Being overwhelmed by debt is a stressful situation that can make it challenging to decide on the best path forward. Two of the most common options for dealing with unmanageable debt are filing for bankruptcy and pursuing debt consolidation. However, the choice between these two approaches depends greatly on individual circumstances. 

Bankruptcy and debt consolidation are distinct solutions, each with advantages and potential drawbacks. Before making a decision, you should carefully evaluate your options based on your financial situation, income level, credit history, and types of debt. 

If you are uncertain about your options, speaking with a financial advisor or an experienced bankruptcy attorney can help. 

Understanding Debt Consolidation

Debt consolidation is the process of taking out a brand-new loan and using the money to pay off other loans or debts. This strategy is usually used to combine multiple monthly payments into one monthly payment. 

Pros & Cons of Debt Consolidation

Debt consolidation can be great if you qualify for a loan with a low enough interest rate. It simplifies your payments, and many people save money with this approach. Debt consolidation will likely have a short-term impact on your credit score, but it should recover as you begin making payments. 

However, it’s important to remember that this does not eliminate debt. You still owe everything you owed before– you just have a new lender to repay. Also, if your credit score is already quite low, you may not be able to qualify for low interest which makes debt consolidation a useful method of debt management. 

How Does Debt Consolidation Work? 

There are a few different methods of debt consolidation, including:

• Balance transfer credit cards
• Debt consolidation loan 
• Debt management through a credit counseling agency 

Debt Management Programs

Debt management programs promise to help people deal with debt by collecting monthly payments from their clients and paying debts off when the money they collected reaches an amount sufficient to negotiate a settlement with a credit card or loan company. The issue with these programs is that they are voluntary. Creditors do not have to participate. If the creditor tires of waiting for payments they can pursue legal remedies like lawsuits. Your credit also continues to get damaged while you are in the program as you miss monthly payments to the creditors. We regularly see people who have lost time, money, and points on their credit score only to get sued and be faced with garnishments while in these programs. 

Understanding Bankruptcy

Bankruptcy is a legal process that allows individuals who are unable to pay their debts to seek relief from their creditors under the protection of federal bankruptcy courts. 

It provides a way for debtors to either liquidate non-exempt assets (most cases result in a no-asset finding, meaning people keep everything they have) to pay off creditors and eliminate remaining debts (Chapter 7 bankruptcy) or to reorganize their finances and debts into a multi-year repayment plan (Chapter 13 bankruptcy).

Pros & Cons of Bankruptcy

Bankruptcy, like other methods of debt management, has its benefits and drawbacks. 

It offers debtors a fresh start by eliminating their debt, except for some non-dischargeable debts like student loans or child support

Different types of bankruptcy meet different criteria, and you aren’t forced into just one kind of bankruptcy if you choose to file. A bankruptcy attorney can help you determine the best kind of bankruptcy filing for your circumstances. 

Types of Bankruptcy

Chapter 7 bankruptcy, known as liquidation bankruptcy, allows debtors to sell off non-exempt assets to pay creditors, with remaining eligible debts then discharged. This gives you an opportunity for a complete financial fresh start, although assets like homes or cars may be sold off if not considered exempt under bankruptcy exemption laws.

Chapter 13 bankruptcy involves reorganizing debts into a 3-to-5-year repayment plan managed by the bankruptcy court. Under Chapter 13, debtors are allowed to keep their assets, but they must agree to pay back a portion of what they owe to creditors through the court-approved repayment plan. Their remaining eligible debts are discharged once the repayment plan period is completed.

Chapter 11 bankruptcy is primarily used by businesses, as opposed to individuals, to restructure and reorganize their debts and operations. It is also an option for individuals with very high debt loads who do not qualify for Chapter 7 or Chapter 13 bankruptcy. It allows for developing a reorganization plan to pay off creditors over an extended period.

Factors to Consider When Comparing Debt Consolidation vs. Bankruptcy

There are several factors to consider when choosing between your options for restructuring or discharging your debt. 

Consider the following:

• How much debt do you have? A lower amount of debt may be better served by consolidation instead of bankruptcy if you can get a reasonable loan.  
• What kind of debt do you have? 
• Are you able to repay your debts with help, or are your debts so significant that you will not realistically be able to pay them off completely? 
• What are your assets, and how will bankruptcy affect the assets you are unwilling to risk losing? 

Requirements for Filing Bankruptcy

When weighing your options of filing bankruptcy vs. debt consolidation, you need to determine whether or not you can meet the requirements for filing bankruptcy. 

To file for bankruptcy, you must meet certain requirements: 

1. Your income level must fall within a certain range. If you have a higher income, you may not qualify for Chapter 7 and will need to file under Chapter 13 instead. 
2. Generally speaking, you cannot file for Chapter 7 if you have already filed for Chapter 7 and had a discharge of debt within the previous 8 years. You can qualify to be in a Chapter 13 immediately after a Chapter 7 discharge, but only become discharge eligible 4 years after the prior Chapter 7 filing. 
3. You cannot be found to have abused the bankruptcy system by the bankruptcy court. 
4. You need to complete any additional required steps, like completing a credit counseling course. 

The differences between debt consolidation vs. Chapter 13 bankruptcy or debt consolidation vs. Chapter 7 bankruptcy are comparable. If bankruptcy is the best option for you, your bankruptcy attorney can help you determine which chapter you should file. 

If debt consolidation is your best choice, you can take the necessary steps to apply for a loan from a credentialed lender and take the next steps on your own. 

What to Do If You Are Considering Debt Consolidation vs. Bankruptcy

If you are feeling overwhelmed by your debt and need to find a way out, there is help available. Sawin & Shea, Indianapolis bankruptcy attorneys, are prepared to walk alongside you through the process from beginning to end. 

Contact us to set up a free consultation. When you work with our attorneys, you won’t feel judged or criticized. Our goal is to help you recover from the financial crisis you are in, and that takes compassion and experience! 

Reach out today to find out more about our bankruptcy services or call us at 317-759-1483.

The post Debt Consolidation vs Bankruptcy: Which is Better? appeared first on Indianapolis Bankruptcy Attorneys of Sawin & Shea.

First, let’s briefly touch on two of the most common types of bankruptcy: Chapter 7 and Chapter 13. 

What’s the Difference Between Chapter 7 and Chapter 13?

Put simply, Chapter 7 is a liquidation while Chapter 13 is about reorganization. What do we mean by this?

In the case of a Chapter 7 bankruptcy, the court appoints a trustee who is in charge of selling off (liquidating) a debtor’s non-exempt assets. Laws called exemption statutes determine what a person or married couple can keep through the Chapter 7 process. If a debtor has assets that are not protected under those statutes, the trustee can liquidate those items and use the proceeds to pay creditors back something. 

Chapter 13 involves commitment from the declarer to repay a portion of their debt over a specified period (usually three to five years). If the declarer keeps to the agreement, then at the end of the period, they can keep their otherwise nonexempt assets and all allowable remaining debts are discharged.

Why Does the Type of Debt You Have Matter in Bankruptcy Cases?

It matters because not all debts are equal in the eyes of the law. It distinguishes between what are called ‘secured’ and ‘unsecured’ debts, which are terms you need to know before filing for bankruptcy. 

And possibly the most common question people ask is credit card debt is secured or unsecured.

What is the difference?

Secured vs Unsecured Debt: What’s the Difference?

In broad terms, if a debt is secured, it means it is backed up by collateral property. If a debt is unsecured, no collateral is put up as a guarantee to pay. 

Unsecured Debt

What is unsecured debt? Unsecured debt would include things like:

• Medical bills
• Credit card bills
• Utility bills
• Back rent
• Personal loans

At the end of the bankruptcy process, the remaining balances for these types of unsecured debts will likely be forgiven. 

However, it is important to note that before bankruptcy is declared, lenders can still come after you to get you to pay off the unsecured debt. They may use collection agencies, or they may sue you (asking the court to garnish wages, take an asset, or put a lien on your home). One of the benefits of declaring bankruptcy is that debt collectors cannot try to collect on debts that were discharged in bankruptcy. 

Secured Debt

Secured debt would include things like:

• House mortgages
• Car/vehicle loans
• Some taxes
• Loans for furniture/appliances/large electronics

Which type of debt is most often secured? The two most common examples of secured debt are mortgages and auto loans. 

Secured Debt in Bankruptcy

A bankruptcy can discharge your underlying responsibility to pay the debt, but it does not do away with the creditors rights to the collateral they hold as security. That means that you must continue to pay on most secured debts to keep or hold onto the collateral.

This is accomplished by entering into a reaffirmation agreement in a Chapter 7. This is a voluntary agreement between a secured creditor and the debtor that re-obligates the debtor on the secured debt. The debtor must maintain regular payments on the secured loan in order to keep the collateral.

In a Chapter 13, the debtor’s reorganization plan sets forth how they are going to treat secured debt. A Chapter 13 plan can cure arrearages on houses or cars, stopping foreclosures and repossessions. Debtor’s plan can reorganize secured debt and pay it as part of the plan, many times at a lower interest rate and sometimes at the fair market value of the collateral even if they owe more on the loan. 

In both types of cases, a debtor can opt to give the collateral back to the lender and walk away from the debt, receiving a discharge on remaining balances. This is what is called a “surrender” under bankruptcy law.

Consulting with the Bankruptcy Experts at Sawin & Shea, LLC

Bankruptcy law and the process for filing are complex, and determining whether your debts are secured vs. unsecured and the options for treating them in a bankruptcy is something our attorneys can assist you with. 
An attorney with experience in bankruptcy law can help you with filings and discuss with you the credit consequences of filing for bankruptcy. The Indiana bankruptcy attorneys at Sawin & Shea, LLC have been helping people navigate the bankruptcy process for years. If you’re considering filing for bankruptcy, call us at 317-759-1483 or request your free consultation online.

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No one would argue that we have been living through some turbulent economic times in the past several years. Factors like inflation, high interest rates, and economic uncertainty have found more and more Americans relying on credit cards to get by. In fact, Americans are at an all-time high when it comes to credit debt to the tune of $1 Trillion. On average, Americans individually carry about $7,951 in credit card debt. With those figures, chances are you are among the millions of Americans needing credit debt relief.

In this article, we will give you some ways to find relief from the weight of your debt and show you how bankruptcy attorneys like Sawin & Shea can help you. 

What Happens if You Get Behind?

Getting behind on paying your debt tends to have a big snowball effect on your credit debt. What often happens is the “Robbing Peter to pay Paul” effect, which means you use credit cards to pay other debts you are behind on, thus making your credit debt situation bigger and more overwhelming. 

Once you start getting behind on your credit card debt, the consequences just make the situation worse. These include:

1. Penalty Fees : Credit card companies typically charge between $15 – $35 for a late payment, adding to your balance. If your balance is small to begin with, this can be a painful percentage of what you owe.
2. Higher Interest Rates: While credit card companies are restricted from randomly raising interest rates, an exception to that would be if you are 60 days or more late with your payment. When this happens, your interest rate can skyrocket and make the situation harder to dig out of.
3. Collection Agency Involvement: After being 90 days delinquent on a credit card payment, the company might send you to their collections department. This means you will be contacted (usually A LOT) by their debt collectors to arrange payment. This action will leave a negative report on your credit rating, which could spell trouble for your future purchasing options. 

In short, getting behind on your credit card payments will cost you a lot more money and add to your credit card debt stress for the foreseeable future. 

What You Can Do If You’re Behind

If you’ve fallen behind, and are desperate for credit debt relief, you are certainly not the only one. It’s estimated that 61% of the population currently carries credit card debt, and 14% of those people reported missing a payment in 2023. 

If you’ve fallen behind on your credit card debt, there are some actionable things you can do to help get your way out of the stressful situation. 

Revisit Your Budget
If you’ve never had a budget you followed or haven’t looked at it in a while, it’s time to get back on track and take an honest look at your income and expenses. Many people find there are numerous ways they can cut corners here and there to help them get caught up and pay more than the minimum balance on their credit debt. 

Call Your Credit Company
A little transparency goes a long way. Informing your creditors of your particular financial situation could make them willing to waive a penalty fee or keep an interest rate at a manageable level. Contacting them sooner rather than later is advisable as it lets them know you aren’t an irresponsible debtor, you just need some assistance. 

Consider Filing for Bankruptcy
While it should be at the bottom of your list of solutions, it should be on the list as it is a viable option for credit debt relief. Two forms of bankruptcy may be your saving grace for your debt management goals:

• Chapter 7 Bankruptcy, which discharges your credit debt in exchange for selling certain non-exempt assets to pay something to your creditors. 
• Chapter 13 Bankruptcy, which helps you develop a debt repayment plan. This plan also allows you to keep your assets and forces creditors to take what the bankruptcy law says you have to pay on your debts.. 

How Does Debt Relief Affect Your Credit?

Debt relief can have both positive and negative effects on your credit, depending on the method you choose and how you manage the process. Debt relief programs, such as debt settlement or debt management plans, will lower your credit score because they often involve negotiating with creditors to reduce your interest rates while you miss payments. This results those late payments being reported on your credit report. Further, these types of plans are voluntary. Creditors can choose not to participate and can move forward with more drastic collection efforts such as lawsuits when they get tired of waiting for payment. Bankruptcy has a impact on your credit, as it typically remains on your credit report for several years. However, it provides a fresh financial start, allowing you to rebuild your credit over time. Creditors cannot opt out of participation in a bankruptcy, and no collection efforts on pre-petition debts can continue after filing.

From a simple phone call to your credit card company to filing for bankruptcy, there are ways you can find the credit debt relief you need to sleep better at night and take control of your financial future. 

How Sawin & Shea, LLC Can Help

At Sawin & Shea, we know the toll all debt can take on an individual, a relationship, and a family. Start taking control of your financial situation again with our help. We can help determine if bankruptcy is the best option for you and which bankruptcy option will help you get back on your feet the best. 

Whether you’re being harassed by creditors or looking at what bankruptcy option is best for you and your family, Sawin & Shea has your back. Contact us today for a consultation and begin taking control of your financial wellness today.  

The post Tips for Credit Debt Relief appeared first on Indianapolis Bankruptcy Attorneys of Sawin & Shea.

Obtaining Personal Loans with a Cosigner

Having a co-signer on a personal loan or credit card means that you associate another individual with your debt. The cosigner responsibilities include taking on the responsibility of the debt if the primary borrower is unable to make payments. 

It’s often necessary for risky or low-credit borrowers to have a co-signer in order to secure a loan or another form of debt. When a borrower applies for a loan or credit card, the lender will assess their creditworthiness by looking at their income, credit score, and debt-to-income ratio. If the lender is concerned about the borrower’s ability to repay the debt, they may require a co-signer. 

If the borrower misses any loan or credit card payments, the co-signer is legally obligated to make the payments on the primary borrower’s behalf. If the borrower is behind on payments, the lender can pursue financial recourse against both the debtor and the co-signer, also often called a co-debtor. Additionally, if a borrower defaults on a debt, it can negatively impact the co-signer’s credit score. 

Although there are risks associated with being a co-signer, the practice is incredibly common. For example, a parent or another family member may become a co-signer for a low-credit borrower so that the primary debtor can obtain a desirable loan. Plus, being a co-signer can help a debtor build credit. 

What’s a Guarantor?

While guarantors and cosigners share some similarities in that they both provide financial backing to a borrower, there are some key differences between the two roles. 

A guarantor is typically someone who agrees to pay back a loan in the event that the borrower defaults on their payments. The guarantor may be required to provide collateral or security to the lender to reduce the risk of the loan. 

Unlike with cosigner responsibilities, a guarantor’s responsibility is usually limited to a specific amount or time period, as outlined in the terms of the loan agreement. A guarantor is agreeing to act as a backup plan for the lender if the borrower fails to meet their obligations. 

Cosigner Responsibilities: Bankruptcy and Debt Collection

If a primary borrower declares bankruptcy, the co-signer associated with the debt may be responsible to pay back creditors, but this will depend on the type of bankruptcy that the primary debtor filed. 

Cosigners and Chapter 7 Bankruptcy

Chapter 7 is a form of bankruptcy that allows individuals to discharge most unsecured debts, such as credit card debt or medical bills, without having to repay them. Unfortunately, the co-signer may still be financially responsible for a debt even after the primary borrower discharges it. 

The bankruptcy filer gets immediate protection called an automatic stay, meaning that creditors cannot pursue legal action or debt collection against the borrower, but with Chapter 7 bankruptcy, the automatic stay does NOT extend to the co-signer. Creditors can pursue reimbursement from the co-signer via repossessions, foreclosures, wage garnishment, and other aggressive actions. 

One way that a Chapter 7 bankruptcy filer can avoid making their co-signer financially liable is by reaffirming their debt. For example, if a debtor wishes to discharge their credit card debt but doesn’t want to make a co-signer financially liable for a personal loan, they can reaffirm their intent to repay the loan. They can discharge their other eligible debts while also taking financial responsibility for their personal loan.  

Cosigners and Chapter 13 Bankruptcy

Filing Chapter 13 bankruptcy allows individuals with regular income to consolidate their debts and repay them over a period of three to five years. Under Chapter 13, the debtor must submit a repayment plan to the bankruptcy court for approval, which outlines how they will repay their debts and may involve reduced or extended payment terms.

Unlike Chapter 7, filing Chapter 13 offers protections for co-signers. Those filing for Chapter 13 get an automatic stay, and co-signers receive a “co-debtor stay,” meaning that creditors cannot pursue action against the co-signer. For the co-signer to receive this protection, the primary debtor needs to include their co-signed debt within their three to five-year repayment plan. 

For example, if you co-signed a friend’s loan, your friend needs to repay that debt within their three- to five-year repayment plan. If the repayment plan doesn’t include the loan, you’re still liable for the debt and the lender can seek reimbursement.

Considering Filing for Bankruptcy? Contact Our Experienced Bankruptcy Legal Team

Declaring bankruptcy can be an incredibly complex process, and it’s critical to find the best filing method for your unique financial situation. Fortunately, you don’t need to file alone — you can enlist the experience and dedication of our Indiana Chapter 7 and Chapter 13 bankruptcy attorneys. We’ll help you navigate the often-confusing filing process and ensure that you’re on the right path to getting your finances back on track. 

You can schedule a FREE consultation with one of our bankruptcy attorneys online or by calling 317-759-1483. 

The post Cosigner Responsibilities: When Is a Cosigner Liable for a Debt? appeared first on Indianapolis Bankruptcy Attorneys of Sawin & Shea.

What Is a Payday Loan? 

Payday loans are small, short-term, and high-interest. They are usually due within two to four weeks. To get a payday loan, you need to be at least 18 years old and have a bank account and the ability to verify your identity. You’ll also need to provide the payday loan company access to your checking account funds through a post-dated check or authorization to debit your account. Lenders rarely check your credit, which means you can get a payday loan even if your credit is subpar. 

Laws that regulate payday loans vary from state to state. In Indiana, the maximum loan amount is $536 and payday loan companies can legally charge up to a jaw-dropping 391% annual percentage rate. 

Why Payday Loans Are Risky 

The National Association of Consumer Advocates considers payday loans as predatory. This means they have “unfair, deceptive, or abusive loan terms that can trap borrowers in a cycle of debt.” Payday loan companies typically target younger consumers, those with lower incomes, and borrowers who have bad credit and nowhere else to turn. 

Payday loan debt can severely damage your credit. You must provide a check upfront, and the loaner will cash that check when it’s due, even if there isn’t enough money in your account. If your check bounces, you will default on the loan. If the lender reports the default to your credit company, it can lower your credit score. Many borrowers must roll their payday loan into another loan to repay the first. The result is a precarious cycle of debt. 

Indiana consumers paid a total of more than $300 million in finance charges to payday loan companies from 2014 to 2019. As of 2019, there were 262 payday loan storefronts in the Hoosier state, disproportionately located in low-income communities and communities of color. The typical payday loan borrower has a median income of just over $19,000 and winds up paying more in fees than they originally borrowed.

Can You File Bankruptcy on Payday Loans?

A common question is, “Does bankruptcy cover payday loans?” There are two kinds of bankruptcy, both of which can be helpful if your payday loan debt has spiraled out of control. 

Chapter 7 bankruptcy, also called liquidation bankruptcy, allows you to discharge all or most of your debt, including payday loan debt. In Chapter 7 a court-appointed trustee can sell some or all your nonexempt property. Nonexempt property varies from state to state. 

Chapter 13 bankruptcy, also known as reorganization bankruptcy, enables you to keep your property. Then you’ll pay off your debt over a period of three to five years using a more affordable, court-mandated payment plan. Your payday loan debt would be part of that plan. 

Compassionate, Non-Judgmental Advice About Bankruptcy and Payday Loan Debt 

If you’re in a bind due to payday loan debt or any other type of financial problem, the attorneys at Sawin & Shea, LLC can answer all of your questions about payday loans and bankruptcy and help determine the best option for you and then walk you through the entire process. We understand that filing for bankruptcy is a distressing proposition. That is why we are committed to helping you get the fresh start you deserve. Let us know how we can help. Give us a call at 317-759-1483 or schedule a free consultation. 

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Lack of necessary medical care

There are several ways that medical debt can affect your health, and many of them are the same ways that any financial insecurity can affect your health. For example, if you are in debt, you will be less apt to visit a doctor for problems with any chronic conditions – or even new medical conditions- you may suffer from. This can mean that diabetes, asthma, or high blood pressure issues go unchecked. It can also mean that necessary mental health precautions are left unaddressed. 

Inexpensive, “empty calorie” foods

Having debts can prevent people from meeting other basic needs as well. This is evident in food buying choices. On average, healthy foods cost three times as much per calorie as unhealthy options. Unfortunately, if you are weighed under by medical debt, it may be easier to buy less expensive foods with empty calories. These foods tend to have high amounts of sugar, saturated fat, and sodium, all of which can lead to obesity, high blood pressure, type 2 diabetes, and heart disease. Poor nutrition can adversely affect anyone’s health. 

Housing

Those with medical debt may also experience difficulties paying for safe housing or adequate utilities, such as heating and air conditioning. It has been documented that financial insecurity is linked to housing located far from green spaces that motivate people to exercise and provide recreational opportunities. One NIH study notes that “access to green spaces has been viewed as a principal key to enhancing health and well-being.” Lack of access to these green spaces can negatively affect your health.

Stress-driven behaviors

Another way that health behavior can be affected by medical debt is in unhealthy stress-driven behaviors. Many people smoke to relieve stress, but in fact, smoking causes stress-related illnesses. It causes increased blood pressure, elevated heart rates, constricted blood vessels, and a decrease in available oxygen. Even worse, 80% of lung cancers and lung cancer deaths are caused by smoking. Other harmful behaviors triggered by stress include alcohol or drug use, both of which negatively affect health. 

How Sawin & Shea, LLC can help

The Sycamore Institute concludes its report by saying that “A growing body of evidence connects medical debt with health outcomes” and reiterating the ”clear link between these factors and poorer health outcomes.” Obviously, medical debt can negatively affect your health. 

However, these negative impacts are not inevitable; you do have the option to take steps to either eliminate your medical debt or to make manageable payments towards it by filing for Chapter 7 or Chapter 13 bankruptcy.

Between 40% and 60% of bankruptcies are prompted by medical debt; this is a problem that is all too common. The ramifications of this kind of cycle of debt can be serious for your long-term financial health as well as your short and long-term physical and mental health. Filing for Chapter 7 bankruptcy can discharge (get rid of) medical debts as well as other unsecured debts as long as you have a low enough income to qualify for it. Chapter 13 bankruptcy can also be a road toward discharging your medical debts after you complete a 3-5 year payment plan. You can read about this in more detail in our blog, How Are Medical Bills Treated in Chapter 13 Bankruptcy?

At Sawin & Shea, LLC, we have over 75 years of bankruptcy experience helping thousands of people just like you get the fresh start they deserve. 

Speak to an attorney today at (317) 759-1483. Or contact us online. 

The post Study Shows Medical Debt Can Affect Your Health appeared first on Indianapolis Bankruptcy Attorneys of Sawin & Shea.

Many people worry that bankruptcy will simply delay the inevitable, such as a lawsuit, wage garnishment, or a foreclosure, and that their creditors will still come after them. But when you file for bankruptcy, there is something called an automatic stay that stops this from happening, and any creditors that violate the stay will face penalties for doing so.

What Does an Automatic Stay Do?

An automatic stay is a fundamental part of bankruptcy that protects debtors from creditor actions. It goes into effect immediately when you file and protects you from those trying to collect from you, such as creditors, collection agencies, government entities, or any other person coming after you for money.

During an automatic stay, all parties or entities mentioned above are prohibited from collecting on debts you incurred before filing for bankruptcy. This means it can protect you from:

• Home foreclosures
• Lawsuits
• Evictions
• Wage garnishment
• Vehicle repossession
• Utility disconnection
• Other creditor collections
• Repossession of estate property
• Harassment

Exceptions to an Automatic Stay

Though there are many benefits to the automatic stay, there are some things it can’t stop from happening. These situations include:

• Audits and Tax assessment: An automatic stay will not protect you if a taxing authority audits you, makes demands for unfiled returns that are due, from assessment of taxes, or the prosecution of tax crimes.
• Child Support and Alimony: A stay will not stop a lawsuit pertaining to child support or alimony.
• Criminal Proceedings: If you are convicted of a felony and are ordered to make payments for theft or on debt involved in a criminal proceeding, these collection efforts will not be protected by the automatic stay.
• Pension loans: If you took out a loan against your pension, an automatic stay would not protect you from wage garnishment to repay the loan.

Automatic Stay Violations

If a creditor willfully violates the rules of an automatic stay, you have a right to alert the court of the violation, and they can be penalized for their actions. You may even be able to recover damages. However, keep in mind that most creditors do not willfully violate automatic stay. If you receive a call after filing, for example, it may be an accident. It is important to let your attorney know if a creditor is contacting you in any capacity after the filing of your case.

Ways a creditor might willfully violate a stay include continuing to make harassing phone calls to collect, taking actions to continue a lawsuit or to garnish your wages after receiving notice of the case filing, sending letters and/or emails, or attempting any other form of communication to collect on a debt.

What Happens When the Automatic Stay Is Lifted?

When the automatic stay is lifted, your creditors can resume certain types of collection activity. An example of this is when the stay is lifted to allow a creditor to continue a foreclosure action against real property or to allow the repossession of a vehicle. The Court allows these actions so that a creditor can recover collateral for which they are not receiving payment. When the stay is lifted in this manner, the collateral is no longer protected, but the creditor cannot pursue payment of the underlaying debt from the debtor. The automatic stay is a temporary protection in bankruptcy. It is generally replaced by the discharge injunction, which is the permanent order of protection provided under bankruptcy law that keeps creditors from pursuing dischargeable debts.

How Sawin & Shea, LLC Can Help

At Sawin & Shea, we believe in providing compassionate and understanding representation to those struggling with debt and looking to file for bankruptcy. Being buried under overwhelming amounts of debt can be debilitating, and the last thing you need is to add more stress to the situation by worrying about your bankruptcy case. Our attorneys have experience in bankruptcy cases and can help walk you through the process every step of the way. We can even offer guidance after your bankruptcy case has ended. If you have questions or concerns about the automatic stay, our attorneys can help. Contact us at 317-759-1483 or send us an email for a free consultation today!

The post The Automatic Stay and Bankruptcy appeared first on Indianapolis Bankruptcy Attorneys of Sawin & Shea.

With credit card debt specifically, debtors often wonder how the process works and how it will affect their ability to still use current cards or open new ones in the future. We’ll walk you through some helpful information on filing for bankruptcy with credit card debt below, but if you’re ever unsure, working with an experienced bankruptcy attorney can help. They have years of experience helping those struggling with debt navigate the complicated legal process and get back on their feet.

What Happens to My Credit Card Debt When I File For Bankruptcy?

When you file for bankruptcy, you will be required to list all of your debts, including all of your credit cards. Once filed, your bankruptcy stops all collection actions against you. Ultimately, bankruptcies result in a discharge. This discharge stops any future collection of dischargeable debts. Credit cards, in almost every case, are dischargeable debts.

In Chapter 7 bankruptcy, most or even all of your unsecured debt will get discharged, including your credit card debt. However, in return for discharging your debts, you must give over your non-exempt property to a bankruptcy trustee. The funds from the sale of that property will be used to pay your creditors. Most Chapter 7 cases, however, are “no-asset cases” which means that the debtor in bankruptcy keeps everything in which they have an ownership interest.

In Chapter 13 bankruptcy, your debts are not discharged upfront. Instead, you will be required to pay what the law says you can afford to pay back your creditors through a repayment plan. The plans typically last around 3 to 5 years. A Chapter 13 is available to those that do not or can not qualify for a Chapter 7. It is also used to help debtors get caught up on things they are behind on, but that they would like to keep such as houses or cars. Credit cards, like most unsecured debts, get paid a partial amount in Chapter 13 and the debtor is then discharged of any further liability on the debt at the end of a plan

Exceptions to Discharging Credit Card Debt in Bankruptcy

While most debts do get wiped out after filing for bankruptcy, there are some exceptions. For example, if you are filing for Chapter 7 bankruptcy and your monthly income is more than your state’s median income, and it is believed that you can pay at least 25% of the debt, a discharge through chapter 7 will not be allowed. In this case, you will need to file a Chapter 13 bankruptcy instead, where a plan will be worked out for you to pay the amount the law requires you to pay before receiving a discharge on the balance.

Another reason some of your debt may not get discharged is if the creditor files an adversary proceeding because they believe that the charges made were an attempt to commit fraud. For example, if you charged more than $725 in luxury goods to a credit card within 90 days of filing for bankruptcy, your intent is presumed to be fraudulent. Additionally, if you took out a cash advance with any of your creditors worth more than $1000 within 70 days of filing, this will also be seen as an act of fraud. As a result, these debts may be considered non-dischargeable, and you may have a responsibility to pay them after your bankruptcy.

Building Credit After Bankruptcy

All of your credit cards, with the exception of some company cards, will be canceled and thus unusable during and after your bankruptcy.

While many individuals fear that their credit score and having just gone through bankruptcy will hinder them from getting any new loans or opening any new credit cards for a while, this is often not the case. Lots of creditors are willing to give debtors a chance, even after they’ve just come out of bankruptcy. Even if your credit is bad, if you have sufficient income, you will likely still be able to open new accounts and start rebuilding your credit shortly after your bankruptcy is over or, if you are in Chapter 13, during the life of the plan.

How Sawin & Shea, LLC Can Help

At Sawin & Shea, we believe in providing compassionate and understanding representation to those struggling with debt and looking to file for bankruptcy. Being buried under overwhelming amounts of debt can be debilitating, and the last thing you need is to add more stress to the situation by worrying about your bankruptcy case. Our attorneys have experience in bankruptcy cases and can help walk you through the process every step of the way. We can even offer guidance after your bankruptcy case has ended.

Contact us at 317-759-1483 or send us an email for a free consultation today!

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If you are contemplating bankruptcy proceedings, you likely want to know how it will affect your income, current credit score, assets, savings, retirement, employment, and much more.

One question that may deter people from pursuing bankruptcy is this: does this mean that my spending is going to be monitored?

The Short Answer: In General, Your Spending Will Generally NOT Be Monitored After Discharge

Here is a piece of good news: you are not going to have your spending monitored forever just because you chose bankruptcy.

Too many people avoid filing for bankruptcy because they are anxious about having their spending habits micro-managed. Unfortunately, it is a common myth that the court is going to monitor your spending habits once you file. This is unfortunate because there are people who could really benefit from bankruptcy and avoid it because they are worried about someone second-guessing all of their spending decisions.

That said, the trustee does have access to information about your spending. So what does that mean for you? What is a trustee looking for when they review your spending?

What Spending Can Be Reviewed?

The two parties who will definitely look over your spending records, including your bank and credit statements are your attorney and the court-appointed trustee.

These individuals have the authority to look for proof of fraud or misconduct in your spending history. However, they are not interested in minor details like how much you spent on lunch or whether or not you bought a bottle of wine with your groceries.

If it’s not evidence of something illegal, excessive–or something that would disqualify you from filing for bankruptcy–then your spending habits really aren’t of much interest to them. However, spending on luxury goods or services, leisure travel/vacations, or excessive cash withdrawals a short time before filing can lead to scrutiny of your bankruptcy case. In some cases, the Court could deny your discharge in bankruptcy due to bad faith if a determination is made that your spending caused harm to your creditors.

The other thing that they are looking for is any funds that could be used to repay your creditors. A big mistake is trying to hide funds from your attorney or trustee, because these funds will be discovered, and the act of hiding can jeopardize your bankruptcy proceedings.

How Far Back Can They Look?

There is a “lookback period” that determines how far back your attorney, and the trustee can look at your records. The point of looking back is to figure out if there have been any suspicious funds transfers or luxury purchases.

In general, the look-back period is 90 days. For paying friends and family money that you owe them, the lookback period is one year. Basically, the court wants to ensure that you didn’t spend a whole bunch of money right before filing for bankruptcy on things that are not reasonably necessary.

They also want to ensure that you are not trying to pay back loans to a friend or family member while clearing debts to other creditors through bankruptcy.

Bankruptcy Means Addressing Debt, Not Monitoring Your Spending

The ins and outs of bankruptcy are complicated and time-consuming. Spending time micromanaging or judging your spending habits simply isn’t a good use of time for a bankruptcy professional.

If you are hesitating to file for bankruptcy because you’re worried that someone might judge your habits, it may be helpful to remember that bankruptcy professionals deal with people in all kinds of situations. Bankruptcy can be the result of poor spending habits, but it can also be caused by medical debt and unexpected life circumstances.

Get Compassionate Help from Sawin & Shea

Having a compassionate and respectful attorney at your side through your bankruptcy process is so important. We know that hiring a bankruptcy attorney is an intimidating and sometimes scary prospect. But we are committed to providing non-judgmental representation to all of our clients.

We are not here to monitor or judge your spending. We just want to help you get out of debt and back on your feet!

Still Have Questions?

If you still have questions about filing for bankruptcy and what your attorney and the court-appointed trustee might look for in your spending history, please don’t hesitate to reach out to our team here at Sawin & Shea. We offer a free video consultation, which may be the first step to clearing your debts and starting fresh.

Sawin & Shea — Indianapolis Bankruptcy Attorneys

Filing for bankruptcy is not the end. It’s the beginning of a new financial life for you. The Indiana bankruptcy attorneys at Sawin & Shea can help you get rid of overwhelming debt and advise you on life after bankruptcy. We are here for you during this life-changing process.

Please do not hesitate to call us today at (317) 759-1483 or send an email for a free consultation. We are ready to help.

The post If I File for Bankruptcy, Will My Spending Be Monitored? appeared first on Indianapolis Bankruptcy Attorneys of Sawin & Shea.

Debt counseling (also called credit counseling) is required before you can declare bankruptcy. There is a pre-filing counseling and pre-discharge counseling.

What is pre-filing counseling?

Before you can file for Chapter 7 or Chapter 13 bankruptcy, you need to do pre-filing counseling. Your bankruptcy attorney can recommend approved agencies that can handle the session and provide the needed certification.

This one-hour course is taught by a nonprofit credit counseling agency and teaches you about the process of declaring bankruptcy — the advantages and disadvantages. It also talks about using repayment plans instead of declaring bankruptcy. The class will teach you about:

• Using debt management tools
• Making informal repayment plans with creditors
• Learning personal budgeting education

What is pre-discharge counseling?

Pre-discharge counseling is your last step in finalizing your bankruptcy. This two-hour course (also called “the second course”) is required before you receive your bankruptcy discharge (the court order that forgives your qualifying debt).

The basic premise for this course is to give you the tools to stay out of debt and manage your finances effectively in the future. Some of the topics that are covered in this class include:

• Understanding your credit score and using credit carefully
• Creating and managing a personal budget
• Learning how to save money/cut expenses

After completing both the pre-filing counseling and pre-discharge counseling, you will receive a certificate that you need to submit to the court to finalize your bankruptcy. Most agencies provide these to your attorney directly.

How do I start the counseling process?

Both types of counseling are available through a nonprofit credit counseling agency that is approved by the Department of Justice. You want to make sure you use an agency approved by the court jurisdiction where your case is filed.

Almost all counseling sessions are over the phone or online, making it easy to have access to an approved agency. Make sure to have your financial information ready when you go for counseling — pull together a basic list of your expenses, debts, and income.

Do I have to pay for it?

You will need to pay for the counseling. The average cost is $15 to $50 per course. Some agencies charge less for online sessions, and many of them will waive fees if you meet criteria specified by the Office of the United States Trustee.

Sawin & Shea – Indianapolis Bankruptcy Attorneys

These two counseling sessions are just two steps in getting out of debt and finding a better financial future. The Indiana bankruptcy attorneys at Sawin & Shea LLC can help you walk through the nuances of the bankruptcy process and advise you on life after bankruptcy.  We are here for you during this life-changing process. Please do not hesitate to call us today at 317-759-1483 or send an email for a free consultation. We are ready to help.

The post Do You Have to Get Debt Counseling Before Bankruptcy? appeared first on Indianapolis Bankruptcy Attorneys of Sawin & Shea.