruptcy?

In this day and age, the internet has become a viable source for everything from buying groceries to purchasing a plane ticket. However, using the internet to research information about bankruptcy can be a slippery slope, filled with bad information or things that do not apply to each unique situation. It is possible to file a bankruptcy case yourself, however it is not recommended. When dealing with this type of case, you have to file correctly, have all required documents properly filled out, and list all property and debts, or your case could be dismissed. Another thing to keep in mind is individual cases are randomly audited. “The audit checks for accuracy, completeness, and truthfulness.” You must not lie, falsify records, or destroy or hide property (1).Filing for bankruptcy in Missouri, Kansas, or any other state is an extremely technical and complex process. A single error could negatively affect the results of your case or even result in your case being dismissed. In certain situations those errors can lead to the debtor losing the right to file another bankruptcy and/or lose certain protections in future cases.

The term “pro se” mean to advocate on one’s own behalf before a court, rather than being represented by an attorney. A pro se litigant is still expected to recognize the rules and procedures of the local and federal courts. One must also be familiar with the Federal Rules of Bankruptcy Procedures and the United States Bankruptcy Code. Even though you are not an attorney; you will still be held to the same rules and standards.

Some people choose to file bankruptcy pro se because they believe they cannot afford an attorney. Speaking with an attorney and discussing your options is your best option. Having an attorney is to your advantage and will likely save you time, money, and offer more protection for your assets. In the instance you have an aggressive creditor violating the collection laws, Heartland Law will prosecute any of your creditors that do not follow the rules once bankruptcy is filed. If you do not have an attorney you will have to handle harassment from creditors, lawsuits and illegal post-bankruptcy garnishments on your own.

There is more to filing for bankruptcy than simply filling out forms. Trying to save money by filing yourself can hurt you in the long run. Often one has to seek counsel to fix a mistake. In the end it will cost you more than if you had simply worked with an attorney in the first place.

Contact one of our experienced bankruptcy attorneys at Heartland Law for a free initial consultation to evaluate your options.







Footnotes

(1) “Filing for Bankruptcy without an Attorney,” This site is maintained by the Administrative Office of the U.S. Courts on behalf of the Federal Judiciary. http://www.uscourts.gov/FederalCourts/Bankruptcy/BankruptcyResources/FilingBankrup tcyWithoutAttorney.aspx

Digging Deeper Into Debt With Payday Loans

Regularly advertised as an easy source of money, payday loans appeal to people with an urgent need. Bankruptcy and payday loans tend to go hand-in-hand because once you fall behind it can be virtually impossible to catch up.

The payday loan industry claims that these loans are meant to be a small, short term advance used to help a borrower meet their financial needs until their next pay day. The lender holds a check anywhere from a week to a month and in return, the borrower gets cash immediately. These loans unfortunately have extraordinarily high interest rates that more often than not leave a borrower worse off than before. At the time, borrowing this money seems like an appropriate option in an urgent situation, but what the borrower may not realize is that they are only digging themselves deeper into debt.

Lenders say that these loans are used only in emergency situations and over a short term period -- however this is absolutely wrong. A Wall Street analyst conducted a study and found that "the average customer makes 11 transactions a year, which shows that once people take [out a payday loan], they put themselves behind for quite some time(1)." Borrowing from paycheck to paycheck will only result in eventually defaulting on repayment.

In one situation a woman named Andrea Felts took out a loan to help cover expenses after her divorce. She took out a $400 loan and was charged $120 in interest for the 16 day loan period. When she wasn't able to pay the $520 she borrowed, she rolled over the loan for an additional $120 in fees. By the end she rolled her loan over a total of 5 times which resulted in $600 in fees on a $400 payday loan(2).

Once you are already struggling to make ends meet, taking out a payday loan can escalate an already dire situation very quickly and it's all too common for a borrower to eventually file for bankruptcy. For the most part, payday loans are considered unsecured debt and are treated as so during bankruptcy proceedings. Filing for Chapter 7 will allow a debtor to discharge their debt without repayment and essentially all unsecured debt is dischargeable. Under Chapter 13, the payday loan is treated equally along with all other unsecured debt in the debtor’s plan. .

If the loan was received within 60 to 90 days before filing, the loan may not be dischargeable in bankruptcy. The creditor will have the presumption they were taken out with no intention of being paid back. Also, if the electronic authorization or check written to the payday loan company “bounces” or is returned by the bank as insufficient funds, the payday loan company may refer the incident to the County prosecutor for bad check charges. If you are charged with writing a bad check, this is a criminal charge that is not dischargeable in bankruptcy.

If you find yourself submerged with debt and your payday loans are only aggravating the situation, contact one of our knowledgeable bankruptcy attorneys for more detailed information.

Footnotes:

(1) M. Anderson, "Cash poor, choice rich, Paycheck-advance firms move in," Sacramento Business Journal (Jan. 11, 1999).

(2) "Payday Lenders: small loans, hefty fees, big problem." Consumer Reports Magazine. 02 2009: n. page. Web. 28 Jun. 2012. <http://www.docstoc.com/docs/23437676/Consumer-Reports-Magazine-February-2009-Payday-lenders-small>.

Credit Card Use Before Bankruptcy

If you plan on filing for bankruptcy, it is never a good idea to accrue new debt right beforehand. While it might be tempting, using your credit cards immediately before filing for bankruptcy can lead to complications that include not being able to discharge that portion of your debt.

The majority of credit card debt is dischargeable through filing for bankruptcy, however credit card charges of $600 or more in luxury items, charged within the 90 days prior to filing bankruptcy are considered non-dischargeable. A credit card charge that transpires within the 90 days before filing may not be discharged if the creditor can prove that there was no intention of paying back the debt. This also goes for cash advances.

Additionally, some creditors will look at overall credit card usage in the 6 months prior to filing and object to a discharge if the charges are excessive and appear to be done in contemplation of bankruptcy. So the best rule of thumb is not to use any credit cards right before filing for bankruptcy once you have met with an attorney and/or know you plan to file bankruptcy.

Cash advances and certain purchases that occurred immediately before filling bankruptcy can be perceived to be fraudulent. So if you purchased a computer, a new car or an expensive designer bag and plan on filing for bankruptcy, be mindful that a lawsuit from your credit card company objecting to your discharge may follow.

Be sure to inform your bankruptcy attorney of any purchases of $600 or more that you’ve made on your credit cards because in most instances it may be in your better interest to delay filing until after the 90 day presumption period has passed.

If purchases right before filing for bankruptcy are for necessities like food and diapers, typically your credit card company will be slightly more understanding. Using a credit card to buy essentials like food can also be a good indicator of financial distress to a credit card company. However they won’t be so understanding when the purchase is a luxury item, or if the necessities are excessive and total a lot of money.

If you are unsure about any purchases you’ve made within the 90 days before you are planning on filing for bankruptcy and are wondering if your credit card debt can be discharged, consult with your bankruptcy attorney for more information.

Heartland Law LLC 700 E. 8th #700 Kansas City, MO 64106 Phone 816-842-6700 Fax 816-337-3812 www.heartlandlawyer.com

Bankruptcy and Form 1099-C

According to the IRS, if a creditor writes off a debt that you owe, or if a debt with a creditor is settled for less than the full amount, you could owe money to the IRS. This includes debt from credit cards, car repossessions, foreclosures, etc.  Creditors that forgive $600 or more are required to file Form 1099-C with the IRS. The IRS treats the forgiven debt as income, and therefore you may owe income taxes.

However, it is my understanding that when a debt has been discharged in bankruptcy that debt does not need to be included as income for tax purposes.

If you file an IRS Form 982 to counteract this, you may be able to avoid payment by proving you’re insolvent at the time the debt was forgiven. It is my understanding that the IRS has specific guidelines and a Worksheet used to define "insolvency".

You can prove your insolvency by filing IRS Form 982 and attaching it to your federal income tax return to combat Form 1099-C. This shows that your debt was canceled during a bankruptcy case and is now excluded from taxable income. 

What if the debt is in an active Chapter 13 and the 1099 C was filed prior to Discharge? 

 You may want to check Line 1a on Form 982—but include an Attachment to the Form 982 that you file with the IRS that states that the debt has not yet been discharged—but it is included in a current Chapter 13 case.  It would also be recommended to provide the IRS with your current case number.  If you provide the IRS with ALL the information, I assume that they will notify you if you are mistaken.

**** Note: You should seek the advice of an accountant, as this is not legal advice regarding taxes. 

How Can I Repair My Credit Score After Bankruptcy?

Your credit score is an important number that determines your rate of interest on loans and credit cards. The question of what happens to your credit score in the event you file bankruptcy a common one in my Kansas City bankruptcy consultations. Filing for bankruptcy will affect your credit score, but just how it affects your score depends on a number of factors.

An important thing is to first understand is how your credit score is calculated. The most common score used is the FICO score. The score, the 3-digit number, is calculated using several different inputs. The largest portion of the score is based on your payment history (35%); followed by your overall debt level, or amount you owe (30%); the actual length of your credit history (15%); the number of inquiries, also known as new credit, (10%); and closed out by your mix of credit (10%). A detailed explanation of a FICO score breakdown can be found here:

http://www.myfico.com/crediteducation/whatsinyourscore.aspx.

If your credit score is already poor due to delinquent accounts, filing for bankruptcy won’t be a huge hit to your score. The reason for this is because once your debt is discharged, your creditors must update your credit report to reflect the account as being “discharged in bankruptcy” and must change the balance owing to “$0”, and all ongoing derogatory reporting must permanently cease. So the 30% portion of your FICO score which is "what you owe" will actually improve.

On the other hand, if you have remained current on all your payments and your credit score is immaculate, your credit score will take more of a hit after filing bankruptcy. However, many clients find that discharging the debt they may otherwise never be able to pay off is worth it. In the big picture, there are things you can do to improve your score after filing bankruptcy, and if you are facing debt that has become unmanageable, a temporary hit to your FICO score may be a worthy tradeoff for a more manageable financial future.

While filing for bankruptcy protection will affect your credit score, it may not be as negative as you assume. In the long term, bankruptcy can be the best path to a solid financial future. A good option is to consult with a lawyer who can look at your financial situation and give you options to consider, one of which may be bankruptcy.

Click these links to read more about how your credit score may be affected by bankruptcy: http://www.myfico.com/crediteducation/questions/bankruptcy-fico-score.aspx
http://www.lawhelp.org/documents/74261bankruptcy.html?stateabbrev=/az/#credit
http://www.ehow.com/how-does_4564668_bankruptcy-affect-credit-score.html
http://www.smartmoney.com/borrow/debt-strategies/declaring-bankruptcy-can-improve-your-credit-score-20681/

All the best~ Charice Holtsclaw,Kansas City, MO Bankruptcy Attorney.

Also serving Gladstone, MO; Liberty, MO;  Platte city, MO;  Riverside, MO; Independence, MO; Kansas City, KS; Overland Park, KS; Leawood, KS;  Shawnee, KS;  Shawnee Mission, KS; and Leavenworth, KS.

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