Car Trouble? Ask a Salt Lake City Bankruptcy Lawyer

There are two very common problems that my clients have: unmanageable medical bills, and car problems.  It makes perfect sense, many Americans are living paycheck to paycheck in today’s economy, and medical bills or car problems can come out of the blue, completely unexpected to throw your family budget into a downward spiral.

Cars can be just as essential as medical care for people in Utah.  While Salt Lake City has an excellent public transportation system, for some people that live in the suburbs or rural areas of Utah, public transportation is not an option, they need a car to get to their job, because if they can’t get to work, they can’t earn money, and they can’t afford essentials such as food, shelter, and clothing – let alone extras like telephone service, christmas gifts, and date nights.

There is one thing you may be able to do to fix your car situation when filing for Chapter 7 bankruptcy. If your car is not paid off, and it breaks down, throwing you into financial chaos, you could just let it go. The legal term for this is “surrender”. You can simply surrender the car to the lien holder, and stop your monthly payments. You do not have to keep a broken-down car and try to figure out how to pay for repairs and car payments, you can just start over.  After all, any Utah bankruptcy attorney will tell you that “starting over” is what Chapter 7 bankruptcy is all about.

I can promise you, based on personal experience with my clients, that offers for car loans will be some of the first mail you receive after filing for Chapter 7 bankruptcy with an attorney. One former client counted over a dozen credit offers within a week or so after filing her chapter 7 bankruptcy petition, and most of them were offers for car loans. Another former client was able to finance a new car on the same day that her bankruptcy petition was filed. As long as the creditor can verify the time at which your petition was filed, any loans entered into after that time are post-petition loans that won’t scare creditors in the least.

In fact, creditors love to loan to people what have just filed bankruptcy, and there is a good reason for that: they know that because you have just filed for Chapter 7 bankruptcy, you won’t be able to do it again for 8 years – so they have a good chance of recovering their money.

The down side, of course, is that these credit offers will come with very high interest rates.  It is important that you mind your budget after filing bankruptcy, because you will not be able to have a second bite at the bankruptcy apple for years to come. If you mess up, you’re stuck!

For that reason, this solution is not for everyone. It can be risky, and will definitely carry a very high interest cost. But if you find yourself stuck between a rock and a hard place (as my clients often do) with a broken down automobile, and you don’t know how you’re going to pay for auto repairs and car loans, on top of all the other bills you have piling up; then it could be a worthwhile move for you to surrender the car and start over.

Koehler Bankruptcy PLLC is a law firm that helps people like you fix their financial problems. If you need help, don’t suffer a minute longer – call us for a free consultation at 801.200.3795.

Bankruptcy Lawyer in Salt Lake City | Ever wonder how your credit score is computed?

Many of the potential new clients who come to see me are concerned about their credit scores, and how bankruptcy will affect their credit.  So I thought I’d write you all a little bit about how your credit scores are computed.

As you can imagine, almost every client I have seen as a bankruptcy attorney in Utah has come to me with an absolutely trashed credit score.  So, I’d like to first dispel a misconception about the effect of bankruptcy on your credit score.  It is true that a bankruptcy will stay on your credit report for 10 years, and it is also true that filing bankruptcy will negatively impact your score (surprise, right?).  But here’s something you should think about: if your score is already trashed, filing bankruptcy isn’t going to cause it to go down further.  In fact, filing a chapter 7 bankruptcy will often give your credit score a small boost!

It is also true that because your bankruptcy filing will stay on your credit report for 10 years, it will continue to negatively affect your score.  But here is something else you should consider: in the meantime, you can slowly rebuild your score with the responsible use of credit.  Imagine you have a large amount of debt, you cannot keep up with your monthly payments, and you find yourself falling farther and farther behind.  You know you need to do something and you have considered bankruptcy, but are worried about the effect it will have on your credit.   Your options, then, are:

  1. continue to struggle and get farther and farther behind until, at some unknown point in the future your financial situation changes for the better and you are able to start catching up again.  Everyone hopes that they will find a great paying job tomorrow, or that a distant relative will die and leave them a fortune, or that they will win the lottery.  But these hopes are generally unrealistic for many reasons, not the least of which is that there is no lottery in Utah!  So, if you try to do this, your credit will continue to get worse and worse over the next several years before things improve to the point where you can take care of your debt, and only THEN can you begin to rebuild your credit.
  2. you can file bankruptcy now, and start over!  Your score will be affected for the next decade, but in the meantime you can get your financial freedom back and start to repair that credit.  By the time the ten years is up your credit could be great, and will almost certainly be better at that point than it would have been if you chose option 1.

Ok, so now I’ll get off of my soap box and talk a little bit about how credit scores are computed.  The first thing you should do, if you haven’t this year, is get your free annual credit report on the internet.  You are entitled to one completely free credit report each year – and I’m not talking about the freecreditreport.com commercials with the signing hipsters.  Those companies will give you a free credit report (and score) if you sign up for their junky monthly credit maintenance crap that you don’t need.  You do not have to go through that hassle, instead go to the government sponsored credit report website: annualcreditreport.com.  Note: you cannot get your credit SCORE, just your report.  But here’s the thing, seeing if there’s anything negative on your credit report, and getting an honest picture of your finances is what is important.  In fact, did you know that the “score” that you get from these free credit report.com places is actually NOT the score that creditors look at when they are considering lending you money.  It is only a guess at what that score might be!

How your Credit score is computed:

A credit score above a 700 is considered to be a “good” score.   The maximum score is 850, and people that come to see a bankruptcy attorney in Salt Lake generally have a score below 550.  Of course, that doesn’t mean that you should wait until your score gets that low before talking to a bankruptcy lawyer!  If you are having financial trouble the best time to get some legal advice about bankruptcy is right now-before things get worse.

As far as computing the score, people think that the most important part is paying your bills on time.  In truth, having a perfect payment history is very important, but it isn’t really that much more important than another very important factor on your credit report: the percentage credit you are using and the number of credit accounts that are maxed out.  You want to keep this percentage low, and you don’t want any of your credit cards maxed out.  You are doing good if you are using less than 15% of your total credit on revolving credit accounts.

Some other things that affect your credit are:

  1. the age of your credit accounts: the longer you’ve had a credit account open, the better it looks.  Conversely, it can negatively affect your score if you have closed credit accounts.
  2. the number of credit inquiries you have on your report.  An inquiry comes from creditors looking at your credit report when you apply for credit.  The less you have the better – when you have too many credit inquiries, it will look to creditors as though you are out spending your income.
  3. “Public Records”: you don’t want to have any public records on your report – things like bankruptcy filings are public records, but so are collections law suits – so if you are going to get some collections suits filed against you – you may be better of declaring bankruptcy.
  4. The type of loans you have.  Your credit score is affected by the types of debt you have – Mortgages, car loans or leases, personal installment loans, student loans, and credit cards all affect your credit differently.  The people with the best scores have an even mix of these types of debt and have long positive payment histories – especially with mortgages.

There’s a guy on YouTube who says you don’t need a Salt Lake City Bankruptcy Attorney

Is he right?  Probably not.

Long story short, I noticed a youtube video of a guy hocking some sort of do-it-yourself bankruptcy booklet for $44 while looking through Salt Lake City Bankruptcy Lawyer videos.  This guy has a bunch of videos marketed to different major cities, and what he’s telling you is almost completely false.   I’m not going to post a link to the videos because they’re pretty disgusting and I don’t really wanna dignify them with extra traffic.

But they do give me a good jumping off point to discuss an important topic: do you need a bankruptcy lawyer to file bankruptcy in Utah?

The answer to this question is: probably, yes.

While the guy in the video says that a lawyer cannot do anything for you that you cannot do for yourself, that is only true in the most technical sense.  Yes it is true that you can file your own bankruptcy petition, and you can represent yourself at your 341 meeting with creditors, and you can do everything else that you need to do in order to get a discharge in your bankruptcy case without hiring a bankruptcy attorney in Utah.  But that doesn’t mean that you know how to do it, does it?  That is one reason you might hire a bankruptcy lawyer – because if you don’t do everything correctly you could mess something up and end up not getting some or all of your debts discharged.

There is one other falsehood in this guy’s video as well.  He completely forgets to mention the fact that most of what you are paying for when you see a Utah Bankruptcy Attorney is legal advice.  You cannot give yourself legal advice, and you can’t get if from a paralegal or a petition preparer either.  You certainly won’t get any legal advice from a do-it-yourself guide.

It is possible to file a bankruptcy petition and successfully get a discharge of your debts without the help of a lawyer – but it requires some special knowledge and a lot of time that many people don’t have.

How do you know if you can file your own bankruptcy petition?  Well, I would never advise anyone to do it by themselves, but at the very least, you should be able to answer the following questions before you try to go into court without a bankruptcy lawyer:

  • What is the difference between secured and unsecured debt?
  • What is the difference between personal and real property?
  • What is a codebtor?
  • What are the property exemptions for Utah?
  • What is the role of the bankruptcy Trustee? (btw – the guy who filmed this video clearly does not understand – his fast and loose vocabulary is inaccurate and betrays his inexperience)
  • What is the difference between surrender, redemption, and reaffirmation?
  • What is the 341 meeting?
  • What are the grounds for objection to discharge?

If you can only answer some of these questions, you’re not ready to do this alone.  The information exists for you to study up and get to the point where you can muddle through for yourself – but it sure will save you a lot of time, worry, and probably money if you just let an actual bankruptcy attorney help you out!

Salt Lake City Bankruptcy Lawyer | You should not be ashamed to file bankruptcy – you’d be amazed how many people have done it!

There is no doubt that filing for bankruptcy in Utah carries a negative stigma.  No one likes to admit that they are behind and owe large amounts of money to creditors.  They don’t want people to think that they are irresponsible with their money.

For that reason, a lot of people who come to see a Salt Lake City Bankruptcy Attorney are ashamed, even when their debts have been caused by legitimate and unforeseen catastrophes in their personal lives.  You should not be ashamed to file bankruptcy in Salt Lake City, especially if your financial troubles have been caused by things that are out of your control.  Many of my clients are very responsible people who have fallen victim to things outside their control such as: illness, giant medical bills, job cuts, layoffs, and firings due to the current recession, losses in real estate values due to the current economic crisis, loss of work resulting from temporary or permanent mental or physical disability, car accidents, work accidents, loss of loved ones, divorce – – – I could go on and on.

Bankruptcy has such a bad stigma that no one talks about filing for bankruptcy, and people that find themselves in difficult financial situations have no idea how many of the friends and coworkers they respect have filed for bankruptcy in the past.  To illustrate this point, I’m including a list of people that you have probably heard of, people who are successful and respected celebrities that have filed for bankruptcy:

  • Henry Ford
  • Ed McMahon
  • Kim Basinger
  • Walt Disney
  • Tom Petty
  • Cyndi Lauper
  • Willie Nelson

But my top two all-time favorites are are:

  1. Donald Trump – who has filed for bankruptcy FOUR TIMES!!!
  2. Abe Lincoln – no kidding – America’s favorite historical figure filed for bankruptcy in 1833!!!

If you find yourself in the position to consider filing bankruptcy, don’t delay out of shame – you may not realize how many people you know that have been in the same situation!

Bankruptcy Lawyer in Salt Lake City | What do I need to do before filing bankruptcy?

Before you file bankruptcy in Utah, you will have to complete a credit counseling course.  This is a requirement written in the Bankruptcy Code.  Your Utah Bankruptcy Lawyer cannot file your bankruptcy petition until you have completed this course.  There are tons of companies that offer this credit counseling course.  You can take it online, and it usually lasts about 90 minutes.

Prices vary from as low as $5 to as much as $35.  Generally, you will probably be paying around $25.  Your Salt Lake City Bankruptcy Lawyer will probably have a preferred company that they use.  Your bankruptcy attorney will have an account with that credit counseling provider, and you will login using that account and the certificate of completion for the course will be faxed to you bankruptcy lawyer automatically.

With my clients, I usually roll the cost of the credit counseling course in to the total fees that my clients pay me.  I find this makes things much more convenient for the client.  This way they just pay one person one time, and I give them a code to use when they take the course.

You will also have to take another course after your 341 meeting.  The subject of the second course is Debtor Education, but it works basically the same.  It takes a little longer to complete online – around 2 hours – and costs a little bit more – about $35.  It is very important that you complete this course within 60 days of your 341 meeting.  You will not receive a discharge in your Utah Chapter 7 Bankruptcy until this course is completed.

Again, with my clients, I generally roll the cost of this course into my total fees – I feel it is much more convenient for my clients to already have the payment for this class arranged, all they have to do is log on and take the course sometime after the 341 meeting.

One important thing.  There are some time restrictions for these courses.  You must take the first course within 180 days of filing.  However, if you wait longer than 180 days before filing, the credit counseling companies are pretty understanding, and usually just issue you a new certificate free of charge.

Regarding the second course, you cannot take this course before your 341 meeting – it MUST be completed after the 341 meeting with creditors.

Salt Lake City Bankruptcy Lawyer | What happens if I file bankruptcy and my friend or relative cosigned a loan that is getting discharged?

It is fairly common for my clients to have concerns about how their bankruptcy will affect people who have cosigned for loans or leases.  What clients are hoping is that they can file bankruptcy that will not affect their cosigners – who are often close friends or family members.  It is natural for you to want to protect these people from the consequences of your bankruptcy filing.  Unfortunately, there is no easy way for Bankruptcy Lawyer in Salt Lake City to do that.  There are some options, but before I discuss those, let me explain why this situation is so sticky.

When a cosigner signs a loan with you, that person is making the same promise to repay the loan that you are.  It may be the case that the two of you have an understanding that you are going to be the one paying back the loan, and that the cosigner is only signing so that you can get more credit or a lower interest rate.  Of course, as your Utah Chapter 7 bankruptcy lawyer can tell you, this understanding has no legal effect.  The person who cosigned your loan is equally liable for that debt, and your creditor will expect to be able to collect from them.

So, what happens, then?

If you file a Chapter 7 Bankruptcy in Utah, you are required to list any codebtors – people who cosigned on any of your debts.  These people will be officially notified of your bankruptcy.  After you file bankruptcy the automatic stay will go into effect, and this will prevent your creditors from taking any action to collect this debt from either you or your codebtor.  HOWEVER, if and when you receive a discharge you codebtor will remain liable for the entire debt that they cosigned – and the creditor will then be able to use any legal means to collect on the debt.

This is the unfortunate fact of the matter, and there’s nothing that a bankruptcy attorney can do to massage the situation for you.  If this state of affairs is unacceptable, you have 3 options:

  1. Reaffirm the debt – you can choose to enter a reaffirmation agreement for the debt, and the debt will survive your bankruptcy.  Usually, you will go on repaying the loan with the same terms as before, and it will be as if you never filed bankruptcy – your cosigner will not be solely liable for the debt.
  2. You can file chapter 13 bankruptcy instead of chapter 7 bankruptcy.  When you file chapter 13 bankruptcy a stay will go into effect protecting your codebtors throughout the course of your chapter 13 payment plan.  In some circumstances, you will be able to pay off the entire cosigned debt during the course of the plan so that when you receive your chapter 13 bankruptcy discharge, your cosigner will be off the hook.  At the very least, entering a chapter 13 plan may allow you to pay back some of the debt, while buying time before your cosigner gets stuck with it.
  3. The most common solution – you simply talk person to person with your cosigner, explain your situation, beg their understanding, and come to an agreement between the two of you that you will pay the debt back – even though you are not legally bound to do so.  Most of the time, cosigners are close friends or relatives that will be understanding and compassionate.  They also know that you are more likely to stick to your word due to your relationship with them.  If your cosigner is a sibling or parent, this solution may be better for everyone than options 1 or 2.

How much does it cost to file chapter 7 bankruptcy in Utah?

For me, this will probably be the least interesting post I’ve written as a Salt Lake City Bankruptcy Lawyer, and yet I imagine that it will be the most popular for readers.  I have held off of writing this post, but lets face it, this is information that is important to you, and I am purporting to give you useful information, so the blawg is a bit of an underachievement without it, right?

Before I get to the nitty gritty of how much Bankruptcy Lawyers is Utah charge for a Chapter 7 bankruptcy – I want to give you a heads up about advertising.  When you see an ad for bankruptcy filing with a flat fee – say maybe $999 – you should not assume that that is your out of pocket cost.  There is a difference between the bankruptcy lawyer’s “attorney fees”, and your actual “out the door” cost.  Sometimes $999 actually means closer to $1400…but sometimes it does mean $999.  You should look for something that says “including filing fees” or the like.  If you don’t see that, you can pretty much tack on another $400 to the price to file Chapter 7 Bankruptcy with an attorney in Utah.

So first, lets talk about those unmentioned “filing fees and costs” first, because they will vary the least between attorneys:

  • $306: The filing fee for a Chapter 7 bankruptcy in Utah is currently $306 – it was recently $299, but has been $306 for more than a year.  The reason I mention this is that when you’re searching for attorneys, if their website quotes a filing fee of $299, that means they’re lazy and haven’t updated it (and there are more than a few who have not).  I’ll leave it to you to decide if you want a lazy lawyer that doesn’t pay attention to detail, but just…ya know…heads up. (UPDATE September 2014: Since I wrote this post, the filing fee for chapter 7 bankruptcy petitions has increased to $335)
  • $25-$50 – credit report fees.  Attorneys should be pulling their own credit reports on you and your spouse if filing jointly.  It is highly important to have complete, current, accurate reports and the best way for a bankruptcy lawyer to do so is to pull the report themselves.  Here’s another red flag – if you’re talking to an attorney that wants you to bring in your own report, you’re probably dealing with someone who doesn’t regularly handle bankruptcy and you’re much better off going to an attorney that knows his way around the Bankruptcy Court – even if it costs a few extra bucks. There are a lot of little things that the average lawyer could mess up, and they could end up costing you much more than you save on attorney fees before you’re done.
  • $35-$70 – credit counseling courses.  You will need to take two of them, and the prices vary from 15-35 dollars each.  Good news – if you’re filing jointly you can take the classes together and only pay one fee.  Another heads up here – if the attorney is quoting something like $50 for a credit counseling class – rest assured she/he is skimming  a little off the top…it doesn’t cost that much for attorneys who have accounts with a particular credit counseling agency that they like.  One way to control costs is to take the course (and pay for it) yourself.  The way I do things is to roll the cost of the course, along with the filing fee and credit report costs into one bundle, I pay for your courses and save a little money, and pass those savings on to you.  (my fee quotes are calculated based on my cost plus a base attorney fee, the attorney fee might be the same from another lawyer, but YOUR cost will be higher if he’s charging you that much for credit counseling courses).
  • Total “costs and filing fees” = $366-$426 (this is now $395-$445 with the recent filing fee increase)

Now for the juicy part – attorney fees:

  • $500-$1700.  This is how much it costs to file bankruptcy in Utah. Big range huh?  Well, first of all, don’t count on $500.  This is a rate that you might find if you try hard enough – but it will probably be from an attorney that doesn’t have much experience. In general, the services of a Bankruptcy attorney are worth far more than $500.  That being said, I have done cases for 500-600 dollars and felt that it was perfectly fair.  If your case is very straight forward and you don’t have a lot of creditors or a lot of debt or a lot of other things that make bankruptcy complicated like a business, co-debtors, collections suits, etc. then I will quote a fee this low and be perfectly happy with it.  But that is the exception, not the rule.    Likewise, you probably don’t need to be spending more than $1500 unless you have a particularly complicated case involving many different creditors and assets and business ventures, etc.  I would say the average case, with the average competent bankruptcy attorney in Utah will run you about $1000 for attorney’s fees, meaning it will be about $1400 total.
  • Please note – in Chapter 7 bankruptcy, you will need to pay this whole amount up front.  You will be hard pressed to find an attorney willing to do a payment plan for a chapter 7 bankruptcy, although there are different rules for Chapter 13 bankruptcy.