New Year Bankruptcy Timeline

NLO Nelson Law Office is a Debt Relief Agency offering debt relief through bankruptcy.


1)  Get Through the Holiday, spend wisely and see our post about credit card use during the holidays
2)  File your taxes as soon as possible
3)  See a Bankruptcy Attorney about Debt Relief Options early in January to find out your options
4)  Receive your tax refund in February and file your bankruptcy.

Why is the New Year such a popular time to file bankruptcy?

Tax Refunds are usually received prior to May 31st of the New Year.  Tax Refunds can be used for legal fees and court costs in a bankruptcy.  The tax refund is listed on the bankruptcy petition, but the portion used for legal fees and filing fees is exempt.

Holiday spending often times puts people "over the top" after years of family budget deficits caused by medical bills, illness, loss of job or overspending.

What should I do if I don't have much of a tax refund?

You can either wait to file your bankruptcy later after you have saved enough money to pay for it, or you can file a Chapter 13 bankruptcy which allows for all of your legal fee to be included in the bankruptcy "plan".

Need more options?  Have Questions?

Call David Nelson at 877-464-6656 to set up a free bankruptcy consultation.

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Can I use my Credit Cards for Christmas Gifts and Still File Bankruptcy?

NLO Nelson Law Office is a Debt Relief Agency offering Debt Relief through Bankruptcy

Yes, you can use your credit cards for Christmas and still file bankruptcy.  However, you must be extremely careful.  If you are filing within ninety days of using your credit cards, you must make sure that you have used them only for "necessary" items and not for "luxury" items.  If you are filing more than 90 days since you last used your credit card, you can essentially charge anything onto the credit cards except it cannot be in bad faith or with a fraudulent intent.  Schedule a Bankruptcy Consultation

At this "Christmas" time of year, people spend excessively and often use credit cards. A large portion of Chapter 7 Bankruptcies are filed in the months of February, March and April because tax refunds can be used for paying your bankruptcy attorney fees, filing fees and due diligence costs such as credit reports.

1.  Best Solution:  Do not use your credit cards - At All.  File Bankruptcy with your tax refund as early as January  or anytime after you receive your tax refund.

2.  Fair Solution:  Use your credit card over the holidays and prior to your bankruptcy for "necessary" items such as groceries and clothing from non-luxury retailers.  File Bankruptcy with your tax refund as early as January or anytime after you receive your tax refund.  Before even considering this solution, you should seek out a qualified bankruptcy attorney.

3.  So-So Solution:  Use you credit card for non-luxury items that might be objectionable as non-necessary, such as toys, electronics or other items are not basic survival items, such as food and clothing.  You could possibly file in January, February or March but best choice is to file April 30th or later.

4.  Not so great solution:  Use your credit card for all items at all retailers, including luxury retailers.  Purchase jewelry, electronics and just about anything you want.  File your bankruptcy at least ninety days after the last purchase.  Take the chance that you have made such flagrantly offensive purchases that the creditor files an adversary petition to take away your discharge, or, worse yet, fraud.  Bottom line: this is risky at best, but if the purchases are small enough, a calculated risk.

5.  Terrible solution that will nearly always run into problems:  Use your credit card during the holidays on anything and run every card up to the limit.  Include luxury items at luxury retailers.  File your bankruptcy whenever you want, such as February.  Chances are that if the purchase is over $500 at any one creditor, the creditor will file an adversary lawsuit.

One scenario that happens over and over again (often times with bad results) is the "blowout" Christmas Charger who decides to "let it all out" one last time before filing for bankruptcy.  This charger may still have up to $1000 left in credit and may often purchase entirely luxury goods such as an IPAD, Wii, Xbox, large screen TV, unnecessary computer, a trip to the Caribbean, or a bunch of jewelry.  Then the charger stops in to a local attorneys office and doesn't mention the charging, the bankruptcy attorney doesn't check out the charge bills, the bankruptcy is filed in February and then a lawsuit is file by the credit card company to take away the bankruptcy discharge with regard to the credit purchases.  Usually, the debtor is forced to hire a second attorney at $2000 or more to represent the debtor in a defense of the discharge action and usually results in the debtor entering into a promise to pay the entire debt to the creditor with interest over a period of time.

What is the lesson of this article?  If you are contemplating bankruptcy, stop using your credit cards and keep it simple.  If you must use your credit cards, then use them only on food and clothing and at non-luxury retailers.  Under all circumstances, try to not use your credit cards at all 90 days prior to the filing of your bankruptcy.

Three true stories:

Client purchases an $8,000 hot tub one week prior to filing on a line a credit issued from a credit card style creditor.  Client files bankruptcy.  2 & 1/2 month after filing bankruptcy, debtor is sued by the credit card company.  Creditor seeks to take away the debtor's discharge with regard to the $8000 debt plus attorney fees and interest or about $10,500 total.  If the case was not settled, this would have eventually been a garnishment on debtor's income for about five years at 15% of his gross salary.  Due to a settlement, the debtor was able to pay off the debt under a new agreement over 5 years at a reasonable interest rate.  What does this teach us?  A luxury item purchased within 90 days prior to a bankruptcy filing that is obnoxious and unnecessary and expensive will result in a nasty lawsuit that will cost the debtor another $1000-2000 in legal fees and possibly ruin all of the benefit of the bankruptcy.

Client purchases a tennis bracelet at Nordstroms as a "gift to herself" for filing bankruptcy...Good Luck!  Nordstrom filed suit against the debtor, debtor ended up returning the item and paying about $600 in attorney fees to Nordstrom as a settlement instead of a fraud judgment, which would have resulted in the denial of an entire discharge of all debts.  Bottom line: no "gifts" for successfully filing bankruptcy.  No jewelry purchases on credit cards included in the bankruptcy up to one day before filing.

Client knows he isn't going to be able to afford a new riding lawn mower for many years after filing bankruptcy, and one week prior to bankruptcy he purchases a new riding lawn mower for $1500.00.  Client files bankruptcy one week later.  Client does not tell his attorney about this purchase and does not make the bill available to the attorney, and the attorney must rely upon a credit report to file the bankruptcy petition.  Debtor is sued in an adversary petition to deny the discharge of this debt.  Result: client ends up paying the debt back over 36 months at 10% interest.  Not much better result than if he had purchased it one year after the bankruptcy legitimately.

The one resounding rule throughout these cases seems to be that creditors object to the discharge, but this "un-permitted" purchasing in effect gives the debtor access to a tool right away that he may have needed immediately but would not have been able to get after the bankruptcy.  Bottom line: even though the behavior above is in violation of the bankruptcy code and even though creditors dislike this behavior, they do end up preferring to extend a loan at a reasonable interest rate.

NLO Nelson Law Office is a debt relief agency offering debt relief through bankruptcy.  To schedule a free confirmation click here and write "Bankruptcy Consultation Request" and hit send.  Our office will respond with a variety of times and date for your consultation.  Or...call our national toll-free number 877-GO-GO-NLO or 877-464-6656.

The Two Hour Closing - How to Stick to It and Never be Late for Dinner Again

CLICK HERE TO HIRE NLO FOR YOUR NEXT REAL ESTATE CLOSING!

Recently, I represented a buyer in a closing that lasted over five hours.  The primary reason for the long closing was funding from the buyer's lender.  I wasn't late for being home from this closing and there is a reason:  There is simply no change that should be occurring on the part of the lender that can't be resolved remotely to the title company.  The seller or power of attorney should remain, the buyer should remain, but service professionals such as attorneys and realtors should be able to leave.

Here's why:

1)  During the first hour of the closing, the buyer signs all of the loan documents, and typically the buyer's attorney reviews, title, deed, related transactional documents.
2)  During the top of the second hours, the closer usually has the HUD for review and it is usually approved by all parties by the middle of the second hour.
3)  Next the documents are sent to the lender who usually raises any substantial objections before the close of the second hour.
4)  The fixing of the lender issues is typically a 15 minute task that is resolved in substance by the end of the second hour.
5)  If the attorneys and realtors leave at this point, they will have their check mailed to them along with supporting documentation.
6)  The risk: if you are a buyer's attorney, the worst thing that can happen is that the lender forces a change and the HUD is re-signed.  Since the lender calls all the shot here and doesn't really allow for any attorney input, this is the point where a simple call to the attorney's mobile phone will confirm whether any changes are undesirable to the buyer going through with the transaction.
7)  For the seller's attorney, the risk is more substantial if he or she is power of attorney for the seller and the HUD must be re-signed.  Bottom line: seller's attorneys who agree to be powers of attorney should add $200 per seller for additional work and significant risk of additional time at the closing table.
8)  For realtors, there is no reason to be at the table after the second hour because their commission is confirmed after the agreement to the first HUD.  Only in a short sale should realtors be gravely concerned about having their commission "chopped down" at the last minute.  But even in these cases, there isn't much that can be done to bring it up if the lender will not approve the short sale with higher commission than the lender's standards allow.

Why is it important in our profession to set reasonable fees but be firm with regard to staying longer than two hours?

1)  It is critically important that we as members of the bar maintain a buyer's ability to afford reasonable cost representation in a real estate closing to ensure that buyers are not taken advantage of and have the opportunity for "good counsel".
2)  Staying at the closing for a "reasonable" amount of time ensures adequate profitability to ensure the ability to continue representing a variety of clients from all socioeconomic groups.
3)  There is simply no reason to be a martyr and stay at a closing just to say you made it to the end, only to stop taking cases that have the potential to be long closings.

How do I ensure that my fees are reasonable and that I am guaranteed to be paid even when the deal falls through? 

The best choice is to use our firm's proposal for a "multi-board" residential attorney client representation agreement.  This novel agreement allows for full pre-payment of fees by deposit into the lawyer's client trust account.  This allows the attorney to bill the full fee on the HUD and then return the deposit to the client or not bill to the HUD if the lender is objecting.  Some attorneys will want to bill the full rate regardless of where the representation terminated; others may choose to charge half when the transaction cancels before closing.

ARE YOU AN ATTORNEY WHO WOULD LIKE TO USE OUR REPRESENTATION AGREEMENT?  IT IS FREE TO MEMBERS OF THE ILLINOIS BAR WITH PERMISSION.

The challenge for residential real estate attorneys in the next decade is to:

1) Not set fees too low
2)  Not spend excessive time at the the closing table 
3)  Bill up-front for fees 
4)  No longer view real estate work as "contingency" work
5)  Turn away "low-ball" business that has no future in providing referrals or subsequent business.

There is also benefit to realtors.  It has often been said that realtors are the keys to the car, and that you won't have real estate closings unless you cave-in to the demands of the realtors who refer the business.  This may be true.  But why work for free or for excessively low fees - leave the residential real estate business and take on cases at the Daley Center and make twice the money.  Many people believe Illinois Realtors have been waiting for this day with bated breath.   I disagree - without good Illinois Residential Real Estate lawyers, the percentage of transactions that make it to closing will fail; more abuses will occur against clients leading to more regulation of the industry; and ultimately, even less real estate transactions will close.

ARE YOU A REALTOR? CLICK HERE TO SPEAK WITH DAVID NELSON TO START A NEW REALTOR/ATTORNEY BUSINESS RELATIONSHIP

Bottom line: residential real estate is and will always be a team sport.  The team: Realtors to take the client to the property; Inspectors to make sure it is right; Lenders to provide the ability to pay;  title companies to do the banking; and Attorneys to make sure that what was agreed upon actually occurs.

Student Loans Chapter 7 Bankruptcy Discharge What to do after the bankruptcy is over?

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One of the thorniest issues in a Chapter 7 Bankruptcy is often what happens to student loans.  Student loans are not dischargeable - i.e. they do not go away as a result of filing bankruptcy!  However, student loans do eventually disappear sort of like a "balloon loan".  All student loans die after 25 years after the date of first repayment plus deferments.

Until that time - you are on the hook and must continue paying.  Recently, a client shared with me his experience in dealing the aftermath of a Chapter 7 Bankruptcy.  Below is a narrative of the status of the loan mid-way just after the 341 meeting:

Debtor's account is not past due.

Sallie Mae received the 341 Meeting of the Creditors Notice.

Student loans placed on hold while in bankruptcy status.

No payments due during the life of the bankruptcy.

This hold on the accounts does not affecting Debtor’s credit.

Debtor needs to call Sallie Mae when bankruptcy is discharged.  At that time, his account is reactivated and billing will begin again.  Debtor will then begin to owe payments. 

There will be no arrears at the time of reactivation.  Interest will accrue during the bankruptcy’s life, but Sallie Mae cannot advise Debtor of what the interest may be or has been because that  can be construed as trying to collect on the debt.

Sallie Mae cannot tell Debtor what his balance is, but they can confirm or deny what he says the balance is.

Debtor does not have access to his account via the internet during the bankruptcy.

 This exception gives us a rare window into the behavior of the student loan servicer during the pendency of a Chapter 7 Bankruptcy.

Summary of Student Loan Treatment before, during and after a Chapter 7 Bankruptcy:

• Prior to Filing your Bankruptcy, you should pay on your student loans or seek deferment.
• Failure to do this will result in garnishment up to 15% of your gross income
• After you bankruptcy is filed, you CAN make voluntary payments on the student loan.
• This will keep your balance from rising.
• This IS NOT necessary.
• Only manual payments (check)
• Taking a "break" from payments for 4-6 months may allow you to improve your cash flow position to give you a "fighting chance" to be in good financial standing
• After your bankruptcy is closed, you should resume making your payments. 
• Recommend calling lender to confirm amount of payment and how to make payment
• Electronic payments resume being available

For more information about filing a Chapter 7 or Chapter 13 Bankruptcy, please email NLO Nelson Law Office Bankruptcy Information



To Call and speak with a Bankruptcy Attorney and Set-Up a free Bankruptcy Consultation, please call 877-GO-GO-NLO (877-464-6656).