Monthly Archives: September 2009

Some Answers To Basic Bankruptcy Questions

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If you’re in debt over your head, and your job is not looking too secure, or if you’ve lost your job, filing personal bankruptcy can seem like a way to stop creditors, get rid of your debts, and move on with your life. Here is some basic bankruptcy information which can help explain more about how to file for bankruptcy.

Declaring bankruptcy is a way to clear your financial slate, and start fresh. That is the purpose of federal US Bankruptcy laws. There are bankruptcy courts around the United States, and you would file in a district near you. Usually your involvement with a bankruptcy judge will be fairly limited. For example if you file for chapter 7 bankruptcy, you likely won’t have to appear in court and you won’t see the bankruptcy judge except in a case where an objection is raised within the case by a creditor or other party.

For chapter 13 debtors, you may only need to appear in front of the bankruptcy judge one time, at a plan confirmation hearing. Normally, the only proceeding where you must appear as a debtor is at the meeting of creditors, and this meeting usually is held at the local office of the U.S. bankruptcy trustee. The debtor attends this meeting so that creditors can question the debtor about debts and property, but note that normally most creditors do not even appear.

There are six basic types of bankruptcy cases in the Bankruptcy Code, but for individuals, the two major types are Chapter 7 and Chapter 13.

Chapter 7, which is called Liquidation, is a type of bankruptcy where the trustee will take over your assets within your estate, sell them for cash, and then distribute the cash to your creditors. In some cases, you have a right to keep certain exempt property and also there are rights of secured creditors who can take back the asset. In nearly all chapter 7 bankruptcy cases for individuals, you will receive a discharge that releases you from any future personal liability for your dischargeable debts. Normally, you will receive a discharge within a few months after your petition is originally filed. With the new bankruptcy laws in the Bankruptcy Abuse Prevention and Consumer Protection Act enacted in 2005 there will be a “means test” which determines whether you qualify for relief under Chapter 7. For example, if your income is higher than certain limits, you may not qualify for bankruptcy under Chapter 7.

Chapter 13 is called Adjustment of Debts of an Individual With Regular Income, and is designed for individuals who have a regular source of income. Many times, a debtor prefers Chapter 13 to Chapter 7 because it will allow you to keep certain valuable assets, such your home, and because it allows you to create a repayment plan to repay creditors over time, usually three to five years.

Chapter 13 is also available to consumer debtors who don’t qualify for chapter 7 based on the means test. There is a confirmation hearing where the bankruptcy court will either approve or disapprove your repayment plan, depending on whether it meets the Bankruptcy Code’s requirements. Chapter 13 is different from chapter 7 in that as a chapter 13 debtor you will usually retain possession of the property within the estate, and you continue to make payments to creditors through the trustee, based on your expected income throughout the life of the plan. Unlike chapter 7, you do not get an immediate discharge of your debts. Instead, you must complete the payments as required by the plan before you can receive a discharge. In the mean time, while making payments you are protected from lawsuits, garnishments, and other creditor actions.

Filing personal bankruptcy under Chapter 7 bankruptcy laws or Chapter 13 bankruptcy laws requires detailed information. It’s best to seek the help of a bankruptcy lawyer or credit counselor who can provide professional advice and bankruptcy information about all of your options.

How To Choose A Bankruptcy Lawyer

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If you are one of the millions of Americans considering filing for bankruptcy, choosing a bankruptcy lawyer is a key consideration. The cost of bankruptcy can be high, and frankly shopping around for a bankruptcy law firm will not necessarily mean you will find someone affordable. Bankruptcy can be expensive, and you need to be prepare to pay the cost of bankruptcy if that’s the route you choose.

Some of the traditional ways to find bankruptcy lawyers is to ask someone you know and trust. Just as with doctors, personal experience with a lawyer is the main way to discover a professional’s good and bad qualities. If you know someone who recently went through filing bankruptcy, you might consider talking to their lawyer as well.

You can also find lawyers through local bar associations. These are the professional groups in your town or city that many or most lawyers join. Often, the association will maintain a free referral service, and sometimes lawyers also offer a free or low cast initial consultation through these services.

If you don’t have access to either of these methods, you can find a bankruptcy lawyer by checking your local yellow pages or even online. It’s hard to figure out what is the difference between lawyers from advertising only. But you can choose to meet with several lawyers, and as said earlier, most bankruptcy lawyers will at least offer some time with you during an initial meeting for free or low cost. See who gives you the best feeling, who seems to have the best feel for your questions. Just like with a doctor, choose the person who makes you feel most comfortable.

When it comes to finding a lawyer, you can also do some additional research to find out more about their skills. Many lawyers join professional groups that focus just on their area of expertise. This is so for bankruptcy practices. The bankruptcy laws are topics of constant interpretation, so your lawyer should be a member of such a professional group. You can also see if your chosen attorney has written about bankruptcy law for professional publications. Often you can find these kinds of credentials on their website, but there are also directories like Martindale Hubbell on the web that you can review.

When it comes to costs, whether you file for bankruptcy Chapter 7 or bankruptcy Chapter 13, you will pay a minimum of probably $2,000. Some lawyers allow you to pay this in installments, and will only file your case upon payment in full. The costs can go higher too if you have a complicated personal estate, meaning lots of assets or debts to be sorted out. Your bankruptcy attorney should tell you up front what he or she estimates your cost of bankruptcy should be. Don’t hire anyone who tells you they don’t know how high your costs can go, they can at least estimate.

You need to have a lawyer who will help provide the right bankruptcy information for you. So, beware of any lawyer who immediately assumes you need to file bankruptcy and starts down that path, without exploring with you all of your bankruptcy alternatives. You always have the option not to file, and your lawyer should explain, based on your personal circumstances, what that could mean for you.

What Affordable Bankruptcy Options Are Out There?

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When you first decide to file for bankruptcy and start calling bankruptcy lawyers, you’ll find out right away that filing for bankruptcy is not cheap. It starts at about $2,000 for legal fees, plus there can be hundreds of dollars in court filing fees. If you’re already broke and planning to file bankruptcy, where do you come up with a couple thousand dollars? You do have some bankruptcy options to choose which can help you reduce the cost of bankruptcy or avoid bankrtupcy altogether.

To start with, the costs of bankruptcy include lawyer fees, court filing costs, and any other extras the lawyer needs to charge, for example copies, or overnight packages to the court. When you first meet with your bankruptcy attorney, make sure you understand what those extra expenses are, and what are fees and what are the court costs.

After seeing the huge price tag, you might be inclined to find out where you can find a cheap bankruptcy option, or even if you can prepare a do it yourself bankruptcy. It’s not likely you can find a discount on bankruptcy fees from lawyers, as the process is pretty paperwork intensive, and there is generally a rate that most lawyer will charge. So if someone offers to do it for you cheaply, you should be concerned about whether your paperwork will be done correctly and on time.

As for a do it yourself bankruptcy, it has never really been easy, since there is so much documentation to be done for each case. LAwyers have software programs that they can use to enter all your financial data and spit out the forms. When you are doing it yourself, you will have to type all the forms by hand, and know which form is which. The process also got a little more complicated after the bankruptcy laws changed in 2005. Now, you have other requirements, such as going to credit counseling prior to filing, that you need to be aware of. However, if you feel up to the challenge, there are some books on How to File for Chapter 7 Bankruptcy which will help walk you through the process of filing bankruptcy yourself.

However, there are other bankruptcy options which include not filing at all. Avoiding bankruptcy is the cheapest bankruptcy alternative there is! How do you decide when to file bankruptcy? Bankruptcy can help most when you have so many debts that your total debt is greater than your annual salary. For example, someone making $50,000 per year, who has $60,000 in debt, is going to have trouble paying that back. It’s possible though if you get on payment plans with your creditors.

If you are employed, filing bankruptcy today is more likely to require that you file Chapter 13, which allows you to keep some property and pay your debts over three to five years. In other words, it’s not a slam dunk that you will get all of your debt wiped clean. This could be a good thing if you are trying to keep your house out of foreclosure, for example. If you are likely to have to file Chapter 13, why not try to work with your creditors to create a debt repayment plan before you spend thousands on a bankruptcy lawyer?

If however you do not have a regular income, a bankruptcy Chapter 7 filing would allow you to discharge, or wipe away, most of your debt. Without income, though, you might also consider just not filing bankruptcy either, unless you have assets you want to try to protect. For example, if you have a car loan, and you file bankruptcy, unless you reaffirm that debt, or agree to pay, you will lose your car in bankruptcy. could you instead work out a revised payment plan with the lender? The same is true for your home; if you do not have the ability to pay the mortgage then either in Chapter 7 or Chapter 13, and can’t work to refinance your mortage, you may be forced to sell your house.

Finally, you want to consider your credit and bankrtupcy. If you file bankruptcy, most lenders will consider that a very big red flag for many years to come. It stays on your credit report for 10 years. Unlike just past due accounts, bankruptcy is more serious, and even if your credit score rises, the mere fact that there is a bankruptcy on your record could lead many lenders to just turn you down for credit.

Keep in mind that most bankruptcy lawyers will meet with you in an initial meeting for free or low cost. You should talk with a professional before deciding what to do, and learn if you have any alternatives to bankruptcy that will not cost thousands of dollars.

Can Bankruptcy Stop Foreclosure?

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So many Americans today are facing financial trouble, and that means they are in danger of losing the one thing they worked so hard for – their home.  Many times, when facing foreclosure, a homeowner may consider bankruptcy, as there is question whether bankruptcy can stop a foreclosure.  Here are some points to think about.

First, there are two kinds of bankruptcy: Chapter 7 and Chapter 13. Chapter 7 bankruptcy mans you do not have the money to pay your debts, and your assets are sold to pay your debt, and your unsecured debt is discharged.  In a Chapter 7 bankruptcy, you are in danger of losing your home., While your mortgage lender is temporarily stopped from proceeding with foreclosure steps, eventually the bankruptcy court will probably allow them to proceed to sell the house, if you can’t make the mortgage payment.s  Sometimes, having some time to put off the foreclosure can be a reason to file for personal bankruptcy, but  it’s not necessarily going to save your home.

Then there is Chapter 13 bankruptcy. This type of filing requires you to set up a repayment plan for your debt. The court will oversee your plan and approve it, and under Chapter 13 you can probably keep making payments on your home and keep it. However without that plan, or if you can’t make payments, you will likely lose your home. 

In just a very few states, such as Florida, the state bankruptcy law will provide that you can keep your primary residence. Some high profile bankruptcies, like that of O.J. Simpson, are probably responsible for the myth that you can always keep your home in bankruptcy.  But this is not the case in most states, and it will depend on your home state’s law. BEst to check with a bankruptcy attorney to be sure.

You might be stuck in pre-foreclosure hell, where your lender is starting or is threatening to start proceedings, you are desperate and trying to find out if you qualify for the new government programs. You want to do everything you can to keep your house out of foreclosure including file for bankruptcy.  Or, you might be worried about forfeiting a car loan in bankruptcy, especially if it’s your only way to get to work to earn money to pay your bills.  When you’re in bad financial shape, bankruptcy starts to look like a life saver. But remember – bankruptcy will cost you upwards of $2,000 for legal and court fees, as well as make it possible take longer to qualify for credit for some time.  Some people do not think that’s a bad thing, since often bad credit habits got you here in the first place! 

Your credit score after bankruptcy might not be much worse than before, but your bankruptcy credit score and your foreclosure credit score can have different results.  Bankruptcy lasts longer on your credit, and can be harder to overcome when getting new credit – lenders won’t just look at your score, but also the fact that you filed for bankruptcy.

If you can’t get your mortgage lender to work with you on revising your mortgage and loan repayment, then you  may have to consider bankruptcy. But remember that it is not a guarantee of keeping your home.

You really should talk to both a bankruptcy attorney and a credit counseling agency, which you will have to do before filing bankruptcy anyway.  Calculate how your income, expenses and debt will impact your future financial decisions. You may have to choose between saving your home and protecting your credit score.  In such a case, whether your bankruptcy credit score or your foreclosure credit score is more important will be up to you.