The Financial Ramifications of Divorce – Part I


Everyone recognizes the emotional distress caused by divorce, but what about the financial ramifications? This two-part series will address several possible financial scenarios after couples split up, and how to ensure that you handle each situation appropriately. Today we will talk about joint credit card debt, and who walks away with the associated liabilities after separation.

Sometimes, in divorce proceedings, credit card debts are not given enough attention due to more pressing financial issues, such as child support calculations and dividing retirement accounts. At Veitengruber Law  we trongly advise our clients to enter into their newly single lives with no joint debt, due to the possibility of the other party filing for bankruptcy or simply not paying his or her due portion.

Credit card companies do not have to abide by divorce decrees, so if your ex-spouse doesn’t live up to his end of the agreement, creditors will ultimately end up chasing you for the amount due plus any late fees. In order to avoid this potentially disastrous situation, make every attempt to pay off any joint credit card debt before you are handed your divorce decree.  If paying it off in a lump sum isn’t possible, divide up the total amount onto separate cards in each party’s name, and make sure that the joint account gets cancelled.

In the event that your divorce is already finalized and nothing about credit card debt was put onto the court record, there is a distinct possibility that your ex-spouse will continue to use the card(s) – ultimately ruining your credit along with his.

If your split was not amicable, things can get ugly if joint accounts remain. Some couples end up in a game of spite, charging more and more items onto joint cards just because the other party did the same thing. In cases like this, you may find yourself drowning in debt and wondering if you should file for bankruptcy.

In today’s society, filing for bankruptcy does not carry the disastrous stigma it did 50 years ago. It’s not an ideal situation, but it can be a necessary solution for some newly single people who have no way to pay off debts that were incurred while married. It’s important that you stop charging anything and resolve to buy only what you can afford with the money you make.

Seek out a qualified attorney to help you determine if you can set up a payment plan with your creditors or if you do, in fact, need to file for bankruptcy. Naturally, this should be your last resort, and all other avenues to resolve your debts should be explored first. Once you declare bankruptcy, you can’t do it again for eight years, so you’ll need a professional to tell you when it’s really time to use your trump card.

Next week we’ll talk about keeping your house….without your spouse.

*Above photo courtesy of Meddy Garnet

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Loan Modification Made Easier With HAMP Tier 2


Photo courtesy of Tiger Girl

If you have received a Notice of Foreclosure on your home, don’t panic. There are some effective steps you can take to avoid foreclosure, thanks to some new governmental guidelines that were just added to Obama’s ‘Making Home Affordable’ program. The changes became effective on June 1, 2012 with the main goal of making more homeowners eligible for the program and decreasing the number of foreclosures.

The ‘Making Home Affordable’ program’s new guidelines are being called the Home Affordable Modification Program (HAMP) Tier 2. Under HAMP, the qualifications for loan modification have been expanded, and deadlines have been extended to December 31, 2013. Fannie Mae or Freddie Mac loans, and those from the VA or FHA are not eligible for modification through HAMP Tier 2.

If you are a financially distressed homeowner, or are in imminent danger of foreclosure, George Veitengruber, Esq.,  will sit down with you to discuss your new, expanded options under HAMP. We specialize in loan modification and credit repair, so we are up to date on all of the governmental programs that will keep you in your home. For example, HAMP Tier 2 now allows for up to 3 mortgage modifications per individual, and has expanded to include displaced homeowners. Relief is also available for unemployed borrowers (Through HAMP’s UP initiative), who will be considered for HAMP relief once they find employment or 12 months have passed.

A requirement under HAMP is that your monthly principal and interest payments must be reduced by at least 10% after the loan modification. If this is not possible, your mortgage will not qualify for HAMP assistance. Additionally, condemned homes are not eligible to qualify for help under HAMP and the Making Home Affordable Program.

To take advantage of these governmental revisions and find out exactly how you can avoid foreclosure, give us a call today. We can explain all of the fine details of loan modification and the HAMP Tier 2 revisions as they apply to your unique situation. We can show you how to reduce your monthly mortgage payments, make life affordable again, and keep your home.

Get Your Life Back After Bankruptcy!


Photo courtesy of Magnus D

After filing for bankruptcy, many people are afraid that they will never be able to get their lives back in order. The truth is, bankruptcy was actually created to help troubled consumers rather than hinder them, and it is definitely possible to reinvent yourself after a bankruptcy as long as you are actively working to make improvements in several areas of your life.

Employment
If you are unemployed at the time of your bankruptcy discharge, the first thing you need to change is your employment status. Getting a job post bankruptcy is not the unattainable impossibility that many have been led to believe. “You’ll never get hired anywhere after a bankruptcy!” is simply a myth perpetuated by lenders to keep their debtors from having their debts discharged instead of repaying them. In general, bankruptcy is rarely a cause for an applicant not being hired for a job, even in positions that require security clearance.  Your credit score and report really have no significance when it comes to getting a job. Additionally, if you are already employed at the time of your bankruptcy, it may be necessary for you to look for a better paying job or a second job temporarily while you work on building your credit back up. Your bills definitely need to be paid on time, now more than ever.

Budgeting
Once you have secured adequate employment, make a realistic budget and stick to it.  Live below your means and start changing all of your bad financial habits. All of your debts have now been erased, so view this as a “do-over” – and do it right this time! Don’t let history repeat itself, or you’ll really have a problem, because you can’t declare another bankruptcy for 8 years.

Building Credit
Attorneys recommend that you get 1-3 bank credit cards and use each card a tiny amount each month, well within your means to be able to make your credit card payment in full and on time EVERY month. This helps gradually boost your credit score by showing that you can be responsible with money that is loaned to you.

Speaking of loaning – it is indeed possible to secure a personal loan after a bankruptcy. In order to expedite the process, look for lenders who lend to people with bad credit instead of seeking a loan from a traditional lender. Also, although your rates will likely be higher than average, do your best to get the lowest interest rate possible. You may be able to offer one of your assets to get a discount. Consider refinancing your loan at a later date to get an even better deal once your credit rating has gotten a little boost.

Finally, ensure that all credit bureaus have accurate information about your debts, and the fact that they have been discharged. You do not want your credit report declaring any old debts that have now been wiped clean. Only when credit bureaus have the correct information will your post bankruptcy credit score begin to improve.

Be Willing to Ask for Help
Contacting an attorney is always advisable even after a bankruptcy, especially if you are overwhelmed or unsure how to proceed in order to avoid making the same mistakes twice. Veitengruber Law would be happy to guide you after your bankruptcy discharge. We want our clients to reclaim their lives as quickly as possible, and we will work with you to help you reach your goals.

Chapter 7 or Chapter 13: Which Bankruptcy is Right for You?

Photo courtesy of Steve A. Johnson

Many people who are contemplating filing for Bankruptcy are misinformed on many important issues surrounding how to file, when to file, and which type of bankruptcy is most appropriate. Today, we will clarify the differences between Chapter 7 and Chapter 13 Bankruptcy to help readers understand specifically what is involved and required in each type.

Chapter 7 Chapter 13
Simple description Personal/business assets are liquidated because of a person’s inability to pay debts. Payment plan is created by court for people with reliable incomes to pay all or part of their debts.
How it works No more than 180 days before filing, credit counseling should be obtained. When petition is filed with the court, a trustee will be appointed. All assets that are nonexempt must be surrendered, and the money from these assets will be split between all creditors. No more than 180 days before filing, credit counseling, and, if applicable, a debt management plan should be obtained. File petition and plan together. A repayment plan will be established and should conclude in 3 to 5 years. Payments made are to come from disposable income. Assets are retained.
Financial limitations Anyone filing Ch. 7 must pass the “means test”, ensuring their eligibility based on their income being lower than the state median. Ch 13. filings are reserved for debtors who owe less than $360,475 in unsecured debts and less than $1,081,400 in secured debts.
How often you can file Individuals are ineligible if their debts were discharged under Ch. 7 within the past eight years. Individuals are ineligible if they received discharge under Ch. 7, Ch. 11, or 12 within the past four years, or if they received discharge under Ch. 13 within the past two years.
Resulting effect on debts owed Aside from limitations noted in the Bankruptcy (student loans, child-support, taxes), most existing debts will be wiped out and responsibility to current creditors will end. Aside from limitations noted in the Bankruptcy (student loans, child-support, taxes), a portion of debts will be paid under a repayment plan, and the remaining debt amount will be wiped out.
Can you keep your home? You may be able to keep your home if mortgage payments are kept current and if there isn’t substantial nonexempt equity. Additionally, spousal ownership may help you keep your home. If your repayment plan is thoroughly completed and there is not substantial nonexempt equity, you will keep your home. Spousal ownership may also help you keep your home.
Can you keep your vehicle? Your car or truck may be repossessed by creditors unless you can absolutely prove it is necessary for work. If your repayment plan is thoroughly completed, you will be able to keep your vehicle.
How will this affect your credit? A Ch. 7 Bankruptcy will stay on your credit record for up to 10 years and will be visible by prospective lenders and employers. A Ch. 13 Bankruptcy may remain on your credit report for up to 10 years. Some creditors only report a Ch. 13 for 7 years.

For more information about filing for Chapter 7, Chapter 13, or another type of Bankruptcy, contact Veitengruber Law for a free consultation, and check back soon for more details about life after Bankruptcy.