Should I Declare Bankruptcy?
I hear that question more and more these days. Let’s first discuss what is Bankruptcy.
Bankruptcy is a term for a legal process to help payback or get rid of debt. The key is that it is legal.
There are a few forms of Bankruptcy out there. Law changes over the past few years have made it so that not all options are available to everyone. There are really two popular versions. Chapter 7 bankruptcy is where you ask the court to get rid of your debt and void your contracts. Chapter 13 bankruptcy is where you have the ability and would like to repay some of the debt you owe.
There is a finacial test that determines if you are eligible for a Chapter 7. You may have to switch to a 13 if you make to much money.
So what is the process to declare bankruptcy?
1) Find a good lawyer. You can declare bankruptcy yourself, I don’t recommend it unless you’ve been through it before. Finding a good lawyer is probably the hardest part. There are so many bankruptcy’s going on now. Find one that says they have done many cases with your exact situation.
2) You fill out a finacial statement for your attorney. You provide bills and list your creditors along with your tax returns for the last couple years.
3) Your attorney will fill out the court paper work. Once that is done verify and sign the papers. Most attorneys file electronicly now. So you should get your case number pretty quick. (You need that sooner than later.)
4) The court will send you and your creditors a letter saying when the trustee meeting is. These meetings sometimes have different names (first meeting of creditors, 341 hearing). Your creditors will also get a paper to verify the claim you made that you owe them money. If they forget to return it….to bad for them.
5) You go to the hearing with the trustee. Your creditors are invited but they generally do not attend. The trustee verifies who you are. They then walk through your paper work. They will ask questions if they have any. The trustee doesn’t ask how you got in the situation or what you did with the money. They just ask questions about your paperwork.
6) The trustee will let your lawyer know after the meeting if there are any issues or objections. Sometimes they may say that in the prior meeting to get it ironed out right then.
7) If there are no objections it will go to the bankruptcy judge 30 days later. You normally do not have to attened. Usually if there is an objection that cannot be solved then you may have to go. That is not normally the case. If it is a chapter 7 you will get a discharge and its all over. If it is a chapter 13 your plan will be confirmed.
8. On a chapter 13, you will get a discharge once all your payments have been made.
Here are some common questions:
Can you keep your cars? Depends. Can you afford them? Are they sports cars with an excessive price tag?
Can you keep your house? Depends again. Can you afford it? Chapter 13 will stop a foreclosure and get things back on the right track. Chapter 7 usually is a keep or loose. Payment plans are generally not an option in chapter 7.
I guess here might be a better way to explain it. The trustee helps keep the process fair to you and your creditors. If you have an average house with normal things, your pretty much don’t have to worry. If you can still afford your house and car you’ll probably get to keep them. If your living a millionaire life style and just want to erase your debt, then you may need to worry.
Do not be afraid of bankruptcy. It is a painless process. Usually people are stressed to begin with when they deiced about bankruptcy, so it seems worse. If your getting calls all day long from bill collectors, or are behind on your mortgage and the mortgage company wont help. Bankruptcy can help all of that.
The second you file your case, bill collectors have to stop calling. If you just got foreclosure papers, bankruptcy can stop them as long as the sheriffs sale hasn’t happened. A lawyer can better explain all your options and how they apply to you. Do not be scared to pick up the phone and call for help.
I am not a lawyer. This is all my opinion and observation from seeing the process from different vantage points. So always seek out an attorney. Get a good one.