Should I Stop Paying Creditors If I’m Going to File for Bankruptcy?

Woman looking through bills. OlsenDaines, serving Oregon and Washington explains if you should stop paying creditors if you're going to file for bankruptcy.

If you’re choosing to file for bankruptcy, and you’re current on your debts, you may be asking yourself if you should stop paying creditors now.

Automatic Stay

The short answer is, no you shouldn’t stop paying creditors until you’ve officially filed. When you file for bankruptcy, the court will order an automatic stay which will prohibit lenders from making harassing collection calls, sending threatening letters, and trying to file lawsuits against you. But until then, they can continue to harass you so don’t be surprised if you suddenly stop making payments.

In most cases, the automatic stay remains in effect until your bankruptcy case is concluded. Keep in mind, it won’t stop every debt collector. Automatic stay orders will not halt child support, loans against your pension, or back taxes. And if you filed for bankruptcy in the previous year, the order will expire after 30 days.

  • Auto Loans: if you stop making payment on your auto loan, at some point the creditor will attempt to repossess your vehicle. If you want to keep the vehicle, you may want to continue making payments so you don’t run the risk of getting it repossessed.
  • Credit Cards: in most cases, people are fine not making their credit card payments, but you will likely be subjected to collection calls until you file for bankruptcy. If you just used a card before you realized you were going to file, you may want to continue to make payments. We recommend consulting with a bankruptcy attorney.
  • Home Loans: as with auto loans, if you stop making your mortgage payments, at some point the creditor will attempt to foreclose the home. If you want to keep it, you may want to continue making your monthly payments. Every case is different.

Bank Setoffs

If you’ve taken out loans through your bank or credit union and you’ve stopped making payments, they can institute a setoff. This allows them to withdraw money from one of your accounts to another to cover the loan payment. You may want to move your money around before missing a debt payment.

Experienced Bankruptcy Attorneys

Filing for bankruptcy can help you “start fresh” if you’re facing mounting debt and pressure from creditors. However, there are many missteps you should avoid in the months and weeks leading up to filing.

To ensure you reach your financial goals, it’s best to work with an experienced bankruptcy attorney. OlsenDaines has vast experience with bankruptcy. In fact, we’re the top bankruptcy filer in Oregon. We’ll help you navigate the process and get your life back on track. To schedule your free initial consultation, contact us today!

Life After Bankruptcy

Woman sitting on her sofa in relief, relaxing. OlsenDaines in Oregon and Washington talks about life after bankruptcy.

Filing for bankruptcy can provide you with relief if you’ve struggled with unmanageable debt but it also comes with some new challenges, such as dealing with a low credit score. The bankruptcy attorneys at OlsenDaines want you to start off strong after filing for bankruptcy, so follow these tips as you prepare for life after bankruptcy.

Think Positive

First of all, don’t be ashamed after filing for bankruptcy. We understand there’s a stigma involved with bankruptcy, which is mostly just misconceptions. Think positive, get back up, and try again. Many people and businesses have overcome bankruptcy and you will too.

Start Saving

Sit down and calculate your income and expenses. This will help you determine how much disposable income you have. After you’ve determined that figure, make it a point not to spend more than that every month.

Cut Down on Expenses

If you filed for Chapter 13 bankruptcy, you’ll repay secured debts through a court-managed payment plan. This means you’ll have to change your lifestyle a bit and you cannot take on a new car loan or credit card without the court’s permission first.

Rebuild Your Credit

Now that you’re starting off with a clean slate, you’ll want to rebuild your credit. Keep in mind, this is especially hard the first year following a bankruptcy filing. Apply for a secured credit card. Unlike a typical credit card, secure credit cards require a cash deposit. Pay off the balance each month and over time you’ll improve your credit score. OlsenDaines will set you up on a credit rebuilding program after filing bankruptcy.

Bankruptcy Experts

Any bankruptcy is difficult. Whether you’ve just finished discharging your debts or are thinking about declaring bankruptcy, OlsenDaines can help. We’ve been helping people throughout Oregon and Washington for over 40 years. Visit our website for more about bankruptcy and schedule your free bankruptcy consultation today!

What You Need to Know About Bankruptcy

Woman holding document, thinking. The bankruptcy lawyers at OlsenDaines serving Oregon and Washington talk about what you need to know about bankruptcy.

If you’re dealing with serious debt issues, filing for bankruptcy may be an option. It’s like getting a second chance. But it cannot wipe out all of your debt and it comes with some consequences, so keep reading to learn more about bankruptcy as you weigh your options.

What is Bankruptcy?

Bankruptcy is a legal court proceeding when a person is unable to repay their debt. A judge and court trustee will examine the person’s liabilities and assets and determine to discharge the debts. If they find the person cannot repay their debts, the person will have to declare bankruptcy.

Filing for bankruptcy can stop repossessions and foreclosures, and it can temporarily halt evictions.

There are two main types of bankruptcy people file for:

  • Chapter 7 Bankruptcy: this is the most common type of bankruptcy. You must earn less than the median income for family size in your state to qualify for this type of bankruptcy. In Chapter 7 Bankruptcy, the court will sell all of your assets, so you can pay off as much debt as possible.
  • Chapter 13 Bankruptcy: Also called a wage earner’s plan. To qualify, you must have a steady income and unsecured debt (less than $394,725) and secured debt (less than $1,184,200).

How do I know If I Should File for Bankruptcy?

While job loss and medical debt are the most common reasons people file for bankruptcy, here are some other situations which could cause you to consider bankruptcy.

  • Your wages are being garnished
  • You’re getting a divorce
  • You are unable to negotiate your debt
  • You have no assets or they’re worth less than your debt
  • You’re being sued
  • You can only afford to pay for things using a credit card
  • You use one credit card to pay off another credit card

If you’re facing serious debt, contact OlsenDaines for your free consultation because every situation is unique. As experts in bankruptcy law, we’ll address your financial difficulties and help you determine whether bankruptcy is right for you. We also offer a complimentary credit rebuilding program.

How to Move Forward After Bankruptcy

 

Going through a bankruptcy —– from decision to discharge— can be a long and stressful ordeal. Eventually, though, you get the breathing room you so desperately need. And after Chapter 7 or Chapter 13 comes the next chapter: putting your life and your credit back together.

How can you do that? A bankruptcy stays on your credit report forever, and you’ll never be able to get a mortgage or another credit card, right?

Wrong.

A Chapter 7 bankruptcy stays on your credit report for 10 years; a Chapter 13 for 7. Maybe restoring your credit won’t be easy, and maybe it won’t be instant, but you can put your life and your credit back together after bankruptcy. We can help you figure out what strategies will work best for you. We have offices in Tigard, Salem, Albany, Grants Pass, Klamath Falls, Bend, and several other cities in Oregon. We also have offices in Vancouver and Tri-Cities in Washington. How quickly you recover from bankruptcy depends a lot on you and what you do after discharge. We can help you develop a sound approach to your fiscal recovery.

In the meantime, here’s a few tips to help you get started down the road to emotional and financial recovery.

Let it Go. Put it Behind You and Move on.

If you’ve recently gone through a bankruptcy, you might be feeling like a failure. You might feel like you are all alone or are some kind of financial outcast. Think again. According to the United States Courts, bankruptcy filings were down in 2017 but they still totaled a whopping 794,492.  You are definitely not alone. But you are the only one that you must forgive.

In order to rebuild your life and move forward, you need to be able to come to grips with the past. You need to take a look at what happened and why, so you can prevent it from happening again, if at all possible. You should look at the past, but you don’t have to live there. Think about what happened and how you can make sure things will be different from now on. Then forgive yourself, and move on. Make a plan to live a better, more responsible fiscal life, and start living that life!

Pay Your Bills on Time. Consider Getting a Secured Credit Card.

One of the best ways to get your financial life back on track is to make a plan and be diligent about paying your nondischargeable debts (taxes, child support, alimony etc.) on time. You can also consider getting a secured credit card. Unlike other credit cards, with a secured credit card, you deposit small amounts of money in your bank account and that becomes your credit line. However, not everyone qualifies for a secured credit card and they often come with high fees.

 Talk to a Lawyer!

Don’t know where to start? If you need help making a plan to rebuild your life after bankruptcy, or if you are considering filing bankruptcy, contact us. We can give you the help and guidance you need.

What You Can Keep After Filing for Bankruptcy

Many people believe that they will lose everything they own if they file for bankruptcy. Not true. In fact, most people who file for bankruptcy do not lose anything they own at all.

How can that be?

Well, the secret lies in…

Exemptions.

Most consumers file for Chapter 7 (or “liquidation”) bankruptcy. In a Chapter 7, exemptions determine what property you get to keep. If your property is exempt, whether it is your home, your car, your pensions, furniture, your clothes, etc., you can keep it during and after the bankruptcy. Exemptions protect your property and put it beyond the reach of the bankruptcy trustee (“trustee”).

If the property is nonexempt, then the trustee is entitled to sell it to pay your unsecured creditors.

In a Chapter 13 bankruptcy, it is the exemptions that determine how much you will have to pay to nonpriority, unsecured creditors.

If you are considering bankruptcy in Oregon or Washington, it’s important for you to understand how exemptions work and to know what property is exempt in those states. We can help. We have offices in Tigard, Salem, Albany, Grants Pass, Klamath Falls, Bend, and several other cities in Oregon. We also have offices in Vancouver and Tri-Cities in Washington.

A Little More About Exemptions.

Every state has its own set of bankruptcy exemptions and most states require that you use the state exemptions only. However, some states allow a debtor to choose whether to use state exemptions or federal bankruptcy exemptions. Like all states, Oregon has its own set of bankruptcy exemptions. But in Oregon, if you file for bankruptcy you can elect to use the federal bankruptcy exemptions instead of the Oregon state exemptions. In Washington, you can use either the federal exemptions or the state exemptions.

How Exemptions Work.

There is a lot to know about exemptions, but briefly, this is how it works: if you have property that is worth a certain dollar amount that is equal to or less than the exemption, you will be allowed to keep the property. If, on the other hand, the property’s value exceeds the exemption, it is highly likely that the trustee will sell that property and use it to pay your unsecured creditors. Why? Because the federal government assumes that honest debtors try to pay off their debts. So, if a debtor has excessive property, the federal government believes it should be sold to pay those debts. On the other hand, the bankruptcy laws are designed to give debtors a “fresh start” —– not to leave them destitute. As a result of these dual concepts, both state and federal bankruptcy laws provide debtors with property exemptions.  Generally, Chapter 7 exemptions are far lower, stricter and are less flexible than Chapter 13 exemptions.

 We Can Guide You Through It.

If you are considering bankruptcy and want to know what property exemptions you would be entitled to, contact us. We have offices throughout Oregon and in Washington, and we offer free consultations.

 

 

Bankruptcy in the Context of Divorce

Statistics show that 55% of all marriages end in divorce. And 39% of all divorced couples say that conflict over finances was the reason the marriage fell apart. Fights over money ruin relationships. That’s why we so often see divorce occurring when there is a bankruptcy. It’s because of this that it is critical to understand the intersection of the bankruptcy laws and divorce laws.

 What Comes First – Divorce or Bankruptcy? No Simple Answer.

If you are facing divorce and a bankruptcy, the first thing you need to consider is timing. You must decide whether to file for divorce first or for bankruptcy first. (Filing the two together causes significantly more problems.) How you answer that question depends on a number of things: your income, your spouse’s income, what type of bankruptcy you are filing for or qualify for (Chapter 7 or Chapter 13), what assets you have, the costs of divorce and bankruptcy, and more.

There is no easy answer to this question. You must take into account both the facts of your situation, the divorce laws, and the bankruptcy laws before you can come to a final decision. That’s why you should sit down with an experienced bankruptcy attorney to discuss your situation and what is best for you. We have offices throughout Oregon and in Washington, and we offer free consultations.

Here are just two things you need to think about when facing bankruptcy and divorce:

Divorce and the Automatic Stay
Once a bankruptcy is filed, whether it is a Chapter 7 or a Chapter 13, the “automatic stay” immediately goes into effect. The automatic stay stops all attempts to collect on your debts and it freezes your assets and your property. The purpose of the stay is to allow the bankruptcy court time to sort through what debts you owe and what assets you have (if any) to pay them with. The automatic stay remains in place until your bankruptcy case is fully resolved (by discharge, dismissal or the case is closed).

Since dividing up a couple’s assets and property (in addition to other things) is what the divorce is all about, bankruptcy’s automatic stay means that the family court will be prevented from making any decisions or dividing up the marital property until the bankruptcy is completed. And that means that the divorce will take longer.

 What Type of Bankruptcy?

Another factor to consider is the type of bankruptcy that you should file for. A Chapter 7 (“liquidation”) bankruptcy requires that you meet the income requirements of the “means test.” If your income compared to certain expenses is too high, you will be required to file for Chapter 13 (“reorganization”) bankruptcy instead.

If there is a big difference between what you earn and what your spouse earns, it might make more sense to file for divorce before you file for bankruptcy. On the other hand, if you earn significantly less than your spouse and you file for bankruptcy individually after the divorce is final, you may have a better chance of qualifying for Chapter 7 bankruptcy.

Then there is the fact that if you both agree to file for bankruptcy jointly, you may not qualify for Chapter 7 as a couple, because the income amounts are based on household size, and the income maximum for two people is not twice that of one person.

The intersection of bankruptcy and divorce may be a common occurrence, but it is not a simple one to navigate. But the good news is that you do not need to try to figure all this out on your own. We are here to help.

 Let Us Help You Decide.

If you are facing filing a bankruptcy and either your spouse has filed for divorce, or you have both agreed to divorce, let us help you think through your options. We are bankruptcy attorneys with offices in a number of cities in Oregon. We also have offices in Vancouver and Tri-Cities in Washington. We offer free consultations and we can help you. To set up an appointment, call us toll free at: 1-800-682.9568 or contact us here.

Core Proceedings and the Bankruptcy Court

Let’s say you’re having a really, really, bad week. You were injured in a car accident, the extension the contractor put on your house fell apart and now you’re suing him for breach of contract, your wife just found out about your (latest) girlfriend and has filed for divorce, and you can’t pay your creditors, so you just filed a Chapter 7 or Chapter 13 bankruptcy. In the middle of reeling from all of this you think to yourself, when I get into bankruptcy court, is the judge going to decide the liability, breach of contract and divorce cases too?

Good question.

When you file for bankruptcy, it is important to understand what matters the court will decide and what matters it won’t decide. Knowing the extent of the court’s  jurisdictional authority is one reason why it is important that you hire competent bankruptcy counsel to represent you. We have offices throughout Oregon and in Washington State. Our attorneys are experienced bankruptcy attorneys and they know the law.

The Bankruptcy Court’s Jurisdiction. Core Proceedings.

Bankruptcy courts are courts of limited jurisdiction. That means that they do not hear and decide everything and anything. Congress granted bankruptcy judges jurisdiction over certain issues, which are called “core proceedings.” A bankruptcy judge’s decisional power is generally limited to bankruptcy matters.

Core proceedings are proceedings or issues that are entirely related to the bankruptcy case. The bankruptcy judge has the power to hear and decide these matters and enter judgment on them. Some examples of core proceedings are: the bankruptcy trustee’s duties, matters concerning debtor exemptions, or proceedings to determine, decide or recover fraudulent transfers. There are many more, but this should give you some idea of what the bankruptcy court will hear and decide.

Non-core Proceedings.

Non-core proceedings are issues that arise in a bankruptcy case that are not technically bankruptcy matters. These are called “non-core proceedings.” Examples of non-core proceedings in our fact pattern above would be your divorce, the car accident and the breach of contract action against your contractor. These matters are not governed by bankruptcy law but by other state laws and they are not directly related to your bankruptcy.

However, that does not mean that the bankruptcy court cannot hear and decide issues that may be non-core proceedings yet are matters directly related to your bankruptcy. For example, in our fact pattern above, while the bankruptcy court will not decide your divorce (in other words, it won’t enter a dissolution of marriage), it may decide issues in the divorce case that are related to your bankruptcy— like division of the marital property.

If the bankruptcy judge makes a decision in a non-core proceeding, that decision cannot become a final judgment unless all parties consent. If the parties don’t consent, then the bankruptcy judge must submit proposed findings of fact and conclusions of law to the Superior or Circuit court.

We Know the Law!

If you find any of this confusing, don’t worry. We are bankruptcy attorneys with offices in Tigard, Salem, Albany, Grants Pass, Klamath Falls, Bend, and several other cities in Oregon. We also have offices in Vancouver and Tri-Cities in Washington. We offer free consultations and we can help you. To set up an appointment, call us toll free at: 1-800-682.9568.

What the Automatic Stay Can and Cannot Do

One of the immediate benefits of filing bankruptcy is the relief that the Bankruptcy Code’s “automatic stay” gives to a debtor. The automatic stay brings all collection efforts against the debtor to a screeching halt. It prevents creditors from collecting on their debts until discharge, the case is closed, or the stay is lifted. The automatic stay goes into effect immediately— without need for a court order —and it applies to all of the chapters of the Bankruptcy Code. It has a very broad reach. But it’s reach is not limitless.

As you might expect, there are many things the automatic stay can do, but there are also some things it cannot do.

Let’s take a closer look at the powers of the automatic stay.

What the Automatic Stay Can Do.

The automatic stay is found in Section 362 of the Bankruptcy Code. It prevents creditors from taking pretty much any action outside the supervision of the bankruptcy court that would give one creditor an unfair advantage over any other creditor.

Here are just two of the things the automatic stay prohibits:

  • Anyone from bringing or continuing any judicial, administrative, or other action or proceeding against the debtor that either was commenced before the bankruptcy was filed, or which could have been commenced before the bankruptcy was filed.
  • Enforcement of a pre-petition judgment against the estate (i.e., the bankruptcy estate), property of the estate, or the debtor. It prohibits all collection activity including: levies, garnishments, restraining notices and all post-judgment collection remedies.

What the Automatic Stay Cannot Do.

While the automatic stay applies to many actions against a debtor, as we said, it is not limitless. Here are just three things that the automatic stay cannot do:

  • Stop criminal proceedings. The automatic stay does not apply to criminal proceedings or criminal investigations against the debtor.  
  • Prevent tax audits or some actions to collect taxes. The automatic stay does not apply to prevent tax audits, notices or demands. It does not prevent all acts to collect any tax, or to enforce, create or perfect any tax lien. It doesn’t restrict the government from continuing with any tax audits. It won’t prevent the issuance of notices of tax deficiencies or a demand for tax returns or tax assessments.
  • Last forever. Generally, the automatic stay terminates on the happening of one of these events:

1. The case is dismissed;
2. The case is closed;
3. A discharge order is entered or denied by the court;
4. The property is no longer property of the bankruptcy estate; or
5. An order is entered that terminates, vacates or modifies the automatic stay.

Understanding the automatic stay— its reach and its limits —is very important. We have attorneys in Portland, Eugene, Coos Bay, Medford, and a number of other cities in Oregon and in Vancouver and the Tri-Cities in Washington, who can explain the reach of the automatic stay to you.

We Are Here To Help You.

If you are looking for relief from collections calls and creditors coming after you, the automatic stay may give you the break you need. We are experienced bankruptcy attorneys with offices in Washington and throughout Oregon. We offer free consultations, reasonable fees, and are committed to getting our clients the relief they need. To set up an appointment, call us toll free at: 1-800-682.9568 or contact us through our website.

What to Expect in Pre-Bankruptcy Credit Counseling

The decision to file bankruptcy is not an easy one to make. Many people experience enormous distress, shame and embarrassment over their financial difficulties. Without question, declaring Chapter 7 or Chapter 13 bankruptcy is no minor decision. But it just may be the right one for you. Especially if you cannot see any way of paying off your debt in the next 5 years.

Mandatory Pre-Bankruptcy Credit Counseling.

Before you can file for bankruptcy, however, you must complete mandatory credit counseling and receive a certificate. Once you have completed the counseling and have your certificate, you must file it with the court along with your other bankruptcy forms. Credit counseling is mandatory. If you do not file a certificate of credit counseling with the court, the bankruptcy court will dismiss your case.

But why do you have to do mandatory credit counseling?

Its purpose is to ensure that bankruptcy is your only best option. In 2005, Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) in response to the fact that many people who were financially capable of repaying their debts were using bankruptcy to have those debts discharged. This new law completely overhauled the bankruptcy law and made a number of important changes to bankruptcy rules and procedures. One of these changes was the requirement that debtors complete credit counseling both before filing bankruptcy and prior to discharge.

The purpose of pre-bankruptcy credit counseling is to provide an impartial look at whether or not a debtor really needs to file for bankruptcy.

The Where, When, and What of Pre-Bankruptcy Credit Counseling.

Pre-bankruptcy credit counseling may be the most painless part of bankruptcy. It can be done in person, by phone, or online; and it usually doesn’t take more than a couple of hours.

The most important thing to remember is that you must complete the counseling before you file for bankruptcy. Upon completion, you will receive a certificate that is valid for 180 days. If you decide to file for bankruptcy, you will need to file that certificate with the court.

For your counseling session, you will want to bring with you (or have available) information about your debts and your income.

The counselor will discuss your financial situation with you and will talk to you about what non-bankruptcy options you may have. Counseling will most likely include:

  • A thorough review of your personal finances
  • A discussion of alternatives to bankruptcy
  • Personal budget plan.

The counseling will help you to understand how bankruptcy works and what you can do to avoid financial risk in the future.

We’ll Walk You Through it!

If you are concerned about whether or not you should file for bankruptcy, or have questions about what happens if you decide to file for bankruptcy, give us a call. We offer free consultations. We are experienced bankruptcy attorneys with offices in Tigard, Salem, Albany, Grants Pass, Klamath Falls, Bend, and several other cities in Oregon. We also have offices in Vancouver and Tri-Cities in Washington. You can call us toll free at: 1-800-682.9568.

What is Bankruptcy Exemption Planning?

The main purposes of the bankruptcy laws are to:

  • Give an honest debtor a “fresh start” by relieving the debtor of most debts, and
  • Repay creditors in an orderly manner to the extent that the debtor has property available to do so.

One of the primary ways that the bankruptcy law attains its goal of providing debtors with a “fresh start,” is by providing debtors with certain “exemptions” that protect their property from creditors and put it beyond the reach of the bankruptcy trustee.

Bankruptcy exemption planning is the process of making deliberate choices concerning a debtor’s property before filing bankruptcy, to maximize the exemption protections provided by the bankruptcy law.

Warning: Bankruptcy Exemption Planning Can Be Dangerous.

Most people who file for bankruptcy do not lose anything they own because they often file a Chapter 7 bankruptcy and everything they own is “exempt.” Or, if they have non-exempt property, they file a Chapter 13 and are able to use its “adjustment of debts” option to protect their “non-exempt” assets. But bankruptcy is not a “one size fits all” proposition, so this isn’t always the case. Sometimes a debtor may have assets that are not exempt, but cannot be protected well through a Chapter 13. That’s when exemption planning can be very beneficial.

That is not to say that exemption planning is simple. It isn’t. It consists of developing strategies for managing and positioning your assets before you file for bankruptcy so those assets are protected once you do file. Those strategies may better enable you to pay certain creditors that you want to pay, or need to pay, over others that you don’t. But there are risks associated with exemption planning. Because of the dangers associated with exemption planning, especially over-aggressive planning, bankruptcy exemption planning should always be undertaken with the assistance of experienced and informed bankruptcy counsel.

As noted above, one of the main tenants of bankruptcy law is that honest debtors should be allowed to discharge their debts, and the law provides exemptions to allow them to do so. On the other hand, bankruptcy is not meant to benefit dishonest debtors. Section 727(a)(2) of the Bankruptcy Code prohibits any debtor who attempts to defraud creditors by transfers of property, from being discharged. Clearly, then, there is a tension in the law with regard to how much you are allowed to sell or transfer before filing for bankruptcy. To properly engage in exemption planning, you will need the advice of an experienced and highly competent bankruptcy attorney to guide you as to the safest way to engage in asset protection and other strategies, and to inform you on which strategies are likely to be safe, and which are risky.

Don’t Go it Alone!

If you have assets that are not exempt but can’t be protected well through Chapter 13, or are simply considering filing bankruptcy, you may well benefit from pre-bankruptcy planning. If you are in Portland, Eugene, Coos Bay, Medford, or any other city in Oregon, we have an office near you, and we provide free initial case consultations. To schedule an appointment, give us a call or send us an email.