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Choices About Secured Property in Bankruptcy

Owing money on a secured debt presents a unique set of circumstances for the bankruptcy client. A secured debt can be anything, like a contract, a note, a mortgage or agreement securing property like your home, car, furniture or other piece of property or personal equipment.  Our clients make decisions regarding these types of loans or debts and the property securing them.  Property securing a debt is also known as collateral.  The options available in bankruptcy for Massachusetts and Rhode Island are Reaffirm, Redeem, Pay as Agreed or Surrender.

Reaffirm

To reaffirm a debt, a Chapter 7 client must sign a reaffirmation agreement.  This is simply an agreement, like a contract, that declares the client wishes to retain the debt or allow the debt to continue, even after the bankruptcy case is closed. A reaffirmed debt is not discharged.  The court must approve a reaffirmation agreement and of course, the client must have a budget that shows they can afford to make the payment and keep the debt. There are many reasons why we may or may not counsel our clients not to reaffirm certain debts, especially in Massachusetts. Rhode Island is very different. Each different state has its own set of bankruptcy rules.

Redeem

Redemption is a tool used for a client who wishes to pay a one lump-sum payment to the creditor to buy back property. Sometimes this tool is used to save vehicles, homes and personal use equipment and tools. This option is a useful tool when the property is valued much less than the balance still owed on the debt, (i.e., the loan is “underwater” or “upside down”).  Redemption must be approved by the court and is only permitted under certain circumstances.  One of those circumstances is that the property must be exempt or the trustee has abandoned the property due to it having little or no value. We advise our clients to be very careful when considering redeeming property.  In most cases, when a client has certain assets to buy back property, like a big chunk of money, then it’s critically important for the bankruptcy attorney to carefully evaluate whether or not the bankruptcy client actually qualifies to file bankruptcy.

Retain and Pay

This option is simple.  It is often used with mortgages.  This option allows someone to keep their home or auto loan and to pay for this debt as usual.  The important thing to note with this option is that once the retain and pay option is used, the client no longer is responsible to pay the loan if they decide, at a future date, that they no longer want to pay and want to give up or surrender the property.  In other words, using the retain and pay tool means that the client will no longer be held personally liable for the debt. This option doesn’t work in all situations and for all clients. We counsel our clients very carefully regarding making wise decisions and whether or not this tool should be used.

Surrender

Surrendering Property is exactly as it seems.  Surrender means that the client has made a choice to give up the collateral securing the debt and give it back to the creditor.  This tool wipes the client’s hands clean of the debt.  Once the debt is discharged, the creditor can no longer collect on this debt and the client is no longer liable for the property.

How do I decide?

There are so many options to choose from in bankruptcy.  Knowing all the ins and outs of each choice is not only difficult, it’s daunting.  Different options are permissible or not, in different states.  Chapter choice, timing, multiple bankruptcies and property transfers are things to think about, just to name a few. Dealing with unraveling the information and the challenging legal analysis is always best left to the professionals. My clients prefer to get the counsel of a professional.  Based on our Google reviews, it is clear why our clients are satisfied and that they made a wise choice.

Attorney Ginger Kelly is now accepting clients in the Dudley, Webster, Sturbridge, Fiskdale, Southbridge, Saundersdale, Oxford, North Oxford, Charlton, Charlton Depot, Auburn, Leicester, Rochdale, Spencer, North Brookfield, Brookfield, East Brookfield, West Brookfield, Warren, Brimfield, Warre, Wales, Palmer and Holland Massachusetts.  We accept clients from Rhode Island on a case-by-case basis.  We can explore whether or not bankruptcy is the easy way out for you.  Our office is located in an easy-to-find place to find in Charlton, MA.  When you arrive, you will be greeted by Attorney Kelly and meet in a very confidential and comfortable place and we typically will have a lovely pot of coffee or a cup of tea waiting for you when you arrive.

By Ginger B. Kelly, Esq., December 17, 2019
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ABOUT ME: Attorney Kelly is an attorney in good standing, licensed to practice in both the Federal District and State Courts of Massachusetts and Rhode Island. Her law practice is focused on consumer debt, finance, bankruptcy and District Court matters. Attorney Kelly is experienced in both criminal and civil trial work. On a personal note, Attorney Kelly enjoys writing and other things, like agriculture, conservation and sustainable homesteading. To find out more, Google us,  visit our website, find us on AVVO.com or call us at (508) 784-1444 and please, leave a detailed message, your contact information and telephone number.  Attorney Kelly will return your call as soon as possible.

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NOTICE: This is an Advertisement. This post is not legal advice. Consult your attorney. Attorney Kelly does NOT provide legal advice to anyone via social media or anywhere over the Internet. Any and all electronic posts and writings, by Attorney Kelly, does NOT establish any type of attorney-client relationship, whatsoever, neither perceived, actual, material, implied or other. We cannot stress enough, if you need personal legal advice, always see your attorney. Do not rely upon Attorney Kelly’s posts, writings or any Internet information on websites or social media for your own personal legal advice. Seek legal advice and representation from your own personal attorney.

Copyright © 2019 by Ginger B. Kelly, Esq., all rights reserved

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December 11, 2019 · 2:26 am

Top 4 Reasons NOT to Consider Bankruptcy

 

Top 4 Reasons NOT to Consider Bankruptcy

By Attorney Ginger Kelly, December 24, 2018

It’s not unusual to borrow money and have every intention of paying it back. But for some unknown reason, you can’t pay it back. Maybe you lost your job or your hours got cut. Did your small business just crash or were sick or hospitalized. Sometimes you need to stay home with a sick child or elderly parent. Whatever the reason, it’s very human to find yourself unable to pay back loans and credit cards. When life happens, and you are stuck with debt you can’t pay, it’s OK to talk to an experienced bankruptcy attorney.

Although many people avoid the “B” word, bankruptcy, bankruptcy could be the tool you need to get back on your feet. If you can’t decide what to do, here are the top 4 reasons why you should not consider bankruptcy.

Number #1. The Hole you’ve Dug for Yourself isn’t too Deep to Get Out

Paying and paying on credit card debt without making a dent in the balances is a perfect storm for credit disaster. Another problem is paying a minimum payment on a judgment for years and years and years and the balance just doesn’t go down, it appears to go up. These are problems that may lead you to think bankruptcy is the best option. But what if you are simply annoyed at paying bills? The best plan of action to take is to do the math. Weigh your disposable income and your unsecured debt. Are you making more than your minimum payments? Are you making any progress paying down principal? Even if you can only see a slight dent in the principal, over time, but it’s taking a long time for you, evaluate whether bankruptcy is really the best idea for you right now. If you have no employment or medical issues, no change in family status, keep plugging along. Bankruptcy is probably not for you.
Dennis, a Veteran living by himself on Social Security and a small pension had problems with a judgment on a small debt. Because Dennis did not defend himself in court, so the creditor obtained a judgment against him. This was way back in the 90’s. Dennis had no choice. He started making very small minimum payments of about $30 per month out of his disposable income, which wasn’t much. In 2017, he came to me for help. Dennis paid almost $9,000 to his creditor over the years and he couldn’t see any end in sight. Since Dennis had little monthly disposable income and other medical debt, bankruptcy was a good fit for Dennis.

Tip #1: If you can’t afford to pay all your unsecured creditors in full, over the next 3 years, your current strategy isn’t working.

Number #2: You Have NOT Looted Your Retirement Account to Pay Bills

It can be very tempting to take a loan or an early withdrawal from your retirement funds, simply to keep your head above water. But if you have the means not to do this and to seek help first, even when debtors are filing law suits against you, awesome! Borrowing money against your retirement account is a very big risk, especially if you are close to retirement age. By looting your retirement, you are not getting out of debt easily. You are actually taking from old-age self and using it, hoping you will recover. Most people don’t recover. And don’t forget the consequences of early withdrawals. It’s not worth it. Alternatively, consider making plans to contact a bankruptcy attorney who can help you move forward, not backward, before you decide to loot your retirement accounts.
Steve is currently being sued by a lender for a repossessed vehicle because he suffered road bumps in his career. After several layoffs, he decided he could no longer afford his $400 a month car payment. He surrendered his car. After the lender sold his car at auction, Steve still owes about $10,000. If Steve borrows from his retirement account he can pay off this debt and not have to worry about the law suit. Sounds tempting, doesn’t it?

Steve decides to hire a lawyer and the lawyer negotiates with the lender for a payment plan. He sticks to his monthly payments and pays off this debt within 3 years. Steve still has enough money to save for retirement, repair his current vehicle, eat out every once in a while and pay his mortgage. Steve probably doesn’t need to file for bankruptcy.

Tip: Seniors who need the relief bankruptcy are often tempted to use precious retirement funds to pay off credit card debt. If you find yourself in this situation, consider this a big red flag.

Number #3: Your Family Isn’t Going to Suffer

It’s a known fact that having a child is not easy. Some say that having a child is the single greatest predictor that a single person will end up in financial collapse. When struggling with debt and weighing your options, consider who is dependent upon you. What are their ages? Do you have an “emergency fund” to care for them if something unexpected happens? The larger the number of dependents you have, the more likely you are to need an emergency fund and health insurance.

Karen got slammed with a judgment from one of her credit card creditors. It was from a debt she acquired back in 2006. She was very upset. Karen is a single working mom, supporting two school-aged kids. Their father pays hardly any child support. If Karen’s creditor garnished her wages, or she lost her job, how would she pay her rent, feed her children and buy gas to get to work? With this in mind, Karen worked out a payment plan with her creditor and is now making minimum payments. Karen is also saving for emergencies and has enough disposable income to pay for things like school pictures and activities, clothes, food and gas. If this wasn’t the case, Karen would probably benefit greatly by talking to an experienced bankruptcy attorney. But since her family is doing fine, and she’s paying her unsecured debt and her bills, bankruptcy may not be a good option just yet.

Tip: If you have dependents, be sure to stash some cash into an emergency fund.

Number # 4 You’ve Got Equity on Your Home AND you can Catch up on your Past Due Mortgage Arrears

It’s been estimated the over 7 million Americans are underwater on their mortgages. But there are many ways of finding relief, like negotiating a loan modification and talking to your lender. If you file for bankruptcy these are the 5 things you may be able to do, as a last resort of course.
1. Catch up on past due mortgage payments or negotiate a loan modification so you can stay in your home;
2. Eliminate a second mortgage or home equity loan through bankruptcy;
3. Erase debt that could be due if the lender foreclosed and sold your home for less than you owed;
4. Free up money that you were paying on other debts so you can afford your home loan; and/or
5. Avoid a big tax bill from “cancellation of debt income” that could happen if your home goes into foreclosure or if you negotiate a short sale.

Where to Get Help

A consumer bankruptcy attorney can help you understand how filing may help you. Many offer low-cost or free consultations. Every bankruptcy attorney should tell you of your options and alternatives to bankruptcy before you make those very important decisions.
If you have other legal questions, especially if you are contemplating bankruptcy or dealing with collections or debt collection law suits, Attorney Ginger Kelly is now accepting clients in the Dudley, Webster, Sturbridge, Fiskdale, Southbridge, Saundersdale, Oxford, North Oxford, Charlton, Charlton Depot, Auburn, Leicester, Rochdale, Spencer, Brookfield, East Brookfield, West Brookfield, North Brookfield, Warren, Brimfield, Wales, Palmer and Holland. We can explore whether or not bankruptcy is the easy way out for you. Our office is a quiet and comfortable place to talk, and a free pot of coffee will be waiting for you when you arrive.

The Law Offices of Ginger B. Kelly

167 Carpenter Hill Road

Charlton, MA 01507

(508) 784-1444

AttorneyGingerKelly@gmail.com

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