The Abcs of Bankruptcy

If your are tired of the constant phone calls of creditors and you are doing everything in your power to pay your bills but the income is no longer enough, or unexpected medical bills keep filling up your mailbox, or you’ve lost your job; you may be one of many who will have to declare bankruptcy.

This can be overwhelming to anyone. Don’t become discouraged, you will get past this. Hang in there and do whatever you have to do to get relief and bring some peace back into your life. You know you are a good and responsible person but sometimes life throws you a curve ball you can’t hit, and it leaves you no other option.

If you find yourself in this position, you should seek out a credit counseling business or a lawyer referral service. If the credit counseling service can not help you, they can provide you with the names of some bankruptcy lawyers. These initial consults with the lawyers are usually free. You may want to establish that before making your appointment. Once you decide who you want to represent you, they will help you decide which type of bankruptcy to declare. This is the best route to take in order to assure that all of your paperwork is done correctly and in a timely manner. It takes a lot of the burden off of you.

There are different types of bankruptcies: Chapter 7 is the most common one used. It is a total liquidation of your debts. You usually do not have to repay anyone. Chapter 13, is where you define who will be repaid and how those payments will be made.

You will need to put an initial amount of the fee down to begin the process, and then the full amount has to be paid before the actual filing. You will have to meet several times with your lawyer; this is usually all included in the fee. Bankruptcy laws vary from state to state. Your lawyer will explain these laws to you.

Prepare yourself for a lot of paper work. You will be given a worksheet consisting of several pages. This is where you will begin to walk through your home and list all of your assets. You will be asked to put a value on these items and then what you feel would be a fair market resale value. Your lawyer will advise you of what percentage can be used to determine this value. Please keep in mind, that giving false information about your assets is a federal offence. Take your time and if possible, have someone you trust to help you do this.

You will have to list all of your income from several months prior. This includes tax returns, tips, or any monies that you received in addition to your wages.

You will need to list secured debts such as your vehicles, mortgages and secured loans. These are usually the ones you want to keep and continue paying for, but they have to be accounted for in your paperwork.

You will then need to list your unsecured debts such as credit cards, types of loans, medical bills and any other debts you have. There are a few debts that you can not declare on bankruptcy. These are back taxes, child support and student loans.

You will have to provide correct mailing addresses for each of your creditors and the payoff balances. The addresses on your statements are usually different from the direct contact address you need to give your lawyer. If these addresses are not listed on your statements or contracts, you will need to call them in order to get this information. Remember to get the name of the person you speak with along with the date and time.

Once you file, you will be given a case number. Your creditors will receive a document called, a Notice of Commencement, and it puts into effect what is called The Automatic Stay. Once your creditors receive this notice they can no longer contact you. THIS IS WHY IT IS SO IMPORTANT THAT YOU PROVIDE THE CORRECT CONTACT INFORMATION OF YOUR CREDITORS TO YOUR LAWYER. All communication now has to be done through your lawyer. If a creditor has not received this notice and they call you; give them your case number and date of filing. Some may ask for the name and contact number of your lawyer.

If you file a Chapter 7 you will be assigned a trustee. This person represents the U.S. Bankruptcy Court and has the responsibility to ensure them that you were honest and forthright in providing all of you assets.

Sometimes a walk through is done of your home. If your assets go beyond what is allow by the court for you to keep, then the trustee will oversee the selling of these assets. If your assets do not go beyond what is allowed; then you will be allowed to keep them.

After a period of time has elapsed since your filing, you will appear in Bankruptcy Court for a Meeting of Creditors. Your lawyer will be there to represent you. If the court determines that you have no assets to sell, then your petition is “discharged”, meaning you are no longer accountable for these debts.

Bankruptcy stays on your credit file for about eight to ten years. During this time is when you will strive to rebuild your credit and to redirect your financial future.