Hiring an experienced bankruptcy lawyer is the first step toward financial freedom for those trapped by debt. A bankruptcy lawyer analyzes the debtor’s financial standing and determines whether he qualifies for bankruptcy protection and under what terms. The lawyer also considers whether bankruptcy is in the client’s best interests and under which chapter he can attain the most appropriate relief.

Legal Consultation in Athens

Your relationship with a bankruptcy lawyer starts with an initial consultation. If you have scheduled this meeting, it’s because you feel bankruptcy may be in your future. Some clients are sure of this. Their situation has become so dire that they already know their salvation lies in filing for bankruptcy.

On the other hand, other clients may be uncertain. Their financial concerns may be grave, but there are other solutions to insolvency than bankruptcy, and bankruptcy comes with long-term consequences. For instance, those who file bankruptcy may have to surrender valuable property and weather a period where credit is largely unavailable to them.

Deciding whether to file bankruptcy hinges on analyzing the consequences and the benefits. A good bankruptcy lawyer walks clients through the bankruptcy process and its impact on those who file. No one should file bankruptcy with their eyes shut.

Bankruptcy attorneys explain in detail what the impacts of this decision will be. Also, they thoroughly review their client’s finances and advise on how to best organize them before filing. As with any legal process, bankruptcy requires planning and strategy to achieve the desired outcomes. With a bankruptcy expert, you have the assurance that your case will proceed smoothly, that you will maximize the benefits of any property exemptions, and that all dischargeable debts will apply.

The Top Five Ways Bankruptcy Attorneys Help Their Clients in Athens

Bankruptcy attorneys help their clients in many ways, but the top five include the following:

 

Eliminating All Possible Debt

Pro se (self-represented) bankruptcy petitioners have a high rate of bankruptcy case failure. As with most legal filings, the process must be followed correctly for the claim to succeed. Often, pro-se litigants make a mistake in the law and lose their case.

For instance, the United States Bankruptcy Code has income limitations on Chapter 7 bankruptcies. A misinterpretation of this requirement can cause a pro se litigant with a fluctuating income to file at a time when he makes too much money.

In another situation, a pro se litigant may run afoul of exemption limits, causing costly complications. Also, lacking knowledge of bankruptcy law, some people fail to place assets in exempt accounts, resulting in substantial financial loss.

Deciding If Bankruptcy Is the Right Option in Athens

Being in financial distress is never easy, and bankruptcy offers one of the swiftest and most effective remedies.  But other avenues for debt relief exist. For instance, households with excessive credit card debt may find a solution in credit counseling. Credit counseling services negotiate lower payments and interest rates with credit card companies. This results in an affordable monthly payment and assists clients in eliminating debt sooner.

In another instance, homeowners find themselves underwater in their mortgage and struggling to make ends meet. Conducting a short sale may provide an attractive alternative to bankruptcy. The owner can eliminate the debt and walk away from the property without sacrificing a solid credit rating.

But bankruptcy provides many advantages over credit counseling, short sales, and other debt relief measures. For example, Chapter 7 bankruptcy clears all dischargeable debts, allowing the debtor a fresh start. Also, bankruptcy eliminates unaffordable monthly payments instantly, saving the petitioner years of struggle. In addition, interest payments are eliminated, so the payor is freed from the corrosive effect of compounding.

A Chapter 13 bankruptcy provides more options than credit counseling. While credit counseling restructures only credit card debt, Chapter 13 can simultaneously address credit card debt, mortgages, vehicle loans, and other obligations.

In addition, Chapter 13 gives you substantial leverage in creditor negotiations because the court can enforce a repayment plan.

One of the most significant advantages of bankruptcy over other debt forgiveness plans is eliminating the debt forgiveness tax. If your lender forgives a portion of credit card debt or you process a short sale on your home, the bank must report the amounts forgiven on 1099, which the IRS treats as income. While a small amount of debt forgiveness tax may be acceptable to reduce expenses and avoid bankruptcy, generating a large tax burden can extend and exacerbate your debt problems.

For instance, imagine you sell your home in a short sale and eliminate credit card debt by negotiating a lower balance with creditors, resulting in $50,000 in forgiven debt for that tax year. In that case, the $50,000 is likely to catapult you into a higher income bracket, increasing your tax rate and possibly eliminating eligibility for tax deductions with income limits.

In this scenario, if your tax rate is 20%, the $50,000 in forgiven debt adds $10,000 to your federal tax bill. Your state income taxes may also skyrocket.

It’s true that you exchanged $50,000 in consumer debt for $10,000 in tax debt, obviously an improvement. However, you are still in debt to the IRS and may find yourself subject to late payment penalties, wage garnishments, property seizures, and other IRS collection activity. For this plan to work, you must be able to manage the increased tax burden.

In addition, if you incur the taxes on the forgiven debt and then need to file bankruptcy later, your Owings to the IRS may be disqualified for discharge. Bankruptcy provides an avenue for you to walk away from punishing debt without increasing your tax burden.

Selecting the Right Type of Bankruptcy in Athens

Bankruptcy lawyers review your situation and advise on the implications of each. Your goals and financial situation need to be accounted for in making this decision. Some of the features of each type are detailed below:

Chapter 7

Chapter 7 bankruptcies provide a fresh start for many petitioners. However, not all debts have eligibility for Chapter 7 discharge, so some petitioners receive a modified fresh start.

A debt elimination bankruptcy allows you to walk away from your dischargeable debts entirely. However, this comes with several costs. Firstly, you must surrender any non-exempt property to the bankruptcy trustee, who uses it to repay your creditors partially. If you have valuable non-exempt property, Chapter 13 may be a better option.

Secondly, your credit rating immediately plummets. However, most Chapter 7 litigants see their scores rise above their pre-bankruptcy level soon after the case ends because they no longer carry burdensome debts.

Thirdly, you sacrifice eligibility for many loan programs, such as conforming mortgages, until you have several years of “seasoning”, or time since the bankruptcy discharge.

Finally, while your case is open, you are excluded from mainstream credit. During the active period of your Chapter 7 bankruptcy case, you can place any new debt into the bankruptcy. As a result, only specialized lenders will extend credit at very high rates. If you need to rent an apartment, you may require a consignor or have to stay in a place offering month-to-month- or week-to-week tenancy.

Though you must give up non-exempt property, Georgia law permits many exemptions, including a modest amount of home- and vehicle equity and personal property, plus generous amounts of retirement savings.

Chapter 13 Bankruptcies

Debtors with large amounts of non-exempt property can use a Chapter 13 bankruptcy to protect it. For example, a debtor facing foreclosure with home equity above the Chapter 7 exemption can save their home through Chapter 13. A Chapter 13 plan allows them to modify their monthly expenses to an affordable level and block foreclosure attempts.

 

Also, debtors whose incomes exceed Chapter 7 eligibility requirements can opt for Chapter 13, which had no income limits.

Help Eliminate All Eligible Debts in Athens

A bankruptcy lawyer helps you determine all debts eligible for discharge. The last thing you want is to be stuck with a dischargeable debt post-bankruptcy. Your attorney does the detailed work of scrutinizing your debts and listing all of them in the bankruptcy. After the discharge, these creditors have no authority to collect from you.

For example, you may have questions about whether you should include all debts in the bankruptcy. For instance, you may have multiple credit cards with high balances and need to decide whether to include all of them. You may reason that paying off one card and keeping it outside the bankruptcy will allow you to retain access to emergency credit while the case proceeds.

However, most credit card companies close your account once you file bankruptcy,, even if it is not included. As a result, in most cases, you are better off including all credit card debts. Your attorney provides advice on the implications of including each debt, ensuring that you eliminate all eligible debts.

No one wants to go through bankruptcy. It is time-consuming, expensive, and cuts you off from many credit opportunities for several years. However, if your financial situation has deteriorated to the point that you lack access to mainstream credit, are unable to service debt, face the seizure of property, and cannot sleep at night, filing bankruptcy provides tremendous relief and a fresh start, importing your life and giving you peace of mind.

In short, the temporary pain of bankruptcy is less than the ongoing pain of unmanageable debt.

Most bankruptcy clients share one regret: They waited too long to file. Bankruptcy is a temporary setback. The sooner you file, the sooner your situation improves. Procrastinating on making the decision only prolongs the restrictive debt situation and results in taking even longer to restore financial stability. Like going to the dentist, the longer you put it off, the worse the problems become. But once you do, you feel so much better.

To learn more about whether bankruptcy is the right solution, contact Morgan & Morgan for a consultation.

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