Preparing For Bankruptcy

When you are considering a trip, usually, you make substantial preparations in anticipation of that trip. You make travel arrangements; you make sure you have a place to stay; you make reservations for any activities in which you wish to participate. You will often make significant plans and preparations for any “big” event. Bankruptcy is no different. It is a significant life event that demands some thought and preparation before you embark on it.


In talking with potential bankruptcy clients, it seems that a lot of them wait until the last minute before contacting a bankruptcy lawyer to find out how bankruptcy may help them. While visiting a bankruptcy lawyer most likely does not rank high on most people’s “bucket list,” if you are struggling financially, it most likely makes sense to determine if and how bankruptcy can help you sooner rather than later.

So, how can “preparing” for bankruptcy help? First, you will need to have the fees for the lawyer and for the court available. For now, for a chapter 7 filing, just the filing fee is $306.00. Additionally, before you file, you must complete a consumer credit counseling session and get the certification that must be filed with the court. If you “fail to plan” for your bankruptcy filing by finding out what you need ahead of time, when your car is on the verge of getting repo’d, you may not have the time and/or money to retain a bankruptcy lawyer.

Second, you can carefully go over your income and expenses and see where the trouble lies. Certainly a bankruptcy lawyer can help you identify the problem (with appropriate information) but you also need to know how you got into this financial mess. Some problems are easy to identify–temporary loss of income; extraordinary medical bills; overspending for a bit, etc. Bankruptcy can assist in overcoming those past problems but you need to be aware of the problem so that you can avoid it in the future. Bankruptcy is designed to be a “fresh start.” You can greatly assist in obtaining that “fresh start” by breaking or modifying some of the habits that perhaps got you here in the first place.

Third, make sure you know who you owe and how much. Find out if there is any collateral associated with the debts and gather up loan documents. Your lawyer will need this but, more importantly, you need to know your own financial picture. Credit reports are freely available and can be a big help. Also, if lawsuits or foreclosures have been filed against you, make sure you have that paperwork–all of it! It is important!

Finally, change your mindset. In dealing with individuals facing financial problems, it is often much more difficult instead of dealing with distressed businesses. That is because a business looks at assets and liabilities and can make a rational decision as to whether keeping an asset is worth the corresponding liability. Understandably, people are attached to their “things.” But, after all, they are just “things” and you have to consider carefully whether retaining a “thing” is worth the potential stress and headache. As an example, if you suffered a decrease in income and you have two relatively late model cars. No one wants to give up one or two cars but sometimes it is better to surrender a vehicle or two in order to keep your house (if that is important to you). There will be some emotional attachment to some “things” but it is imperative that you do this. Determining what is important to you is important for your bankruptcy lawyer in setting achievable goals for your bankruptcy filing.

Finally, do some research. There is a lot of information about bankruptcy that is freely available. However, you should exercise extreme caution in considering the information. Not that the information is inaccurate (some info may be outdated or simply inapplicable) but it takes an experienced profession to know what is appropriate and what is not. But, by familiarizing yourself with some basic bankruptcy information, you will be in a better position to appreciate and assist your bankruptcy lawyer in setting realistic and achievable goals.

After all, the real goal of a bankruptcy filing is a “fresh start.”


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Five Most Common Questions

WILL MY CREDITORS STOP HARASSING ME?
Yes, they will! By law, all actions against a debtor must cease once bankruptcy documents are filed. Creditors cannot initiate or continue any lawsuits, wage garnishees, or even telephone calls demanding payments. Secured creditors such as banks holding, for example, a lien on a car, will get the stay lifted if you cannot make payments.
WILL MY SPOUSE BE AFFECTED?
Your wife or husband will not be affected by your bankruptcy if they are not responsible (did not sign an agreement or contract) for any of your debt. If they have a supplemental credit card they are probably responsible for that debt.
However, In community property states, either spouse can contract for a debt without the other spouse's signature on anything, and still obligate the marital community. There are a few exceptions to that rule, such as the purchase or sale of real estate; those few exceptions do require both spouses’ signatures on contracts. But the day to day debts, such as credit cards, do NOT require both spouses to have signed.
Your bankruptcy lawyer will be able to guide you in this regard.
WHO WILL KNOW?
Chapter 7 filings are public records. However, under normal circumstances, no one will know you filed for Chapter 7. The Credit Bureaus will record your filing and it will remain on your credit record for 10 years.
WILL I EVER GET CREDIT AGAIN?
Yes! A number of banks now offer "secured" credit cards where a debtor puts up a certain amount of money (as little as $200) in an account at the bank to guarantee payment. Usually the credit limit is equal to the security given and is increased as the debtor proves his or her ability to pay the debt.
Two years after a discharge, debtors are eligible for mortgage loans on terms as good as those of others, with the same financial profile, who have not filed Chapter 7. The size of your down payment and the stability of your income will be much more important than the fact you filed chapter 7 in the past.
The fact you filed Chapter 7 or 13 stays on your credit report for 10 years. It becomes less significant the further in the past the filing is. The truth is, that you are probably a better credit risk after bankruptcy than before.
WHAT DOES IT COST?
It costs about $ 300 to file a Chapter 7 bankruptcy. A bankruptcy lawyer's fees vary but should be in the range of $ 1,000 to $ 2,000 . Many bankruptcy lawyers will give you a free initial consultation. You can keep the fees down by being well organized and well prepared. You may also be able to keep the fees down by not requiring the lawyer to attend the meeting of creditors with you. Check this with your lawyer. In some states such as Massachusetts, attorneys must attend the Section 341 meeting with the debtors otherwise attorneys are deemed to have NOT represented the debtors. (The 341 Meeting).
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What is Bankruptcy?

While searching the internet and posting blogs, I realized that it has been awhile since this blog dealt with what bankruptcy actually is. To make sure that you are aware of whether or not you should pursue this option, here is some information that I have pulled from various sites (which are linked below) to help you out.

Two Types of Bankruptcy

While there are many types of bankruptcy, here are the two most commonly filed chapters (or types). For a full list of the requirements and your potential eligibility concerning bankruptcy, you can get a free consultation with a bankruptcy attorney, consultant, or a similar expert.

1) What is a chapter 7 bankruptcy? (a more thorough explanation can be found in our September 27th post)

"Under the federal bankruptcy statute, a discharge is a release of the debtor from personal liability for certain specified types of debts. In other words, the debtor is no longer required by law to pay any debts that are discharged. The discharge operates as a permanent order directed to the creditors of the debtor that they refrain from taking any form of collection action on discharged debts, including legal action and communications with the debtor, such as telephone calls, letters, and personal contacts. Although a debtor is relieved of personal liability for all debts that are discharged, a valid lien (i.e., a charge upon specific property to secure payment of a debt) that has not been avoided (i.e., made unenforceable) in the bankruptcy case will remain after the bankruptcy case. Therefore, a secured creditor may enforce the lien to recover the property secured by the lien."

2) What is chapter 13 bankruptcy?

"In a chapter 13 case you file a plan showing how you will pay off some of your past-due and current debts over a period of three to five years. The most important thing about a chapter 13 case is that it will allow you to keep valuable property, like your home or car, even if you are behind on payments or you have equity not covered by your exemptions. Your payments on these secured debts will generally be your regular monthly payments plus some extra amount if you need to get caught up because you are behind when you file."

Experts in this field can be found in your local area or through sites such as http://www.debthelper.com/.

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The Importance Of Finding A First-class Bankruptcy Attorney

Bankruptcy. It’s not a decision anyone comes to lightly. For most people it is, as it ought to be, a last resort, chosen only after other options have been exhausted. Before you even get to point of considering bankruptcy, you’ve probably already been through disappointment, discouragement, worry, and many gut-wrenching bill paying sessions.

Don’t compound your troubles by trying to make decisions about bankruptcy without good expert advice. A reputable Phoenix bankruptcy attorney can review your situation and will honestly let you know whether or not bankruptcy is the best option and if you are likely to qualify. If you are unsure where to begin finding an attorney, you can check with the Maricopa County Bar Association. Their referral service can help you find a competent and reliable Phoenix bankruptcy lawyer. A creditable lawyer will charge you a nominal fee for an initial consultation, at which point you can determine if this is the right person to help you move forward with your bankruptcy filing.

Good advice can help you determine the best way to manage your debt and get your life back on track. It will take time, but eventually your can regain a good credit standing as well, certainly faster than if you continue to miss payments or try to borrow more and more to catch up to your debt obligations. Your bankruptcy lawyer will assess your state of affairs and let you know which form of bankruptcy is the better option: Chapter 7 or Chapter 13. These labels refer to the federal codes regulating bankruptcy, and your personal circumstances, including type of debt and assets you may want to protect, will determine the better choice.

Many people will not even have an option, as you must meet the standards of a means test to qualify for a Phoenix Chapter 7 bankruptcy. Congress passed a sweeping new bankruptcy law in 2005, making it more difficult for people to qualify, and file, for bankruptcy.

The reasoning behind the new bankruptcy regulations was that too many people were carelessly piling on debt and using bankruptcy to get out of their obligations. If you find yourself facing this incredibly difficult decision, you probably think that any member of Congress ought to try walking in your shoes for a while. They might become aware that injury, illness or job loss does not constitute carelessness. When you find yourself in this challenging position, don’t tough it out alone. Find yourself a good Phoenix bankruptcy lawyer to help you guide you through to the light at the end of the tunnel.

Source: Lawyers-Law.com

Avoid Bankruptcy Double Jeopardy

Our guest author for this post is Morlino and Lathea Morris on How to Avoid Bankruptcy Double Jeopardy

As more people remain unemployed and layoffs continue, more and more consumers are finding themselves unable to pay their bills and forced to file Chapter 7 bankruptcy. Although you expect your credit score to take a hit when you file bankruptcy, you shouldn’t be penalized twice. But many consumers who have filed bankruptcy and anxiously applied for financing soon after their bankruptcy is discharged, are shocked to learn they have been denied only because the credit bureaus have failed to do their job. Credit bureaus sometimes don’t update consumer credit reports to show debts that are included in the bankruptcy. A court ruling requires the three credit bureaus - Experian, Equifax and TransUnion to report all debts that are discharged through Chapter 7 bankruptcy to be listed as such on consumer credit reports. Delinquent debts that were discharged through bankruptcy that still appear on your credit report not updated will negatively impact your credit score. Why? These debts will be looked upon as current debts and will appear to a potential lender that you still owe these debts.

A customer who has been using our Complete Credit Management Toolkit to smartly manage his credit after filing Chapter 7 bankruptcy, unfortunately, missed a very important follow-up step. He spent a period of time getting his family finances in order and remaining debt free. But it wasn’t until his mortgage application was denied, that he realized he had failed to take a very important step. Had he reviewed his credit reports after his bankruptcy was discharged, he would have discovered credit cards debts that had been included in the bankruptcy were being inaccurately reported on his credit reports. So despite the fact in reality he was debt free, to the mortgage lender he was carrying more debt than he could afford, and he was delinquent on these accounts as well. The lesson here is this, if you see a bankruptcy in your future, remember, once your bankruptcy is discharged, your job is to follow-up with the credit bureaus to make sure they have done their job. Unresolved errors will negatively impact your credit worthiness. Here are some Smart Credit Moves:

1. Request a copy of all three of your credit reports from the three major credit reporting agencies, TransUnion, Equifax and Experian. You can get them free online at www.annulacreditreport.com or call 877-322-8228.

2. Examine your reports carefully for errors. Pay particular attention to any accounts that were discharged as part of a bankruptcy. Any civil judgments discharged in a bankruptcy should be reported as discharged or included in bankruptcy and show a zero balance. Any other accounts discharged in bankruptcy should be reported as discharged or included in bankruptcy and show a zero balance versus showing charge-off or any other reporting.

3. Report to the credit bureaus any errors uncovered. Send them a copy of the credit report with the errors high-lighted, include any supporting documents from the bankruptcy court.

During these economic times, it’s more important than ever for consumers to review their credit reports for inaccuracies that could cause their credit score to plummet -and interest rates and insurance premiums to spike! It is your responsibility to make certain credit bureaus are doing their job. Be Proactive!

Source: Rosie's Boomer Review

Will You Qualify For Chapter 7 Bankruptcy After Halloween?

If you are a consumer thinking about filing bankruptcy, you will want to figure out whether to file bankruptcy before or after November 1 when changes to the income eligibility guidelines take effect. For some people, the means test changes will help and for others the changes will hurt.

In Kansas, for example, median family income for families of one to three goes up while median family income for four or more person families decreases. In Florida, median family income went down for all family sizes.

The new income figures have been released so you have 21 days until October 31, 2009, to file bankruptcy, if you will be hurt by the new means test guidelines. See your consumer bankruptcy attorney to learn your options.

Congress created an income test for determining eligibility for consumer bankruptcy in the law reform of 2005. The thought was that you should only get as much bankruptcy relief as you need. Creditors complained that people were discharging all their debt in chapter 7 bankruptcy who had the ability to make partial payment in chapter 13 bankruptcy.

A math test was created to determine who can file chapter 7, who must file chapter 13, and how much debt has to be repaid in chapter 13. This test is called the means test. It starts with the median family income for your family size in your state according to data compiled by the U.S. Census Bureau and adjusted by the U.S. Trustee Program. The median income figures are changing for bankruptcy cases filed on or after November 1, 2009.

If your income is less than the family median income for your state, you pass the means test and are eligible for filing either chapter 7 or chapter 13 bankruptcy.

If your income is higher than the family median income for your state, then you keep going by filling out about six pages of information about your expenses and various deductions you are allowed to take to determine if you have disposable income to pay your unsecured creditors (the ones without collateral such as credit cards and medical bills). You could pass the means test at the end of the process if you have no disposable income and qualify for either chapter 7 or chapter 13 bankruptcy. You could even qualify for nominal repayment to general unsecured debts in chapter 13 bankruptcy. Or, if you have disposable income, you may be eligible for a chapter 13 payment plan bankruptcy.

The means test is very complicated. The devil is in the details, as they say, and your consumer bankruptcy attorney can help you determine your options.

Source: Bankruptcy Law Network

Considering Bankruptcy? These guys can help...

Clark & Washington, P.C., Georgia Bankruptcy Law Firm

Valuable information for anyone considering bankruptcy.
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