The federal bankruptcy laws are very forgiving and will protect the honest, but unfortunate debtor. One of the main aims of bankruptcy is to give the debtor a fresh start, but Massachusetts bankruptcy courts frown on anyone trying to use the laws to get a head start. Bankruptcy attorneys have a saying: "Pigs get fat, hogs get slaughtered."

One way some individuals try to get a head start is using up available credit just prior to filing bankruptcy. As you can imagine, going on a spending spree with your credit cards and then filing bankruptcy is a very bad idea. The Bankruptcy Code specifically addresses credit card spending sprees, and presumes that such debts are nondischargeable when the debtor makes purchases for "luxury goods or services" totaling over $500 to one creditor within 90 days prior to the bankruptcy filing. The term "luxury goods or services" does not include purchases "reasonably necessary for the support or maintenance of the debtor or a dependent of the debtor." Likewise, cash advances that total more than $750 to one creditor within 70 days of the bankruptcy filing are presumed nondischargeable.

Last year the United States Supreme Court in Milavetz, Gallop & Milavetz, P. A. v. United States reiterated that incurring new debt before bankruptcy with the intent to discharge the debt is not only prohibited, but may also amount to civil fraud or a criminal act.  The high court said that bankruptcy attorneys cannot instruct or encourage debtors to take on more dischargeable debt before bankruptcy, but attorneys "remain free to talk fully and candidly about the incurrence of debt in contemplation of filing a bankruptcy case." 

There are many situations where taking on additional debt is beneficial and permissible.  The Supreme Court cited three of those situations in the Milavetz opinion: (1) refinancing a mortgage; (2) purchasing a reliable car; and (3) incurring "additional debt to buy groceries, pay medical bills, or make other purchases 'reasonably necessary for the support or maintenance of the debtor or a dependent of the debtor[.]'"

If you are struggling with debt and need bankruptcy relief, call the Law Office of Robert W. Kovacs, Jr. toll-free at (877) 315-2641 before you make any further purchases with credit. The bankruptcy laws can relieve Worcester debtors of many financial burdens, but the path to financial recovery can be complicated without the sound advice from an experienced Massachusetts bankruptcy attorney.  Don't make any significant financial decisions prior to filing bankruptcy without consulting your attorney.  

Many of my Worcester and Farmington bankruptcy clients report that filing bankruptcy was the best choice they ever made. The Bankruptcy Code provides powerful relief for Massachusetts residents struggling with debt. Let's look at the top five provisions available in the Bankruptcy Code

Number 5: Redemption/Cram-Down of a Vehicle

A Chapter 7 debtor may redeem a personal vehicle by paying the fair market value of the vehicle, and discharge the remaining vehicle debt. While the redemption process requires a lump sum payment, there are several companies that offer redemption loans.  Additionally, Chapter 13 debtors may "cram down" a vehicle loan to the value of the vehicle. The crammed-down debt is then paid off during the Chapter 13 repayment period. Your Worcester bankruptcy attorney can explain both the Chapter 7 redemption and Chapter 13 cram-down processes and how you may save thousands of dollars.

Number 4: Lien Stripping a Second Mortgage

Lien stripping a junior mortgage during Chapter 13 bankruptcy has become a very popular option for underwater homeowners. Lien stripping is authorized when the value of the home is less than the amount of the senior mortgage(s). For instance, if your home is worth $200,000 and the amount of the first mortgage is $210,000, any junior mortgage can be stripped off in Chapter 13 bankruptcy. The stripped off debt is now considered unsecured and receives the same treatment as your other unsecured creditors.

Number 3: Chapter 13 (or 11) Repayment Plan

The Chapter 13 repayment plan provides time to pay creditors over three to five years. Most Chapter 13 debtors pay little or nothing to unsecured creditors (e.g. credit cards or medical bills), while paying off mortgage arrears, vehicle payments, taxes, and other secured or nondischargeable debts. The Chapter 13 repayment plan is way to restructure your finances under the supervision and protection of the federal bankruptcy court.

Number 2: Automatic Stay / Co-Debtor Stay

The automatic stay is one of the most powerful and far-reaching provisions in the American legal system. The filing of a bankruptcy case triggers this federal legal protection that automatically stops all legal processes and collection actions. State and federal lawsuits must stop, garnishments must stop, repossessions and foreclosures must stop. This stay is an opportunity for the bankruptcy debtor to reorganize finances without the pressures of creditor collections. Non-filing co-debtors are also protected during a Chapter 13 bankruptcy which may last up to five years.

Number One: Bankruptcy Discharge

The bankruptcy discharge is a federal court order prohibiting the collection of pre-bankruptcy debts. Discharged debts are no longer legally enforceable against the debtor. The bankruptcy discharge is the foundation of bankruptcy's "fresh start." The discharged debtor can begin the rebuilding process free from the pressures of overwhelming debt. The bankruptcy discharge is permanent and never expires.

Bankruptcy offers many powerful tools to reshape your finances. Get the facts today from the Law Office of Robert W. Kovacs, Jr. and learn how bankruptcy can help your family build a better financial future. Call toll-free (877) 315-2641 for a free case evaluation.

The Law Office of Robert W. Kovacs, Jr. is dedicated to helping individuals through overwhelming debt within the bankruptcy court.

If you have any questions please do not hesitate to contact us via e-mail or telephone.

You may also book an appointment on-line by clicking the link below.

https://www.securedata-trans13.com/ap/lawofficesofrobertwkovacsjr/index.php?page=10