Bankruptcy Can Solve Major Problems … But Not Always, Especially If There Is a Delay in Filing! Take action early to avoid some major pitfalls!

Here are some examples where delay in getting a Chapter 7 or Chapter 13 petition filed can lead to trouble.

Lawsuits. Folks behind in their bills are often served with summons in suits filed by “the usual creditors”—local collection agencies, credit card companies, easy loan companies. Upon filing a bankruptcy the Bankruptcy Court does immediately halt such suits and folks can relax. But things can happen in lawsuits that cannot be undone by a later BK filing. A wage garnishment can be stopped, but nothing can eradicate the shame and embarrassment of being served with papers at work! A judgment in a lawsuit can result in a lien recorded against your home—while such liens can often be removed by court motion, this will result in a higher attorney fee for you. And not all liens can be removed! If not removed a lien accrues legal interest at 10%, which can double the total owed in about nine years. Once your case is filed a judgment line cannot be recorded at all. So it is important to file your case before a lien is recorded

Repossessions. A car creditor will wait only so long before attempting to seize your vehicle. While the vehicle can be recovered, this will often require you to travel to Fremont or Tracy or some other distant location to retrieve the car. And any personal items left in the car will almost certainly wind up stolen with no recourse for you. Vehicles are often damaged in being towed, and it is extremely difficult to recover damages from a tow company. Finally, some vehicle creditors will flat refuse to release a car, forcing your attorney to seek a court order before the car is sold at auction—which can add substantially to your attorney fee and a substantial delay to getting your ride back. Filing your case promptly prevents a repossession.

Foreclosures. After several years of almost no property foreclosures, when home lenders would commonly allow forbearances on house payments, often for six months or even a year, such times are long gone. And with the value of homes dramatically rising, foreclosures are sadly becoming more common, even for loans only three or four months in arrears. While a Chapter 13 filing will halt a foreclosure sale, the foreclosure adds substantially to the cost and complexity of your Chapter 13 Plan, increasing the possibility of your case failing. And if any last-minute problem arises preventing the BK filing, the loss of a home is an immediate danger. In California a foreclosure sale is final and forever; there is no do-over!

Taxes. Folks in financial difficulty are often behind in their taxes. The chore of gathering documents and records can discourage someone from even calling their accountant to schedule an appointment. But for your bankruptcy to be successful, or even have a chance, your tax filings must be up to date. Such “tax chaos” is a frequent reason people put off their bankruptcy filing. Because so many other problems can arise while tax problems are stalling your moving forward, such procrastination can become a major issue. When financial difficulties are still distant, even just on the horizon, commit yourself to addressing your tax filings now. Do not worry about how much you owe, just get the returns prepared! You can discuss how to pay the taxes with your lawyer once you have your current returns in hand.

There is never a fee for an initial consultation with lawyer Clark Miller at Cypress Coast Law. Please call us for an appointment before you are in crisis. We have been helping folks get out of financial difficulties for over 40 years.