If you’ve been making a lot of late payments, or not paying some debts at all, then your credit score has probably already taken a hit, and there’s likely nowhere to go from here but “up.” Bankruptcy will show up on your credit report for up to 10 years, but ask yourself how long it will take you to dig out of the financial hole you’re in if you don’t file? Getting your debts forgiven in bankruptcy can give you some breathing room and a chance to finally get your feet back on solid ground.
17 Feb 2016
By David F. Mills
This year is shaping up to be a problem for many farmers in our area. Too much rain last fall decreased crop yields, cutting into farmers’ profits and causing a shortage of soybean seed. Prices for soybeans, corn, and other commodities are well off the highs of a couple of years ago. The combined effect of these issues will likely lead to the unfortunate default by many growers on their 2015 operating loans and other farm-related debts.
Unfortunately, farmers often wait too long before seeking help. Farmers are, by nature, eternal optimists—“next year will be better.” Also, farmers in financial difficulty are worried and embarrassed. They want to keep their lender happy, keep their trade creditors (fertilizer, chemical, and fuel dealers) happy, and maintain something of a normal life. As a result, the farmer often just does nothing.
Over the past 24 years, I have represented many farmers in financial distress, including many in Chapter 12 family farm bankruptcy. I am always surprised by how long the farmer has waited before coming in to get advice and direction.
If you are a farmer facing financial difficulties, there are things that you can do proactively to get a handle on your financial situation. An attorney experienced in agricultural finance issues can help. To get a head start, ask yourself the following questions:
1. What do you own, and what is it worth? List your real estate, your vehicles, your farm equipment, and all your other assets. What is the value of each item today?
2. Who has liens against your assets? Does anyone have liens against specific equipment, or does anyone have a blanket lien on all your equipment? How about deeds of trust against your real estate, including your home? How much is owed to each of these creditors? If more than one creditor has a lien against certain assets, what is the order of their priority?
3. Are there creditors who don’t have liens (unsecured creditors)? Who are they and how much do you owe them?
4. In the last 2 to 3 years, have you completed a financial statement, balance sheet, or cash flow statement? Often you will complete these forms when borrowing money, especially through the Farm Service Agency (FSA) or the farm credit system. Are these statements accurate and up-to-date?
5. Are your assets insured, including your farm equipment?
6. Do you have any crop insurance claims, other types of insurance claims, or do you anticipate receiving a government program payment?
7. Have you made arrangements for renting land for the coming year? Do you owe any land rent from last year?
8. Has anyone filed a lawsuit against you? If so, you have only a limited amount of time to respond to it.
9. Has anyone started a foreclosure against you, or repossessed any equipment? Again, if so, you must respond within a short time or you may lose important rights.
10. Have you talked to the lenders you are unable to pay? Don’t ignore them.
11. Have you defaulted or are you about to default on a loan from FSA? You have certain rights as an FSA borrower (loan servicing options) but you must act within a limited time in order to take advantage of those options.
12. Do you have a projected budget for the current year, with projected income and farm expenses? Is it a realistic budget?
13. Do you NEED all of the land and equipment you currently own? Can you “trim the fat” and turn in or sell any of your assets? If you do, what are the tax consequences?
14. Do you owe any income taxes or payroll taxes? Are you current on your tax return filings?
15. Are any of your debts guaranteed or co-signed by someone else?
16. Does anyone have a lien on your crops?
17. What are your options for financing this year’s crops?
18. Have you talked with a lawyer who is experienced in dealing with farm debt issues, including family farm bankruptcy? Talking to me doesn’t mean that you will definitely file bankruptcy. Often, I am able to help my clients avoid bankruptcy and deal with their debt problems through a workout plan with their creditors. But bankruptcy is an option to be fully considered. Farmers have special rights and provisions under bankruptcy law to protect them from their creditors, help them reorganize their finances, and stay in business.
If you are a farmer in financial distress or have been denied a crop insurance claim, call me to schedule an appointment. We will discuss your situation and I will help you realistically identify and evaluate your options. My telephone number is (919) 934-7235.
David F. Mills is an attorney in Smithfield, North Carolina, having grown up on a tobacco farm in Jones County in eastern North Carolina. He has practiced bankruptcy law, focusing on agricultural debt relief, since 1991. He is an Adjunct Professor of Bankruptcy at Campbell University School of Law and a member of the American Agricultural Law Association.
01 Feb 2016
Perhaps it seems ironic, but filing for bankruptcy protection costs money. There are court filing fees, trustee administration fees, attorney fees, credit counseling fees, etc. After learning about the costs involved, some who could benefit from bankruptcy protection may end up wondering, “Can I afford to file bankruptcy?” In a good number of cases where bankruptcy is appropriate, the answer is “yes.” If bankruptcy protection would be beneficial in your case, your bankruptcy attorney can advise you on how to afford it. Here are some examples of ways to pay for bankruptcy:
Stop paying unsecured creditors. Always do your utmost to pay the bills that cover the essentials of life: your mortgage, your electric bill, your car payment (assuming you’re not driving a Ferrari), etc. Many times, the other bills can wait. The money that you would otherwise send to these creditors can help raise money to file bankruptcy.
- Borrow money from a family member or friend. The legal obligation to repay the loan will generally be discharged in bankruptcy, but after you receive a discharge, you’re free to repay any debt voluntarily.
- Borrow money from your retirement fund. Just be aware that you will have to repay the loan within a certain amount of time to avoid a penalty.
- Try crowd funding. There are all kinds of websites out there that can help you ask family, friends, and total strangers to help fund your personal cause. GoFundMe is just one example of such a site. Or set up a PayPal account, and ask your Facebook friends to donate $5. Of course, this will require sharing personal details on social media, and only you can decide if that’s something you’re comfortable with.
Bankruptcy protection could benefit many people struggling with debt. A bankruptcy attorney can analyze your options, and give you advice going forward. Your initial consultation is free at Mills Law, so it won’t cost you a dime to find out what your options are. A fresh start might not be easy, but it can certainly be worth it.
This tax season, the Internal Revenue Service and state revenue departments are bracing for fraudulent refund requests filed by identity thieves. Read more about steps the IRS is taking here. This scam not only defrauds the U.S. Treasury, but can cause innocent taxpayers major headaches. Your good credit is a valuable asset. You can help protect it by taking action:
- If you file your returns this year and find that a fraudulent return has already been filed, immediately report the matter to the IRS or your state revenue department.
- If you use TurboTax to file your returns, log into your account and make sure a return hasn’t been fraudulently filed. If you find evidence of fraud, contact TurboTax customer service immediately.
- Request a taxpayer-specific PIN from the IRS by filing IRS Form 14039. Visit this link for a copy of the form: https://www.irs.gov/pub/irs-pdf/f14039.pdf
- Consider placing a fraud alert or freeze on your file with the major credit bureaus.
- Monitor your own credit by obtaining a free copy of your credit report from each of the major credit bureaus annually.
No hope of a refund? Certain tax debts may be dischargeable in bankruptcy. If you feel overwhelmed by what you owe, call our office for a free consultation, and see how we can help.
27 Oct 2015
Scammers are reportedly posing as bankruptcy attorneys and asking their intended victims for wire transfers to satisfy a debt. Your bankruptcy attorney will never ask for a wire transfer to pay a debt. If you receive a call like this, hang up immediately and contact your attorney’s office as soon as possible. Read more here.
17 Jul 2015
Many people wonder how a celebrity like 50 Cent is eligible to file bankruptcy. You might ask, “Where did all his money go?” Well, the Bankruptcy Code (the set of laws governing bankruptcy proceedings) doesn’t require a person seeking bankruptcy protection to be insolvent. In fact, there are two main types of bankruptcy proceedings: liquidations and reorganizations. Individuals who need bankruptcy protection have several chapters available to them: Chapter 7, Chapter 13, and Chapter 11. Farmers have their own type of bankruptcy proceeding under Chapter 12. The appropriate type of proceeding for an individual will depend on their particular situation. A bankruptcy attorney can advise you about the appropriate course of action in your case.
You can read about other bankrupt celebrities here.
If you have been reading about filing bankruptcy lately, you have probably read a lot about “no money down” bankruptcies, promising to get you the help you need at no cost. It sounds great, but before you commit, you need to make sure you understand what you are getting into, and exactly what you are getting.
These advertisements are referring to Chapter 13 wage earner plans. In a Chapter 13, the debtor (the person filing bankruptcy) makes monthly payments in order to repay some or all of his or her debt. If the debtor has higher income or needs to stop a home foreclosure, a Chapter 13 is the way to go. These payment plans usually go on for 3 to 5 years.
However, in many situations, a Chapter 7 case will stop your creditors from trying to collect from you and provide you with a discharge, or forgiveness of your debt, in a much shorter time (4 months or so) without having to make any monthly payments at all or give up any assets. It’s true that all attorney fees in Chapter 7 must be paid up front. This is because any debt owed when the case is filed will be wiped out—including attorney fees. But, those fees are generally less than half the attorney fees that you will have to pay in a Chapter 13 case. That’s right—“no money down” doesn’t mean “no cost.” It just means they are paid over time. Generally, Chapter 13 attorney fees are more than double Chapter 7 fees and include an added commission that is paid to the Chapter 13 Trustee—just like paying interest. Paying for things with interest over time is often the cause of financial trouble in the first place!
So, if you pay a $3,700 attorney fee through your Chapter 13 plan (which is standard), with the commission you will pay a total of almost $4,000 in attorney fees, compared to $1,200 to $1,600 in most Chapter 7 cases.
When considering a “no money down” bankruptcy case, ask the lawyer these questions:
- Do I qualify for Chapter 7?
- Would Chapter 7 get me the help I need?
- How much does Chapter 7 cost?
- How much does Chapter 13 cost?
- Do I have to file Chapter 13?
- Why are you recommending Chapter 13?
- How long will I be in Chapter 13? How long would I be in Chapter 7?
- Are you recommending Chapter 13 so that you can charge a higher fee?
There is often a very good reason to file Chapter 13. Just make sure you ask the right questions, that you know exactly what you are getting into, and that you are acting in YOUR best interest.