What is bankruptcy?
Bankruptcy is a federal legal process whereby a person can end his debts and so get a fresh start.
What can bankruptcy do for you?
- End (“discharge”) your legal obligation to pay most or all of your debts.
- Stop foreclosure on your house or mobile home and let you catch up on missed payments (though bankruptcy does not necessarily eliminate mortgages and other liens on your property without payment).
- Prevent repossession of a car or other property, or force the creditor to return the property even after it has been repossessed.
- Stop acts by creditors to collect or attempt to collect debts from you. This includes creditor harassment. As soon as you retain us, you can refer all future creditor calls to your bankruptcy attorney. Their calling you after that is a violation of federal law, for which we can sue them for you. (Nice to have the shoe on the other foot!)
- Keep or restore utility service.
- Allow you to challenge fraudulent or exaggerated claims.
What can bankruptcy not do?
- You can force a secured creditor (one who has taken a lien on property as collateral for a loan, like a car loan or a home mortgage) to take payments over time, or eliminate your obligation to pay any further money on the debt if you return the property. But usually you cannot keep secured property without continuing to make payments on the debt.
- Discharge debts in certain special categories, like child support, alimony, court-ordered restitution, criminal fines, most student loans, and most taxes.
- Protect cosigners on a debt, who may still have to repay all or part of the loan.
- Discharge debts that you incur after filing for bankruptcy.
What kinds of bankruptcy cases are available?
There are four types. Chapter 11 is generally used by businesses, and by a few individuals with very large debts. Chapter 12 is reserved for family farmers and fishermen.
Most persons filing for bankruptcy will file under chapter 7 or chapter 13, which are summarized as follows:
Chapter 7 (“Straight Bankruptcy” or “Liquidation”)
Basically, a chapter 7 bankruptcy wipes out your debts in exchange for your giving up certain property, which is sold and the proceeds distributed to creditors (though in most cases you will be able to keep all of your property, that which is “exempt”).
A chapter 7 bankruptcy probably will not work if you want to keep such property as a home or a car and are behind in the mortgage or car loan payments, or if your income is above a specified level (“the median family income”). In such instances, the best solution will likely be a bankruptcy under . . .
Chapter 13 (“Reorganization”)
In chapter 13, you file a three to five year “plan” to repay part of your debt. It allows you to keep valuable property, like a home or car, which might otherwise be lost, if you can make minimum legally required payments (usually at least as much as your regular monthly payments on these loans, plus an amount to catch up on the delinquency). Chapter 13 may be proper if you are in danger of losing your home because of money problems; if you are behind on debt payments, but could catch up if given some time; or if you have valuable property that is nonexempt, but you could pay creditors from your income over time. In a chapter 13 case, you must have enough income to make such periodic payments, and to pay your other living expenses.
What must be done before filing for bankruptcy?
You must receive budget and credit counseling from an approved credit counseling agency within 180 days before you file your bankruptcy case. It is advisable to meet with a good bankruptcy lawyer (like us) before receiving the required credit counseling. Unlike a credit counselor, an attorney can give you legal advice, as to whether or not bankruptcy is your best solution, and, if not, review with you other available options. As well, a lawyer can recommend a good credit counselor.
Isn’t filing for bankruptcy unethical?
No. Most persons who file for bankruptcy need to do so and have no realistic alternative. If you do not need bankruptcy or there are better options for you, we will let you know. That is part of our job. Conversely, if bankruptcy is right for you, you owe it to yourself, to your family, and, for that matter, to the community, to take lawful and appropriate action to get out from under crushing debt, so that you can get your life back on productive track. This is the purpose of the bankruptcy law.
When is filing for bankruptcy advisable?
If you’re being sued, and you want to stop the lawsuit and prevent the creditors from taking your home or garnishing your wages; if your home is being foreclosed on, or you’re being evicted, or your car is about to be repossessed, and you want to save your home or car; if you have significant debt that you just can’t seem to pay down, and you don’t want to spend the next few decades of your life making payments on it, only to end up with the same or even greater debt—if you want a fresh start—bankruptcy may be indicated.
What will I lose by filing for bankruptcy?
Usually, just your debts. As a rule, in bankruptcy we can protect your assets — your home, your car, your wages, and your personal belongings — even if the value of your property exceeds the amount of your debts.
In fact, if you don’t file for bankruptcy, creditors can sue you and reach your bank accounts, your income, and your property, possibly preventing you from making timely payments on your mortgage, your rent, or your motor vehicle, putting at risk your very survival.
How will bankruptcy affect my ability to get credit?
Although a bankruptcy on your record is, in itself, a negative, creditors extend credit based on their perception of your ability to repay your debts. Obtaining credit may actually become easier after bankruptcy, because your financial health is better. Potential creditors know that you are on the road to financial recovery (you have no, or less, current debt), and they know that you cannot get bankruptcy relief again for some time. In addition, after your bankruptcy discharge, there are actions you can take to rebuild your credit. We can help you with this.
How do I find a bankruptcy lawyer?
First of all, it is preferable to have a bankruptcy lawyer than a mere document preparation service, also known as “typing services” or “paralegal services.” Problems with such services are common, in that non-lawyers cannot give legal advice, let alone legal advice on difficult bankruptcy cases, and they offer no service once the case has begun. Also, this field is rife with shady operators, who give bad advice and defraud consumers.
In choosing a lawyer, bear in mind this rule of thumb: The easier the lawyer’s telephone number is to remember, the better the lawyer. But seriously, the best way to find a trustworthy bankruptcy attorney is to seek recommendations from family, friends, or other members of the community, especially from an attorney you know and respect.
If you are unable to find a bankruptcy lawyer via referral, there is no substitute for shopping around. Talk to a number of bankruptcy lawyers. Remember that the person advertising the lowest rate is not only not the best, but may not even be good enough. And carefully read retainers and other papers an attorney asks you to sign. Don’t hire one who will not agree to represent you throughout the case. Hire a lawyer who will respond to your individual situation. The attorney should not be too busy to meet with you personally and answer your questions. We’re here to help you. We’ll be happy to meet with you. Call us.