A new article discusses how banks are becoming even more aggressive in their foreclosure procedures.  They’re kicking people out on the street in shorter periods of time.  What does that mean to you?

The emotional attachment to a home is something that simply cannot be understated.  I’ve had plenty of people begin to cry while sitting in my office when the prospect of leaving their home came up.  I get it.  My parents owned their co-op for 30 years.  The memories I had there were some of the best memories I can remember.  But then there is the inevitable problem or trying to pay a mortgage that is more than the actual home is (and may ever be) worth.  In a situation like that, which happens all the time these days, the best thing you can do is file Bankruptcy and surrender the home.  I know you’re looking for an out other than that, but realistically there almost never is one.  Here are your options:

1.  Continue paying the mortgage; Hope you win Jeopardy soon:

You  take this approach about six months prior to calling me.  You  will do anything possible not to admit that you need to walk away from the home.  You’ll slave and scrimp and do anything to make sure the mortgage (sometimes two mortgages) is paid, even partially, each month.  If you fall a few months behind, you figure you’ll catch up and pay when you can.  You cut down on almost anything (and I’ve seen it all) just to make that payment.  Next month will be different.  Next month you think you’ll have enough.  But inevitable you don’t because of the economic situation we’re all in.  So you call me.  6 months later than you should have.  6 months worth of saving money that you likely could have kept.  You feel great after the Bankruptcy and the monkey comes off your shoulders, and you can finally sleep.

2.  Stop Paying the Mortgage but do not file Bankruptcy.

Let me guess; the Bank told you that you can apply for a loan modification.  Let me guess; they told you to stop paying the mortgage for a few months.  You listened.  Stop the insanity.  The Loan Modification process, in my opinion, is one the dumbest, most irrational, most arbitrary process’ that I’ve ever seen.  Literally, communists in government offices would look at it and go “This is just too inefficient.”  It’s crazy, makes no sense, and has very little chance of succeeding.  It’s almost always a waste.  And it puts you in the hole.  Your credit score drops, and you’re waiting for months and months and sometimes years and years for some solution and meanwhile your credit score goes down the tubes.  You don’t even know, if you do get approved, if you’re going to be able to afford the new payment.  And forget it if you have a second loan.  Twice the insanity.  Again, total waste of time.  You’re waiting years for something that may not happen and may not help you.  File Bankruptcy, have your credit generically repair itself (quickly) and move on.  You can, if you want, even chose to keep the home once you file Bankruptcy.  I do not recommend this if you’re home is worth less than what you owe.

3.  Think the Bank wont go after you after a Foreclosure because your friend/neighbor/Priest/bodega owner told you they wont.  

They will.  End of Story.  If they don’t, they’ll sell it to a credit collection agency that will.  They have up to six years to sue you.  Then another twenty or so to collect.  Want that phone call 10 years from now?  That frozen bank account?  Deal with the issue now, before it’s too late.

Emotion is HUGE in this, but understand that there are literally millions of people dealing with the exact same issues right now.  Ask the people who have filed Bankruptcy and gotten rid of these debts, and ask the people that haven’t.  I’m pretty sure I know which side feels better about their financial life going forward.  We’re here, as always, in our Manhattan or Brooklyn office, to answer any questions you may have.

In the opinion of this Manhattan Bankruptcy lawyer, things are getting worse, not better.  Unemployment hovers around 9% (those are the official numbers.  The unofficial numbers are likely much worse).  About 1 in 5 people is behind on his/her mortgage.  People are underpaid, and many of them don’t have enough to out food on the table and pay the rent at the same time.  Not everyone who was meant to file Chapter 7 Bankruptcy in Manhattan has filed Chapter 7 Bankruptcy in Manhattan.  To the contrary, many people are still waiting for that next big paycheck or job to come in.  They’re dealing with debt settlement companies when they should be filing.  They’re spending more and more on interest and late charges when they could realistically be completely out of debt in approximately 90 days.  They’re doing the same thing, but there is even less money to play with now.

In meeting with clients in our New York City office, we’re finding many potential clients have already run through their entire 401ks, accruing large fees to the IRS in the process.  They’ve stopped paying rent in hopes that they’ll be able to find a cheaper apartment while still paying their credit card minimums (they have no choice but to live on credit cards).  Things are getting worse, not better.

The advice has always been the same but I fear it still hasn’t sunk in.  You’re wasting your money in almost every other scenario.  The debt isn’t going away, nor is the stress.  The credit card companies and debt collection companies aren’t going anywhere either.  I can’t ever be clearer about this than I am now.  You’re wasting money as things seems to be getting worse, not better.  You’re paying debts that aren’t going away with money that could likely keep in a Bankruptcy filing. You may be wasting what money is left on this.

The rest of us, to the best of my knowledge, are not immortal, and therefore we have to do some prudent financial planning going forward. Our life expectancies are going up. Our money has to stretch farther than ever. Which means we have to save more for retirement. Which means we have to put more money away now towards retirement. Which means we need to free up more money to put away but not paying for unnecessary expenses. Which means I have absolutely no idea whatsoever why you are paying credit card minimums when you are so neck deep in debt that you will never, ever, ever, be able to get out of it by doing the things you’re doing now. Like that buildup? It was OK. No big deal.

Heres my point: You have to assess your financial situation immediately and take steps to rectify it and put you back on the path you need to get on. If you’ve got a ton of credit card debt that you know you wont be able to pay off, and your sacrificing putting money aside because of it, then maybe you should stop. Or at least talk to a Bankruptcy Lawyer. Almost every single one of my clients, before they came to my office, thought that their debt was manageable. But how can you manage interest accruing at 30%. The Mafia doesnt charge that (there, um, is no mafia).

I’m not telling you to simply stop paying your bills and put money aside. Specifically if you’re not in over your head. But I am telling you that if you realize you’re only making minimum payments, then you have to have a conversation about what to do going forward. You can’t simply say “I was doing OK because I was paying minimums”. It would be weird if I owned a car and could only afford to put one gallon in at a time. Maybe thats telling me something. Maybe I shouldn’t own a car. Maybe I should figure out why I keep driving my car when I can only put in one gallon at a time.

Realistically speaking, you know when you’re in over your head. There is no magic formula. You just know. You might want to trick yourself into thinking if you just wait another year you’ll get that promotion or someone will give you money or your grandma will die and leave you the money in her will, but that likely wont happen. More importantly, thats another year of bad credit. Another year where you haven’t contributed to your IRA, 401k, your kids college fund. For what? For the sake of saying you’re paying minimums on cards you wont be able to pay off? Or making interest only mortgage payments on a house you know you can’t afford.

Its time to have a conversation with yourself. My grandmother may be immortal, but we are not. We’re going to need money to live on.

1. ” Filing Bankruptcy will ruin my credit for 10 years.  My neighbor told me.”  Your neighbor is a liar and is jealous of the view from your apartment and shes much too loud on the phone.  Bankruptcy will IMPROVE your credit almost overnight.  You heard me.  Improve.  As in get better.  If you’re tens of thousands in debt and missing payments, trust me, your check to settle Debt #1 out of 15 is not going to do much for your credit.  Bankruptcy, on the other hand, can greatly improve something called your Debt/Income ratio, which effectively comprises about 35-40% of your score.

2.  ”They’ll take my couch if I file Bankruptcy.  They’ll come in and go through my stuff”  Stop this.  Who will?  The US Marshalls?  They want your Levitz couch from 2002?  Big market out there for your coffee tables?  In all seriousness there are enough Bankruptcy exemptions as of January 2011, that we can confidently state that you likely wont have any issue with used furniture, etc.  It just doesn’t really happen.

3.  ”I own a home and Im scared”  If we file under the New York Exemptions, you’ve got $150,000 in equity you can protect in your home.  $300,000 if both you and your spouse are on the deed of the home and you’re both filing.  Next.

4. “It feels weird to file Bankruptcy.”  I know, it feels weird to get a Mud and Cucumber facial too, but you feel like a million bucks at the end (not that I know….seriously not that I know).  I know it feels weird, and you don’t want to do it, but you do it because you want to open up a bank account again and not be scared that someone is going to freeze it or garnish your wages.  You do it because you want to sleep at night and not worry about $30k in debt growing at 30% interest.  You did it because you want a fresh start.  You feel great when the process is over.  Don’t believe me?  Ask anyone who has filed (and had a good lawyer)

The lesson here is to stop throwing money you don’t have at creditors who aren’t going to go away.  If your house is on fire, are you going to get cups and fill them with water and throw them at the carpet?  Same thing here.  If you’re thousands in debt, settling with one creditor and hoping you’ll have enough to settle with the others is a losing proposition.  There are other, less expensive, faster, more efficient, painless ways to get through this mess.  Before you send in another check, make sure you speak with a Chapter 7 Bankruptcy lawyer.

The new exemptions allow you to either opt in to the New York Bankruptcy Exemptions or the Federal ones. Really, its all boring lawyer stuff, but the bottom line to you is that you can now get rid of thousands upon thousands of dollars in credit card debt, stop wage garnishments, lawsuits, and STILL STILL have enough to start your financial life over again.

With the new law I figured there would be a ton of questions from people out there, and we were right. We’re going to be instituting something called “Free Hour Fridays” in the coming weeks. You get to talk to yours truly, via Skype, either through phone or video, free for one hour. Ask me any questions about filing Bankruptcy in Brooklyn, Queens, Staten Island, Long Island, the Bronx. You get it. I’m absolutely thrilled that we’ll be able to help our clients keep so much more of whats their while getting rid of their debt.

Stop wasting money on debt settlement and solutions that dont work, before speaking to a New York City Bankruptcy attorney about this new law!

Heres a small story and maybe you can relate. I had a client in my office a few days back. Around 60 years old or so. Lost a fortune when the market crashed in 2008. Regular person like me and you. And you could tell that this was an incredibly emotional decision even walking into my office to discuss the filing. Lets face it, no one wants to say, at least initially, that they’re filing for Bankruptcy. I get it. So should the lawyer you choose. This isn’t coming in to claim some prize you won. It’s a heartfealt decision. Many people have sleepless night prior to going to see a Bankruptcy lawyer. Others are worried beyond belief and try to do everything they can do to solve the financial problem without filing (even when they may know in the back of their minds that Bankruptcy is likely the cheaper and better option.) Your lawyer should be cognizant of all of this and LISTEN. It’s so crucial and sometimes so overlooked. You’re not just another client. You have a story to tell. A particular set of circumstances which make the predicament you’re in….yours and yours alone. Look, there are a ton of Bankruptcy attorneys that do a great job out there. But I think it’s vital, and I’ve said this many times before, that you choose someone you feel absolutely comfortable with. As this is likely to be one of the biggest financial decisions of your life. Choose someone who understands what you’re going through and can empathize with your situation, but can also show you that there is a way out of this mess.

We don’t take any client that walks in the door. I know that certain clients may or may not want to do this and may or may not cooperate throughout the process. And just like me, you shouldn’t just pick the first attorney you find. Make sure that when you choose someone you’ve thoroughly thought it through. Again, there are so many people in Queens that want financial relief from their sleepless nights, stress, and the constant calls of creditors (which are insane). The lawyer needs to understand that. It will make the relationship, in my opinion, ten times better.

For instance, if you have two people living in your home, including yourself, but only one person is filing, you would look to see what the income limit for a two person household is, regardless of whether or not you are both filing for Bankruptcy in New York.

This is where a good lawyer comes in.  There are literally a ton of variables that go into whether or not you can file a particular case and if you qualify. Talk to a Bankruptcy lawyer before you make your decision.  Dont go at it alone.  And everyone…VOTE TODAY!!!

I had a client in my Brooklyn office the other day. Debt well in excess of $100,000.00. The client also owned a vehicle outright. It was a pretty new vehicle as well, so it still had some equity in it. If the client filed for Chapter 7 Bankruptcy in Brooklyn, the client would most likely lose the car. I advised the client that because of the amount of debt that client had, it would still be highly beneficial to file for Bankruptcy. Without making minimum payments, he would be able to save several thousand dollars in the coming months, and purchase a vehicle (not a great one, not a sexy one, but one that ran). He didn’t want to do it yet, which is unfortunate.

I’m always very compassionate and understanding with clients, but there are also times when you have to realize that problems simply arent going away. If you’re in over your heard in credit card debt to the tune of $100,000.00, thats not going away. Those creditors aren’t going to stop. They’ll call all day, freeze accounts, garnish wages, for up to twenty years. As I keep saying, this practice has made me understand that Chapter 7 bankruptcy is in fact an emotional decision. You have to be ready to say “This is it. I start fresh now.” Along with that comes the realization that you can’t go bankrupt, and have your debts forgiven, and still have assets that are worth more than you’re allowed to exempt. That car that you’re holding onto is not going to stop your creditors from coming after you for money you owe them. That big bank account that you have, if its less than what you owe, wont pay off your debt. Financially speaking, you need to let go of these things to be able to start anew.

Look, I understand that we have connections to things. Its normal, and natural. But you must understand that this process is allowing you to get rid of thousands upon thousands upon thousands of dollars in debt for close to nothing in many case. If I gave you the opportunity to get rid of 90%-100% of your debt for pennies on the dollar( in the worst case scenario), you’d obviously take it. Anyone would. But if I said to get rid of that debt, you have to get rid of the motorcycle or RV that you love, or the Time share, then that question moves people into two categories. The first realize that there is no way they can pay all that debt back, and they want to be free from credit collectors, from annoying calls, from frozen bank accounts. They want to start fresh. The others….still think that somehow, someway, this will go away. I can’t, no matter what I do, help that latter category. At the end of the day, you need to make this decision for yourself. If you have to give up a car that you have an emotional attachment to, so that you can stop worrying about the thousands of dollars of unpaid bills chasing you, I think the decision is a clear one.

Now look, I know you may be thinking “Chapter 7 Brooklyn Bankruptcy Attorney Daniel Gershburg, you have a nice tie, and also, I have all this money in an account with my brother. I’ve never used the account. I have no check signing authority on the account. I don’t even know my name was on it. But it’s there, and I don’t want my brothers money taken should I file for Bankruptcy, so I’m going to remove it.” This is one version. The other, more common version, is that you do it, and you don’t tell your lawyer about it. Which is, by far, the worst thing you could possibly do. In either example, you’re engaging in hiding assets. This may not be the same, in your mind, as taking money out of your account and putting it under the mattress, but in the Courts eyes it is.

Heres the other part. Lets say your name IS on a bank account with some other family members and there is some money in it. If you’ve never taken a dime, if you’ve never accessed the account, if you’ve never deposited money into the account, the Trustee will likely not touch the account. However, if you’ve been using the account and you take your name off before you file, thats simply not allowed. And realistically, whats happening here. You’re trying to save a few thousand dollars while getting rid of tens of thousands of dollars of debt.

At the end of the day, the moral and the lesson is this: Don’t do anything without speaking to your consumer Bankruptcy attorney. I wouldn’t bring my car into the mechanic and say “I heard a noise, and I thought it sounded like it was going to be expensive, so I ripped out some hoses. Here. Fix it.” The same applies here. This is a huge financial decision for you. Make sure everything you’re doing is correct. Speak to us before you do it.