Use Your Tax Refund Wisely!

It’s that time a year again when people start receiving their tax refunds. It’s also that time of year where debt collectors start harassing people who are having a hard time paying their bills.
Don’t waste your tax refund if you’re struggling with debt. If your tax refund is not enough to pay off your debt this year, then you need to find another solution.
Unfortunately, some people will take their tax refund and pay off one or two debts.
However, they still have more debts and the tax refund only provided a partial solution. Instead of wasting your tax refund, you should consider filing bankruptcy.
You can use your tax refund to pay for a Utah bankruptcy attorney who will solve your entire debt problem, instead of one or two debts. Most people’s tax refund is enough to pay the entire fees for a Chapter 7 bankruptcy as well as a Chapter 13 bankruptcy.

Make it a great new year by using your tax refund wisely to resolve your debt problem once and for all. In Utah Call the Law Office of Douglas Barrett, LLC at 801-221-9911.

Advertisements

Did Bankruptcy Reform Increase Financial Distress?

Interesting article on the effect of 2005 Bankruptcy reform:

“The number of personal bankruptcy filings in the United States increased more than fivefold between 1980 and 2004. By then, more Americans were filing for bankruptcy than were graduating from college or getting divorced.”
The number of personal bankruptcy filings in the United States increased more than fivefold between 1980 and 2004. By then, more Americans were filing for bankruptcy than were graduating from college or getting divorced. When Congress reformed bankruptcy laws two years ago, its aim was to crack down on those who were using bankruptcy as an easy way to escape their debts. The reform made filing for bankruptcy more difficult by requiring debtors with higher incomes to repay more, by making it much more complicated and expensive for all debtors to file, and by increasing the number of debtors who are ineligible for bankruptcy. These reforms caused the number of filings to drop dramatically – from 2 million in 2005 to 600,000 in 2006.
But the reforms had an unintended effect, contends Michelle J. White in Bankruptcy Reform and Credit Cards (NBER Working Paper No. 13265). While bankruptcy filings dropped, financial distress increased. How did this happen?
The answer is that by making it harder for consumers to escape their debts, the new law dramatically reduced lenders’ losses from default and bankruptcy. As a result, they started lending more, even to consumers with bad credit. Credit card debt increased more quickly during the past two years than at any time during the previous five years.
Consumers should have responded to the new harsher bankruptcy law by borrowing less, which would have lowered their risk of getting into financial distress. But not all consumers behaved in this rational way. Instead, many behaved shortsightedly and took advantage of the greater availability of credit to borrow more than they could easily handle — ignoring the risk of financial distress. (Economists refer to this shortsighted behavior as “hyperbolic discounting” – consumers who are hyperbolic discounters intend to start paying off their debts immediately, but each month they consume too much and end up postponing repayment until the following month. So their debts steadily increase.)
The new bankruptcy law exacerbated the problem of shortsighted consumers borrowing too much, because it prevented many of them from using bankruptcy to limit their financial distress. Many consumers in financial distress are unable to file for bankruptcy under the new law, because they cannot afford the costs of filing, cannot meet the new paperwork requirements, or are ineligible. This means that their debts will not be discharged and they will remain vulnerable to creditors’ collection calls and to wage garnishment that may take funds they need for basic necessities. Because of the new bankruptcy law, consumers can end up in deeper financial distress than would have been possible before 2005.
Survey evidence presented by White supports the idea that most debtors get into financial distress because of shortsighted behavior, rather than because they behave rationally but experience adverse events. In one survey of bankruptcy filers, 43 percent pointed to “high debt/misuse of credit cards” as their primary or secondary reason for filing. Another survey in 2006 found that two-thirds of those who sought credit counseling before filing for bankruptcy cited “poor money management/excessive spending” as the reason for their predicament, compared to only 31 percent who pointed to loss of income or medical bills.
White argues that lowering the costs of filing for bankruptcy would help debtors who are in the worst financial distress by making it easier for them to file. But changes in bankruptcy law cannot solve the basic problem of shortsighted consumers borrowing too much, since these consumers generally ignore the provisions of bankruptcy law until after they are in financial distress. Instead, White argues that changes in credit market and truth-in-lending regulation are more likely to work because they motivate lenders to lend less to the most vulnerable consumers.
— Laurent Belsie

CAN I ELIMINATE ALL OF MY DEBT THROUGH BANKRUPTCY?

The simple answer is no. For the most part, credit card debt is generally subject to discharge, but in some instances it may not be. For example, credit that was issued based on fraudulent information by the debtor will not be discharged. Other debt, such as child support, spousal maintenance, and outstanding taxes will likewise not be discharged. In Utah the best way to know about your personal situation is to discuss your case with a Utah bankruptcy attorney.

What types of Utah bankruptcy cases are there?

Chapter 7 (Liquidation)
Chapter 7 is designed to repay debts owed to creditors by selling most of the debtor’s property. When a Chapter 7 case is filed, a trustee is appointed to take over the debtor’s property for the benefit of the debtor’s creditors. The debtor, however, is allowed to keep a limited amount of “exempt” property specified by law. The trustee then sells all non-exempt property of the debtor and distributes it to creditors in accordance with procedures set forth in the bankruptcy laws. Visit www.utahchapter7.com for more information.
Chapter 13 (Debt Adjustment of an Individual)
In a Chapter 13 bankruptcy, the debtor may keep his or her property, but must repay creditors in installments taken from the debtor’s future earnings. A debtor is required to submit a plan for approval by the court specifying how and when the debts will be repaid to creditors. A trustee is appointed in a Chapter 13 case, and a portion of the debtor’s future income in most cases is paid to the trustee, who then pays creditors. Visit www.utahchapter13.com for more information.
Chapter 11 (Reorganization)
Chapter 11 is designed mainly to give an ongoing business an opportunity to resolve financial problems through reorganization. A trustee is not normally appointed. The debtor is allowed to continue to operate the business under court supervision. Visit www.dlblaw.com for more information.
Chapter 12 (Debt Adjustment of a Family Farmer)
Chapter 12 is similar in many respects to Chapter 13, except that it is available only to family farmers.
Chapter 9 (Debt Adjustment of a Municipality)
Chapter 9 is available only to a political subdivision (i.e., a city, town, or county), public agency, or other instrumentality of a state.