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Which First, Divorce or Bankruptcy?
Money is a major source of tension for any marriage. It may not be the cause of a divorce but financial arguments can add to the stress on any couple. Especially if that pressure is compounded by bills that are not being paid and calls from creditors. As much as financial troubles can be the cause of divorce, divorce can also be the cause of bankruptcy.
Given this close relationship to two of the most stressful events that might occur in life, it is important to plan ahead. The first consideration is which you should do first, file for divorce or for bankruptcy.
The fees for filing for bankruptcy are the same regardless if you apply separately or together. That means you can potentially save money if you file with your soon to be ex-spouse. It should be mentioned to your bankruptcy attorney that you will divorce soon, that way there is no conflict of interest.
A 341 Meeting in Texas: Bankruptcy Basics
Deciding whether or not to file for bankruptcy can be one of the most important decisions a family makes. Some families put off the process as long as possible hoping to avoid the stigma that comes with filing for bankruptcy, but in many cases it’s the easiest, simplest, and most effective way to recover from financial insolvency. Following the financial crisis of 2008, from which many Texans are still recovering, bankruptcy became a more important option than ever.
But it’s a complicated process, one that has many different steps and processes depending on which type of bankruptcy the debtor is filing. Though local rules govern each bankruptcy court, the overall procedure of filing bankruptcy is overseen by Federal Rules under the Bankruptcy Procedure, set forth by the U.S. Court system and laid out in the U.S. Bankruptcy Code. There are two main types of personal bankruptcy: Chapter 7, in which the debtor liquidates his assets and his debts; and Chapter 13, in which the debtor goes through a debt reorganization process. In a Chapter 7 filing, the debtor never appears in court, and only sees the judge if an objection is raised in the case. In a Chapter 13 filing, the debtor will likely appear before a bankruptcy judge only at a plan confirmation hearing.
How Payment Methods Influence Consumer Spending Habits
Americans say that they are spending less money on extras like restaurants, bar tabs and the like compared to 2012. That is according to a survey conducted by the consumer research team Mintel. They surveyed Americans about consumer spending habits for thirteen different categories. The only two categories that consumers admitted to spending more on were groceries and household care items.
This might not be the case according to consumer spending data. That research has shown that spending has increased for several of the categories surveyed by Mintel by as much as five percent. This discrepancy could be caused by a small percentage of consumers who have spent more money on luxury and big ticket items.
Small Business Bankruptcy Threatens San Antonio’s Future
With the economy firmly in recovery, it may seem for residents of San Antonio that it’s all clear ahead. Indeed, CNN Money Magazine lists San Antonio as one of the top ten booming cities in the country. According to CNN, “those who move here from other parts of the country often find their income stretches much further in San Antonio… it’s 57 percent less expensive to live there than in Manhattan, 29 percent less than in Los Angeles, and 18 percent cheaper than in Chicago.” This translates to some big savings—especially when it comes to housing. Now that the Great Recession has done its worst to the housing market, houses in San Antonio are some of the cheapest in the nation. According to CNN, the median price for a single-family home in San Antonio was $167,000 in 2013, “well below the $184,000 national median.” This means that the city is prime stomping grounds for new entrepreneurs and start-ups. Even CNN reports “San Antonio is a blue collar town that is attracting a lot of cutting edge companies.”
Bankruptcy and Your Credit Score
Bankruptcy is a personal choice that may or may not be the best solution for everyone. However for many Texas residents, filing bankruptcy offers a way to overcome insurmountable debt. Nonetheless, it's no secret that your credit score will be affected if you file bankruptcy. According to Dailyfinance.com, there are at least five steps that one can take to rebuild credit after bankruptcy.
Erase the Guilt
This isn't to say that your credit score will be low forever. Rebuilding your credit is a process and bankruptcy is viewed by many as a fresh start. The first step to rebuilding your credit is giving up guilt or shame. According to the Wall Street Journal people who filed for bankruptcy protection rose 9% in 2010. That number has increased since then. So avoid the negative self chatter and replace it with thoughts that you are doing what's best for you.
Filing for Chapter 7 Bankruptcy
When someone files for personal bankruptcy, they typically file for either Chapter 13 bankruptcy or Chapter 7 bankruptcy. Under Chapter 13, a payment plan is set up for the debtor to pay back all of the debts, whereas, under Chapter 7, the debts are forgiven.
When a person files for Chapter 7 bankruptcy, these are some important steps to take early on:
The person in debt (debtor) must file a bankruptcy petition with the court, along with a list of assets and liabilities, a list of income and expenditures, a financial affair statement and a list of all current leases
- Once the petition has been filed, debtors must also have tax documents available to hand over to the case trustee
- If the majority of the debts are consumer debts, the debtor must also file a certificate of credit, a copy of a debt repayment plan from credit counseling if there is one, evidence of payment from employers and any interest in qualified education or tuition accounts
How Bankruptcy Affects Retirement Planning
When it comes to retirement planning, people face many questions and choices. Some wonder what types of investments are best for them. A popular retirement planning tool is an IRA, which stands for Individual Retirement Account. As the name suggests, it is an investment vehicle designed to ensure income during retirement. They were first introduced in 1974, with the passage of the Employee Retirement Income Security Act (“ERISA”). 26 U.S.C. § 7701(a)(37). Since their creation, Congress has acted to increase the contribution allowed and the protections against creditors.
Congress recognized that people work hard during to build enough savings in their 401(k)s and retirement funds to provide for retirement. As such, they thought it necessary to protect retirement money from creditors in a case of bankruptcy. Yes, persons who file for Chapter 7 or Chapter 13 bankruptcy get to keep their retirement funds.
Card debt being paid off at slower rates?
According to a recent article, an Ohio State University study found that young Americans borrow a lot of money with credit cards, and they repay the debt much more slowly than generations before them.
Lucia Dunn, an economics professor at Ohio State University, has suggested that these new findings mean that the typical young credit card holder will probably die in debt to credit card companies. Dunn was a co-author of the study, along with Sarah Jiang, who is the manager of credit and business strategy at Capital One Financial in McLean, Va.
According to Professor Dunn, if this pattern continues, the United States may end up with a serious financial crisis among the elderly people who cannot pay off their card debts.
Texas Deceptive Trade Practices Act saves bankruptcy case
While proving whether the defendant broke the law is all that must be done in most court cases, it is not always that simple. Sometimes, judges must rely on past cases to determine the outcome of a current court case, and that is exactly what had to be done in Texas not long ago in bankruptcy court.
The United States District Court for the Northern District of Texas heard Carroll v. Faroogi in February and agreed with a U.S. Bankruptcy Court’s decision that an individual has standing to pursue an action against a franchise or under the Texas Deceptive Trade Practices Act (DTPA).
The case was about an unsuccessful sale of a Salad Bowl franchise. The CEO (who is also president, chairman and CFO) of the franchise company contacted a potential buyer of his franchise and the buyer, then signed a thirty-day option contract and paid $25,000 to the CEO for the franchise fee. The buyer, unfortunately, was unable to line up suitable financing to complete the purchase and demanded that the CEO refund him his initial $25,000 fee.
Texas Congressman Ruben Hinojosa emerges from bankruptcy
When people think of bankruptcy, they often think of foreclosed homes, people with cardboard signs on the sides of highways and old raggedy clothing. That is often not the image of a bankrupt person, however; sometimes the people that file for bankruptcy are those with great jobs and just more debt than income. In Dec. of 2010, Rep. Ruben Hinojosa (D-Texas), had to file for personal bankruptcy. According to a court document, he recently emerged from the Chapter 11 bankruptcy.
The document, which was issued by the U.S. Bankruptcy Court in Southern District of Texas, provided a final decree that closes Hinojosa’s bankruptcy case.
Hinojosa has been serving in Congress since 1997, had a debt of $2.9 million at the time he declared bankruptcy, including $2.6 million claimed by Wells Fargo Bank. Hinojosa stated that his bankruptcy was due to a loan that he had secured to rescue H&H Meat Products, a slaughterhouse that was founded by his father and uncle, after the company declared bankruptcy in 2008.
In a statement at the time of the filing, Hinojosa, who, ironically, is currently sitting on the House Financial Service Committee, said, “I have done everything humanly possible to avoid filing for bankruptcy protection to no avail. The bank debt of H&H was more than I could handle financially.”
Although House members are required to disclose personal financial documents with Congress each year, nothing prevents members that are indebted to banks from serving on the House Financial Services Committee.
Hinojosa’s annual congressional salary is $174,000. His debt stood in large contrast the wealth of about 249 members of Congress, 47 percent, who were reported as millionaires in 2011.
In the five months that followed Hinojosa’s bankruptcy filing, documents revealed that the congressman spent thousands of dollars on unnecessary expenses, such as $1,800 on clothes, $680 on cleaning services and $540 in allowance to his children.
If you are considering filing for bankruptcy, contact a bankruptcy lawyer in San Antonio, Tex. today. Attorney Chance M. McGhee will help you with your bankruptcy filing now.
Photo courtesy of cooldesign/FreeDigitalPhotos.net
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