Filing for Bankruptcy: What NOT to Do

2247299538_8a26dcf655Photo courtesy of Phil

As with every significant decision in life, there are certain tasks that you must do when filing for bankruptcy, and there are actions that you are advised to avoid like the plague. The bankruptcy trustee assigned to your case is going to microscopically comb through all of your behaviors in the year immediately preceding your filing, so it is of the utmost importance that you work diligently to adhere to the following points of advice:

  • DON’T cash out your retirement savings. Any creditors to whom you are indebted cannot touch any of your retirement accounts because they are considered exempt in bankruptcy under certain specific sections of tax code. This includes 401(k)s, 403(b)s, and most IRAs. Taking your retirement savings out of these accounts in order to put them into your bank account and spend them is a bad idea. Your dollars will no longer be safe once they are released from your retirement resources.
  • DON’T pay money to family in the hopes of recovering that money secretly after you have filed for bankruptcy. That transaction will be discovered during your bankruptcy case, and it will be considered a deceptive and fraudulent move on your part, which can be reason enough to dismiss your case altogether.
  • DON’T continue to make payments on your dischargeable debts, like credit cards. Why put any more money toward a debt that you will likely be released from when your bankruptcy is complete? Be smart and don’t throw money down the drain.
  • DON’T overuse your credit cards. Many people who have gone before you have made the grave mistake of maxing out their credit cards immediately before filing for bankruptcy, with the thought that it is basically free money because your debt will be dissolved in your bankruptcy matter. This is considered bankruptcy fraud and will be discovered at some point, which will probably lead to your case dismissal.
  • DON’T go without a qualified and experienced bankruptcy attorney. You’ve seen ads and heard estimates of paralegals who will prepare your bankruptcy filing for a small fee. It seems too good to be true, right? That’s because it is! Do not enter into a bankruptcy case without a lawyer. To do so would be extremely risky to the outcome of your case.
  • DON’T transfer any of your property. To do so looks very suspicious, and the bankruptcy trustee assigned to your case will view this action as an attempt to defraud the court.
  • DON’T file immediately before receiving a significant inheritance or tax refund. Timing of filing your bankruptcy matter is important, and it should be discussed with your New Jersey bankruptcy attorney.
  • DON’T gamble. Whether it’s hitting the casinos in Atlantic City, or placing your entire paycheck on the trifecta at the racetrack, avoid all betting until much, much later (preferably never).
  • DON’T marry your sugar daddy. (Or sugar mama) All joking aside, don’t get married immediately before filing a bankruptcy petition if your potential spouse earns significantly more money than you do. The bankruptcy court will take his or her income into account when determining your ability to repay your debts.
  • DON’T lie to your attorney or to the bankruptcy trustee. To do so will most likely result in your case being dismissed and will prevent you from ever being able to file bankruptcy on your current debts in the future.

Pssst… If you are reading this information a little too late, there may still be a way to fix your mistake. You will want to contact a bankruptcy lawyer in New Jersey ASAP in order to discuss your options. He will be able to help you decide whether to file at a later date, switch your Chapter 7 to a Chapter 13, or pursue other avenues in order to resolve your debts and get you to a financial place that feels good and works for you.

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Costly Banking Mistakes and How to Avoid Them

6791146971_77854f2e22Photo courtesy of  TrentTSD*

Banking was so much easier when you were 10 years old. Back then, your one and only financial decision was when and where to crack open your piggy bank. Your 5th grade self didn’t know how good he had it, and likely spent a fair amount of time wishing to be a grown-up.

Fast forward a few decades and here you are in the present with the modern version of a piggy bank: a real, live, official bank account. With statements and everything! (Paper optional in today’s eco-friendly world.)  When that bank account is full of numbers, everybody’s happy. However, along with grown-up banking comes a lot of rules and responsibilities. It turns out that a real-life bank has a lot more rules then your parents did when they handed you your allowance every week. And while most of us fully realize the impact of significant negative financial activity (like foreclosure or bankruptcy) on our credit rating, the nation’s largest banks have recently begun amassing some other information about you from a relatively unknown database. The main informer is known as ChexSystems; a company that gathers and shares pertinent information about the simple matter of your daily banking habits. To date, over a million people have been essentially “blacklisted from the mainstream [U.S.] financial system” due to relatively minor banking infractions, like a bounced check.

Whether you’re just beginning your foray into financial independence or if you’re looking for ways to improve your money management, we’ve compiled a list of common banking mistakes and how to avoid them. We’ve also included some solutions for those of you, who (like many of us) have already landed smack dab in the middle of one of these unfortunate and often costly situations:

  • Do you feel a draft over there? At up to $35 per transaction, over-drafting your account can get expensive in a hurry. Common reasons over-drafts occur include spouses sharing the same bank account and not keeping track of your spending. If you’ve overdrawn your account, deposit cash or transfer money from savings as quickly as possible to avoid further over-drafts and charges. Then, contact your bank’s customer service department and explain the mistake and what you’re doing to remedy it. Ask to have the overdraft fees removed, and if they refuse, ask to speak to a manager.
  • Practicing your limbo skills. Leave the catch phrase “how low can you go?” on the skating rink floor! If your bank has a minimum balance policy, set up email or text alerts for when your balance dips too low for comfort, but above the minimum balance amount. Doing so will help you avoid minimum balance and overdraft fees.
  • Post-dating (and not the ‘dinner and a movie’ kind). Insider information from bank tellers shows that they rarely look at the date on checks deposited due to the high volume of paperwork they deal with on a daily basis. If the money’s not in your account, don’t write the check. Post-dating rarely ever works.
  • Living separate lives. While it’s imperative that you have relatively easy access to your savings account in case of an emergency, it’s good practice to hold your checking and savings accounts at two separate institutions.  Keeping them both together at the same bank makes it too easy to transfer money from your nest egg any time you feel like it.
  • Run, Forrest, run!  Ask if a bank has a “universal default clause” before you even open an account. If they answer in the affirmative, run, do not walk, to a bank that does not have such a clause. This clause gives banks the authority to view all of your credit accounts and, in turn, give you a higher interest-rate if you have been late on any payments.
  • Don’t help the bank make $$. While (as we’ve said), it’s a good idea to pad your checking account to avoid bounced checks, some people take it a little too far. Banks love this quirky human trait, because, if you kept your extra money in your savings account, (where it should be) the bank would be paying you interest on it.
  • “It’s all Greek to me!” Reading the fine print on important documents in your life should be required, and this includes all of the terms on your checking and/or savings accounts. Read it all, whether you think you’ll understand or not. Ask your banker to explain anything you have questions about before you sign on the dotted line. Once you give them your John Hancock, you’ll be hard-pressed to get out of any contracts without paying a hefty sum.

Most importantly, stay humble if and when you’ve made any banking errors. Your financial well-being is your responsibility. Everyone makes mistakes, so don’t be too hard on yourself, but don’t look for a scapegoat either. Do what you can to remedy the situation and start keeping a better eye on your money. To do otherwise will put you on a slippery slope, headed in the wrong direction. If you find yourself at the bottom of the slope, don’t just sit there. The only way up and out is asking for help when you need it.

*Photo has been edited from its original format

Bankruptcy and the New Jersey Means Test

70676193_bc99ae139fPhoto courtesy of Jackie

If you’re having significant trouble paying your bills and making good on your debts, it’s important that you stop trying to keep up with the Joneses. The first step to getting back to financial wellness is to take a good, hard look at your purchases and eliminate anything non-essential. If that means your neighbors will have a better Christmas display this year because your animated Santa and reindeer blew a fuse, so be it.

But, you say, you make as much money, if not slightly more, than the Joneses. Why is it that you’re the one filing for bankruptcy? And, when it comes to Bankruptcy Court, will your income (as compared to everyone else’s) play a role in the outcome of your case?

The answer is complex, but in general: Yes.

Part of the process of filing for bankruptcy in the State of New Jersey includes something called the Means Test. This test involves comparing your income with a schedule of the median incomes in your state. The number of people in your household comes in to play as well. If you take home less money than the median household does, you will qualify to file for a Chapter 7 bankruptcy. This assumes that your bankruptcy matter is also rather straightforward in that you hold no properties, goods, pensions, or other items that exceed exemption, and that you are not knee-deep in mortgage arrears, student loans, or child-support debt, etc.

If, when you take a look at the Schedule of Median Incomes, you find that your income exceeds the median, don’t despair. A skilled NJ bankruptcy attorney can run a unique means test based on your personal economic situation and financial obligations. You still may qualify for a Chapter 7 bankruptcy if you are slightly above the median income, but proving your case will become increasingly difficult.

Are social security payments included in means testing? Will your child support payments affect where you fall on the income scale? These are important questions that your bankruptcy attorney can answer for you. Based on your income and your obligations, your attorney will be able to begin your Chapter 7 bankruptcy filing, (which will discharge most or all of your debts) or will help you file for Chapter 13 bankruptcy (in which you will set up payment plans you can afford).

If you’ve been on the fence about filing for bankruptcy, time is of the essence. Although it may seem that median incomes would be on the rise due to the slight upturn in the economy, the cold hard truth is that the opposite is true in most areas. The unemployment rate has dropped a bit, but many people have taken lower paying jobs than they held previously. Furthermore, countless employees have been dealt pay cuts or freezes in order to keep their jobs. These factors combine to mean that, although less people are unemployed, the median income isn’t going up.

What that means for you:

Let’s assume that your income is $50,000/year and that the latest median income data for a family like yours is $52,199.

In that example, you fall below the median income for your area, and you would qualify to file for Chapter 7 bankruptcy, which would give you the best chance at financial recovery. However, because the Census Bureau shares updated information with the courts regularly, you could easily end up above the median income if the numbers continue to drop and the courts begin using the new data. Once the median income in your area falls to $49,999, it will become much harder for a judge to look at your case and grant you a discharge of all debts, because “most people” have it even worse than you do.

By meeting with a bankruptcy attorney in New Jersey, you can finally get the help you need, and it’s better to do it sooner rather than later, while the numbers are (hopefully) still in your favor.