Bankruptcy and Your Emotions

 

Do not feel badly about having to file bankruptcy. Many successful people have had to file a case at some point in their lives. We are raised to pay our bills in our society, but the founding fathers also provided this safety net to citizens so that they can get a fresh start when needed. The bankruptcy code also promotes business and economic growth by providing the ability to start over in certain circumstances.

The emotional cost of bankruptcy case be enormous for many people, and it’s important that you find a lawyer that understands and will listen to your particular situation. Remember that bankruptcy lawyers are American consumers as well. We know that the car breaks, that medical costs and education can bury a family. In particular, in Denver we regularly see working people paying 50% and upwards of their net monthly income on housing. We’ve seen it many times and lived it ourselves. A good lawyer has empathy, do not feel you are being judged. We are here to help.

Often times emotional stress is generational, with older family members not understanding today’s world. We are no longer in a place where employees have a safe steady job until age 65 and then retire. That still happens but it is now the exception, not the rule. There is no reason to feel judged by someone who has not walked a mile in your shoes.

With older Americans, there is often a huge resistance to filing bankruptcy. This is ironic because often times persons closest to retirement are the people most in need of bankruptcy relief. They have little time to recover and build retirement savings, and the debt can be like an anchor dragging them down year after year. They also typically have less need for a good credit rating, though filing bankruptcy often helps your credit rating.

People can find life after bankruptcy much more enjoyable, and much less stressful. Living with debt and stress can quite literally make you sick and or kill a person. In a world where large businesses regularly reorganize using the bankruptcy laws, consumers should not feel badly about having to resort to the same laws for help. Bankruptcy is a financial decision, not an emotional one. Meet with a qualified lawyer to explore your options sooner rather than later. No one can answer the question “Should I file,” but you. Good lawyers recommend and advise, they do not pressure and force.

Another aspect of bankruptcy and emotions is the relationship with your bankruptcy lawyer.  You should trust your bankruptcy lawyer, and your bankruptcy lawyer should trust you.

It is easy to go for the cheapest solution and let the emotional stress of bankruptcy lead you to unproductive interactions with attorneys. The cheapest solution is often cheap for a reason. It’s completely human to ask how am I supposed to pay for this, given I am already struggling financially? So ask, a good bankruptcy lawyer can answer. He or she can answer well. We can show you why a reasonable fee is necessary and in your best interest. We also understand that the fee issue is an emotional issue, you will be treated fairly and well by a qualified and empathetic lawyer. You ought feel good about the skill and work given by a law firm to your matter. You ought feel that the cost was appropriate to your circumstance.

No two bankruptcy lawyers are the same, and no two bankruptcy clients are the same. There’s a good deal to know, consider and explain in even a “simple” bankrutpcy case. Choose your lawyer rationally and carefully, let facts and reason dictate your choice and don’t let your emotions drive you to the worst bankruptcy mill type lawyers.

I want to repeat that this article is NOT a justification for expensive bankruptcy services, our fees are reasonable. It is a explanation of the emotional aspects of choosing a bankruptcy lawyer. Please call and we will offer you a bankruptcy fee appropriate to your particular circumstance.

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Guns and Bankruptcy In Colorado

Colorado does not have an exemption that protects firearms. If you have moved from another state within the past two years, it may be possible to use a “wild-card” exemption to protect your guns.

Exemption for Tools of the Trade Sometimes Protects Guns:

If you are in law enforcement or work as a security guard, you may be able to use the “tools of the trade” or “business equipment” exemption to claim your guns as exempt in Colorado. This exemption is strictly construed in Colorado where you must show that your weapon is necessary for the performance of your job. If you must carry a gun to work in dangerous places, or you believe that owning a gun for personal protection in the home is wise, you may well be right but unfortunately the law in Colorado bankruptcy court is such that this alone will not protect your guns in the bankruptcy case.

Gun Trusts May Protect Guns in Colorado, But The Timing Must be Right and There is Risk:

When you put property in a trust you no longer own it legally. You may still have an equitable interest in the property however and your bankruptcy estate includes equitable property. Also, unless the transfer to the trust was made at least four years before a bankruptcy filing, you will likely see arguments that your transfer of guns to the trust was a “fraudulent conveyance.” This essentially means that although you are not trying to hide the property, the trustee can essentially get at the guns because your act in putting the guns in trust is presumed to be fraudulent within certain times and while you are insolvent.


Selling Your Gun(s) Before Filing a Bankruptcy:

This is something many Colorado families do not want to do. People are attached to their guns and rightly tend to value their Second Amendment rights. But, it is perfectly legal to sell guns in advance of filing for bankruptcy as long as you do so to an independent third party for a fair price and follow the Colorado private sale requirements for background checks. The court will ask about sales to anyone and it’s not against the law to sell to friends, but of course there are special rules that apply to sales to friends or family members. This type of sale gets special attention from the Trustee and Court but if it is for a fair price and is documented it can be done. You can then repurchase the gun after your case is over.

If the gun or guns are replaceable models that are generally available, it is best to sell them to an independent third party in a safe and documented transaction for a fair price and then put that money into an exempt asset before you file. After your case is over, you can go repurchase any gun that is important to you.

Including Your Guns in the Bankruptcy Estate:

This has the disadvantage that you must of course declare the gun(s) and state their value. If they are worth more than a few hundred dollars the trustee will likely be interested in the guns. You can still keep these guns as long as you are willing to pay the fair market value of them. If your gun is a family heirloom or just plain important to you for hunting, or for whatever reason you choose to keep it, you may do so simply by paying its value to the trustee. The trustee in your case would much rather get the money for the gun, or any item, than take the time to collect the gun and resell it to generate assets for your creditors. This will cause your case to be an “asset” case which has certain disadvantages such as the trustee will then try to collect other items like wages due at filing. However, if a gun is important to you it may be worth it in your circumstance.

A chapter 13 case also protects non -exempt assets. So if you have extremely valuable guns that you do not want to part with, you can file a chapter 13 and pay some of your debt over time. This is yet another way to protect your guns while still getting the advantages of a bankruptcy filing.

Summary:

Guns are not exempt in Colorado, meaning you could lose them in a bankruptcy case unless you plan ahead. You can sell your guns in advance of bankruptcy to an independent third party for a fair price and replace them later, or you can pay the value of your guns in to the bankruptcy trustee in order to keep them. You cannot give them to friends or family or “hide” them, this is a federal crime and very much not worth it given there are other, legal ways to protect your gun ownership rights.

A lawyer who will encourage or allow you to not list your guns in a bankruptcy is risking not only your bankruptcy rights, but also your gun rights. This is because bankruptcy fraud is a felony, and felons cannot own or even possess firearms. 18 USC 922(g). Preparation, honesty and expertise can protect your guns and protect your gun rights in a bankruptcy case.

Preparation is the key to success in any legal matter. I have a lot of experience protecting guns for Coloradans and if you need bankruptcy relief but also have guns that are important to you please call for a free consultation . (303) 501-4028.

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Student Loans In Bankruptcy

Discharging Student Loans in Bankruptcy

It is very unlikely that you will be able to discharge any part of your student loans in a bankruptcy case, either under chapter 7 or chapter 13.

The Bankruptcy Courts in Colorado (that is the 10th Circuit of the Federal District Court system) are bound by the “Brunner” test which gives every advantage to your student loan creditors and leaves you little room to argue.

The Brunner test is a 3 part test. First the court asks whether the debtor is able to maintain a minimal standard of living while paying the loans. Second the court looks at the debtor’s physical mental and emotional health and asks whether any disability that could prevent repayment is a condition which is likely to continue. Third the court will look at whether the Debtor has made a good faith effort to repay the loan.

In this context it is very difficult to proceed toward getting rid of these loans. The existence of income sensitive repayment programs is used against debtors when judges make these decisions. They reason that if you are able to pay on the loan, at all, you should not get out of it even if your payments do little to reduce the principal balance.

Recently (Jan 2016) the Supreme Court refused to decide a case brought by a lawyer who had $220,000 of student loans and was unable to find a job. In certain districts, the Court uses a “totality of the circumstances approach,” which can make it easier for debtors to get relief. Bankruptcy lawyers in Colorado were hopeful that the Supreme Court would take up the case and decide that the Brunner test should not be used.

Congress got us into this mess by authorizing student loan lenders to borrow from the government at 0% interest, lend that money to students at effective rates of 10% and promote the idea that everyone needs education to succeed in life. That may be true, but if we were to set out with the intent of causing costs to rise, we couldn’t have come up with a better system. When Congress realizes that student loans are crippling the economy and hurting the very businesses that are competing for citizen’s dollars. They will act.

In the meantime it is important to stay on top of your student loans, there are programs that can help reduce your payment and there is hope that the future may bring relief. You may be eligible for deferment. But defaulting is VERY expensive and will only add to your burdens long term. If you would like a consultation about student loans in the context of bankruptcy please call (303) 501-4028.

 

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