Is it time for a fresh start?

A middle class lifestyle is not supposed to include struggling to make ends meet or being overburdened with debt.

In today’s economy, more and more families struggle to meet their day-to-day financial needs. This has placed an enormous strain on the middle class lifestyle of many Americans. In addition, we all know that life sometimes throws us curves that we never could have imagined. The bankruptcy laws have been designed to help people address their financial difficulties in an honest, straightforward manner.

Our clients come from all walks of life. Many were living the American dream, with a beautiful house and a steady job. They could never have predicted the financial instability that required them to seek guidance from a bankruptcy lawyer. Over the past 20 years, we have represented thousands of individuals who considered themselves financially secure, but nonetheless found themselves struggling to pay their bills at the end of each and every month.

If you are experiencing financial difficulties, you do not have to work through them alone. California Bankruptcy Lawyer Marc Mathys can help. As a Central Coast based bankruptcy attorneys, our practice concentrates in the areas of consumer and business bankruptcy law, including foreclosure defense and the filing of Chapter 7 bankruptcy, Chapter 13 bankruptcy and Chapter 11 bankruptcy cases. Bankruptcy Freedom can assist you to determine if filing for bankruptcy is the right financial alternative for your situation.

Even if you are gainfully employed and you believe that you have everything under control, the following are some telltale signs that you may not be in the right place financially…

  • There is too much month left at the end of your money, and each month you need to purchase necessities with a credit card.
  • You are afraid to answer your telephone, even if you have Caller ID, or you dread opening your mail each day.
  • You are at the maximum limits on your credit cards, and can barely make the minimum payments each month.
  • You are borrowing from one credit card to make your minimum payments on other cards.
  • You are borrowing from your retirement benefits to make payments on your credit cards.
  • You are living paycheck to paycheck or with the fear that if either you or your spouse lost your job, you will be in financial hot water.
  • You have applied for a debt consolidation loan, and have been turned down.
  • You have signed up with a debt consolidation company, and cannot make the required minimum monthly payment.
  • You are constantly fighting with your spouse over money matters
  • Your bills are weighing on your mind to the point where you are constantly anxious, and it is now affecting your ability to sleep soundly or to perform your function day-to-day tasks normally.

If you answered yes to any of the above items, and you are reading this you should be applauded. You are here because you wish to take a positive step to regain control of your financial situation and plan for the future. You have acknowledged that a problem exists and you are taking action to address it.

Our Bankruptcy lawyers can help you stop adverse creditor actions. With few exceptions, immediately upon the filing of a  Chapter 7 bankruptcy, Chapter 13 bankruptcy and Chapter 11 bankruptcy petition, your creditors are prohibited from taking any further action against you; even if your bank account has been frozen and your salary has been attached.

Don’t let creditors take away the life you have worked so hard to create. Contact Bankruptcy Freedom By taking timely advantage of the U.S. Bankruptcy Laws, you can take control of your finances and save your business, home, savings, automobiles and personal belongings.

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Who to pay when you can’t pay everyone.

Who gets money when everyone can’t be paid must be a decision you make based on your own situation, not who calls you the most or who you owe what to. In most cases the first mortgage on your home will be on top. This obligation likely represents your largest payment. We tend to pay smaller creditors when money gets tight. Often credit cards and 2nd mortgages can be paid in full once first mortgage payments cease. This results in a short sighted solution. Soon your credit score drops and foreclosure on your home follows.  Negotiating with first mortgage holders can be more difficult than with other creditors.  But stop and think: If faced with the options of losing a credit card or losing your home, which would you choose? Your response to these and other questions should dictate your actions.

To evaluate your situation try the following:

  1. Figure out how much you saved or spent from savings to live last month. This number should be a hard fact. Either you added to an account or needed to borrow from savings, friends or relatives to make ends meet. Write this number down put it aside.
  2. Make a list of all available income for the month.
    • Use the regular net income of both spouses.
    • Do not include inconsistent items such as occasional overtime, tax refunds, or gift proceeds.
    • Are working children or other adults living in the home who could contribute funds? This comment always meets with a lot of resistance, but when the other option may be losing the house, it must be examined!
  3. Make a list of extra income available.
    • What savings can be used?
    • Do you have available credit lines or available credit cards?
    • Can you borrow money from friends or relatives or are owed money?
    • Look under the sofa cushions (or any others sources which may be unique for you – a 401K plan or whole life insurance policy perhaps).
  4. Make a list of all monthly expenses.
    • Essential Expenses – Food, that’s it for this category.
    • Very Important Expenses
      1. First Mortgage (or rent)
      2. Other Mortgages
      3. Utilities
      4. Transportation for work
    • Important Expenses
      1. Clothes
      2. Taxes
      3. Transportation – other
      4. Credit Card Payments (if credit remains good)
    • Regular Expenses
      1. Most daily expenses
      2. Household goods
      3. Credit card payments (if credit is already tarnished)
    • Luxury Expenses
      1. Entertainment
      2. Vacations
      3. Jewelry
    • Wasteful Expenses
      1. Gambling or Playing the lottery
      2. Falling victim to scams
    • Obtain your credit report. It can usually be obtained free (once a year or upon a turn down)..
    • Complete a personal financial statement.
      1. Prioritize assets. Which do you need to keep, would you like to keep, wouldn’t mind keeping, and which would you just as soon get rid of?
      2. Which liabilities are reported to credit bureaus?
      3. Does the net monthly figure match the number you put aside back at item #1? Probably not, this time include everything you spend. Make up categories or call items miscellaneous. Go over the expense section again and again. Self employed debtors may need to revisit the income entries. When you have a net figure matches what really occurred proceed.
    • Honestly evaluate your problem. Is it long term or short term? Has it been solved or is there a date certain when it will be? Will it reoccur? Is it permanent?

NO magic formula exists. So which is the best path from here?

Contact a debt professional to help you. An attorney who concentrates in debt workouts would be my first choice. Be careful, finding this type of lawyer can be very difficult. Filing bankruptcies in volume can be quick easy money for the law firm. Do not fall into this trap.

If you can not afford a lawyer look for a non-profit organization such as Consumer Credit Counseling Service. Be wary of individuals or for profit agencies offering these services. Some don’t possess the knowledge, others are out right thieves. Many just take your money and put you in touch with a lawyer they have selected based on a referral fee.

Sometimes people who have never been late on a payment in their whole life think they have a financial crisis when find themselves making payments a few days late. Often if your credit has not gone bad yet and you still have a strong income a debt consolidation loan or a credit card balance transfer may be all you need. Be wary that bad choices in the wrong circumstances escalate the problems and deepen the issues. Be even more careful about using emergency savings and most cautious of all about accessing retirement funds.

No matter what you do take an active role. Educate yourself, learn about the various debt options and be a part of both the professional selection and decision making process. Lawyers may try to push you toward a bankruptcy filing, consumer agencies lean against it. Do not ignore the problem.

This does not mean you should do your own negotiations any more than you should take out your own appendix. Saying you can’t afford a lawyer is like being too sick to go to the doctor. Lets take this analogy one step further. If most bankruptcy attorneys were doctors they would operate on every patient with a slight stomachache. Some consumer agencies would tend to keep a patient on antibiotics and not operate even if it meant the patient would live in the hospital for the next ten years.

Here are some guidelines to follow.

1.     If you want to save your home, pay your mortgage first. If you are already behind formulate a way to catch up, then call the bank, tell them your plan and why it will work. Do the same for all mortgages or rent.

2.     Communicate with your creditors. Don’t wait until you get in trouble. Before you miss a payment give them a call and let them know you need help and why.

3.     Never waste money. No lottery, no gambling, no get rich quick schemes. Be very wary of scam artists, they will be out to find you.

4.     If your credit has already turned sour don’t try to rebuild credit until the current problems have been resolved.  Do not put good money after bad.

5.     Paying more than the minimum payments on credit cards does not give you a better credit rating.

6.     Don’t become emotionally attached to any asset. Re-evaluate all of your possessions and don’t be afraid to give them up. Should you be driving that Lexus or would you be better off in an Escort for a while? Maybe necessity dictates moving to a smaller house or a less affluent neighborhood. Evaluate your assets and property without emotional attachments.

7.     Identify the cash drains and plug them up. This may mean closing a business or losing an income property.

8.     If you are not making mortgage payments or they won’t accept your checks save the money. Don’t spend it on other bills. You may need it to save the house. The one ranks as one of the worst mistakes people make when facing foreclosure.

9.     Don’t make arrangements you won’t be able to keep. Tell creditors what you can really do, not what you think they want you to say. Often professional foreclosure negotiators or debt negotiators can get a better deal for you.

10.  Do not spend money on house repairs if you may be losing the house.

11.  Explore all options but be ready for the worst, including an exploration of the rental market.  Don’t pour money into black holes. If your situation has taken a permanent downturn to the point that an asset will ultimately be lost stop wasting savings or current income just to delay the inevitable. You will need that money for other things, such as finding a rental after a foreclosure.

12.  Formulate a plan as soon as you see the first sign of trouble do not wait!

13.  If home foreclosure looms above you ignore the collection agencies from the unsecured creditors. You have more important things to worry about. Don’t let them bully you into giving them anything. You may need every cent to save your home. If you really want to keep the house be prepared to work for it. This may mean cutting items you thought were essential like cable TV; or getting a second job. Find the time to deal with this problem. If your house matters to you, this is more important than almost anything else. If you hate the house anyway, don’t pour money in to save it, explore other residence options.

14.  Don’t waste money or flaunt your spending. I once heard the story of a debtor who had almost completed negotiations with a bank for a deeply discounted settlement. When the loan officer was told the debtor was vacationing in the Caribbean, the deal was off.

15.  Don’t file for bankruptcy unless it’s really the right thing to do. It may not be not the only option.

16.  If you have bad consumer spending habits including but not limited to shopping addiction or compulsive spending change the way you budget money even if it means seeing a mental health professional for help.

17.  Don’t spend money on big gifts or celebrations. Your daughter would surely rather have a smaller wedding than homeless parents.

18.  If you have been able to save some money don’t leave it at a bank you owe money to. They might be able to take it from you without notice.

19.  Once in the foreclosure process call a lawyer before paying anything. When you’ve reached this stage little time remains. You’ll need someone familiar with all legal options.

20.  Important: Once you know you will be filing a bankruptcy do not run up a bill or credit card subject to discharge. This would be fraud, not to mention non-dischargeable. Think twice before not paying income taxes or your employees withholding or FICA match. These will probably not be dischargeable in bankruptcy.

You will not be put in jail for falling behind on your payments. You will not be shunned by the whole community. Most people will never know about your situation unless you tell them. Yes, this even goes for small towns with legal notices in the paper. Those who do find out will soon forget. Personal issues always interlace with your debt issues, but you cannot chart your course based on your emotion alone.

Perhaps the most important, don’t lose hope, don’t give up, don’t put your head in the sand.

Are you Personally Liable for Business Debt

Many small business owners see their businesses as an extension of themselves and combine their business finances with their personal finances making it hard to figure out where your business’s finances end and yours begin. Because their business and personal finances are often intertwined, small business owners often face collection efforts against their business assets and their personal property. In looking at your options, one of your first tasks will be to figure out which business debts you are personally liable for and which are owed only by your business.

If you are personally liable for some or all of your business’s debts, they can be wiped out by filing for Chapter 7 personal bankruptcy. On the other hand, if you are not personally liable for any business debts—for example, because your business is organized as a corporation or LLC and you have not voluntarily pledged your personal credit—you won’t need to file a Chapter 7 personal bankruptcy action for your business debts. Although your business might need to file its own business bankruptcy.
Assuming you formed a separate business structure that offers limited liability, you may still be responsible for its debts if you’ve personally guaranteed them or taken other actions that might put you on the hook, such as signing a lease or contract in your personal name rather than your capacity as a corporate officer, or pledging personal property as collateral for a business debt.
Note: Whether your business is organized as a corporation, LLC, partnership, or sole proprietorship, you are legally personally responsible to pay taxes your business withheld from employee paychecks.
Sole Proprietorships and Partnerships
If you are the sole owner of your business, and you haven’t filed paperwork with your state to incorporate or form an LLC, you are a sole proprietor, even if it is run together with your spouse. Legally, a sole proprietorship is inseparable from its owner; the business isn’t a separate entity that can take on its own debt. You are personally liable and creditors can, and often will, go after your personal assets. If you are a sole proprietor considering bankruptcy to get rid of your business debts, you need to file a personal bankruptcy, not a business bankruptcy. A personal bankruptcy will help you wipe out most types of debts, whether or not they are related to your business.
The same is true of general partnerships. In a general partnership, each partner is personally liable for 100% of the partnership’s debts. If there aren’t enough business assets to pay those debts, and your partners are broke, creditors can take your personal assets to pay all of the business’s debts, not just your pro rata share. But fortunately, filing a personal bankruptcy will get rid of all of your liability for the partnership’s debts, as well as any money you owe to your partners.
Corporation or LLC
If your business is organized as a corporation or LLC, you and your business are separate legal entities. You have limited liability for the business’s debts. In theory at least, this means you aren’t personally liable for the debts of your business, so creditors can’t take your house or other personal assets to pay business debts, even if your business can’t pay them.
Unfortunately for small business owners, legal theory is not necessarily legal reality. There are many ways corporate shareholders or LLC members can make themselves personally liable for business debts. In fact, most owners of small corporations and LLCs voluntarily take on personal liability for at least some business debts. If you are personally liable for some or all of your business debts, you will have to file a personal bankruptcy, rather than a business bankruptcy, to rid yourself of these debts.
Signing a Personal Guarantee
Because most suppliers, banks, and landlords know that corporate shareholders and LLC members aren’t personally liable for business debts, they often won’t extend credit or lend money to a small corporation or LLC without an owner’s personal guarantee: a legally binding agreement that the owner will repay the debt if the business can’t. And many small business owners are willing to sign a personal guarantee, even though they incorporated or formed an LLC precisely to limit their liability for obligations relating to the business, because they can’t get the money otherwise.
Check to see whether you signed a personal guarantee on any of your business contracts, such as a loan for a business vehicle or business equipment, trade terms with a supplier, a bank line of credit, or a commercial lease. If so, the creditor can go after your personal assets for repayment.
Offering Your Property as Collateral
Banks often require the owners of small corporations or LLCs to put up their home, other real estate, or other assets as security for a loan. If your business defaults on the loan, the lender or creditor can sue you to foreclose on the property (collateral) and use the proceeds to repay the debt.
Signing a Contract in Your Own Name
You may also have given up your limited liability if you were careless about signing purchase agreements and service contracts for your business. Sometimes these agreements display the personal name of the business owner without the name of the corporation or LLC. If you signed an agreement in your personal name and not on behalf of the corporation or LLC, you’re personally liable for the underlying debt, even if it was a simple mistake. If you’re not sure whether you signed an agreement or loan personally, check the language of the agreement and the signature block to see whether you signed it in your name or in your capacity as an owner or officer.
Using Credit Cards or Personal Loans to Fund the Business
If you used credit cards or home equity loans to obtain funds for your business, you are personally liable for those debts. (Under the terms of most credit card applications, even those used in the name of a corporation or LLC, you agree to be personally liable for making all payments.)

Tortious Conduct
Generally, owners of corporations and LLCs are not personally liable for mistakes in management, but they can be held personally liable for injuring others. An owner who commits a tort (the legal term for an act that harms another person and causes monetary loss) can be held personally liable.
Fraud, Misrepresentation, or Sloppy Record Keeping
If you misrepresented or lied about any facts when you applied for a loan or credit on behalf of your corporation or LLC, you could be held personally liable for the debt. Likewise, if you failed to maintain a formal legal separation between your business and your personal financial affairs, creditors could try to hold you personally responsible for the business’s debts under a theory known as “piercing the corporate veil.” This happens when a court finds that your corporation or LLC is really just a sham and you are personally operating the business as if the corporation or LLC didn’t exist. In this situation, a court may decide that you aren’t entitled to the limited liability that your business structure would ordinarily provide.
One way creditors try to pierce the corporate veil is by showing that you didn’t observe the legal formalities imposed on corporations and LLCs. For instance, you may have made important corporate or LLC decisions without recording them in minutes of a meeting. Or, you may have paid business bills from a personal checking or credit card account or paid personal bills from your business bank account. Even corporations or LLCs owned by a single individual or a married couple have to obey the rules and formalities imposed on these business structures; otherwise, they risk losing their limited liability protection.
Assess Your Spouse’s Liability for Business Debts
Whether your spouse is liable for your business debts turns mostly on where you live.

Community Property States
In the community property states, all income either spouse earns during marriage, as well as all property bought with that income, is community property, owned equally by husband and wife. For the most part, any debt incurred by one spouse during marriage is owed by both of them, too; it’s a community debt, and the spouse’s creditor can go after community property as a source of repayment (although they rarely do when the debt is in one spouse’s name). So, if you live in a community property state, you may want to file for bankruptcy to wipe out your business debts and protect your community income and property; even if you currently have little or no income, your spouse may have a good job.

Common Law States
The law works differently in “common law” marital property states. In these states, debts incurred by one spouse—even during the marriage—are generally that spouse’s debts alone, and only that spouse’s income and property are liable for the debt. Debts are jointly owed by both spouses only if they were jointly undertaken. If you and your spouse have not kept your income and property separate, and your spouse brings significant income and/or assets to the table, filing together for bankruptcy can be advantageous.