Oh My Aching Debts » bankruptcy

Do I Need An Attorney to File Bankruptcy

cindys — Tue, 28 Apr 2009 10:41:13 +0000

Legally you are not required to hire an attorney to declare bankruptcy, however, you will probably want one. While it is possible to represent yourself in bankruptcy court, the laws are complicated. A missing form or an incorrect calculation, could get your case thrown out of court and you could lose all or some of the protection that bankruptcy offers.

Complicated New Bankruptcy Laws

The new bankruptcy laws were passed in 2005 and were meant to curb bankruptcy abuse. Over the last 25 years, there has been an increase in the numbers of bankruptcy and this costs everyone. The old laws did not require that you qualify for bankruptcy and it was believed that people who could afford to pay back their debts were declaring bankruptcy to avoid them.

The new laws require that you qualify for Chapter 7 bankruptcy. If after applying certain tests to your income and bills, you do not ‘pass’, you will have to file a Chapter 13 or reorganization. There is also a consumer credit education requirement. You are also required to take a credit counseling class prior to filing and another afterwards. These are available online but they do need to be approved or they do not qualify.

Online Or Self Bankruptcy Filing Services

There are several online filing services. I am not going to mention them here because I do not know enough about them to recommend them. I have searched for references but have been unable to locate any that are not on their website.

Most of these services are forms services. They basically gather the information online and transfer it to the bankruptcy forms. This would certainly help you in getting the information organized but these services cannot give you advice about whether you can claim a debt or whether certain property is exempt.

While bankruptcy is declared and filed in Federal court, every state has laws which may override the Federal laws. On top of that, each bankruptcy court has local or standing rules which affect what can and cannot be done in that particular court.

The Bottom Line

The bottom line is that you are not required to have an attorney to file bankruptcy. The truth is that you will be far better off investing the money in a qualified bankruptcy attorney. I figure that I have made enough mistakes in my financial life, I do not want to make another one. If you are considering declaring bankruptcy, I would recommend that you find the best bankruptcy attorney that you can.

This post is part of a series of posts on debt relief and bankruptcy. If you have enjoyed this article, please see related articles below for more information on Bankruptcy.

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Do I Qualify For Bankruptcy?

cindys — Fri, 17 Apr 2009 11:48:33 +0000

There are two different types of bankruptcy that private individuals can take; Chapter 7 and Chapter 13. With the new laws, you actually have to qualify to take Chapter 7 bankruptcy. The laws were intended to require people who can afford to make payments toward their debt do so. The laws have succeeded in making the cost of bankruptcy much higher as there is more paperwork for the attorneys to do.

So how do you know if you qualify for bankruptcy?

The test is actually not difficult if you are low income but can be more complicated if you are above it. It is based on your income over the past 6 months. If your income is higher than the median income in your state, you may have to take Chapter 13 bankruptcy. You can take this test at Nolo.com which computes the IRS allowable expenses to determine if people over the median income can file for Chapter 7.

What is the difference between Chapter 7 bankruptcy and Chapter 13 bankruptcy?

The types of bankruptcy are generally and commonly known by the chapter of the bankruptcy code that relates to that specific type. The types most commonly used by individuals are:

Chapter 7 is what most people mean when they talk about bankruptcy. It is a liquidation or termination of all unsecured debts and is the preferred method of declaring bankruptcy. If you have secured loans (mortgages, car loans) you will have to continue paying them in order to keep them. Chapter 7 bankruptcy remains on your credit report for 10 years.

Chapter 13 is basically a repayment plan. It is a reorganization of debts and is meant for people who have a stable income. It sets up a payment plan over 3 to 5 years where you pay off a portion of your debt. It allows people who want to keep their secured property to do so if they can make the payments. Chapter 13 bankruptcy remains on your credit report for 7 years.

As I have said before, bankruptcy should be a last resort but it can help you save your house or your car. It can relieve some of the stress if you lose your job. If you are considering bankruptcy, consult a qualified attorney in your state.

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Considering Bankruptcy? – Debt Relief Series

cindys — Mon, 13 Apr 2009 12:27:29 +0000

With unemployment rates at a 25 year high, more people are falling behind in their debt payments, most through no fault of their own. When faced with escalating collection calls and declining incomes, what are your options? Before you consider bankruptcy, you might want to look at some other options.

Refinance: When so much of the news is about foreclosures, declining values and bank failures, this might not seem like a smart thing to do but if you have decent credit and any income at all, the banks might be willing to do a mortgage streamline. This can save money on the monthly payments and could be the difference between keeping and losing your home.

Debt Negotiation: Write your creditors a letter and tell them your circumstances. Ask for a renegotiation of your debts. In many cases, the creditor will reduce interest and monthly payments to allow you to keep your account current. Keep accurate records of all communications with creditors or collection agencies.

Debt Management Companies: There are many choices when it comes to debt management companies. The theory behind them is simple. You hire a Debt Management Company to negotiate a payment plan with your creditors and then you pay the DMC a monthly payment. They pay your creditors and everyone is happy, right? Not necessarily! There have been many DMCs that have charged exhorbitant fees, failed to work out an agreement with creditors and their customers have ended up in worse shape than when they started. The FTC has published must read article on Debt Management Companies. This outlines the questions to ask and some of the things to watch out for when you are considering hiring one.

Second Mortgage: If you have equity in your home, you might be able to qualify for a second mortgage. You can use this to consolidate your debts and usually get a better interest rate with a lower payment. Make sure that you can afford the payment. There is no reason to trade one delinquent bill for another. Also make sure that there is no prepayment penalty so that you can pay the loan off sooner.

Bankruptcy is still an option but it should be a last resort. It will affect your credit and it is emotionally draining but it can provide relief from the constant stress of not being able to pay your bills. The next article in this series will be on the types of bankruptcy and the qualifications for each.

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5 Questions You Need To Ask if You Are Considering Bankruptcy

cindys — Sun, 27 Jan 2008 19:01:00 +0000

After being advised to speak with an attorney about bankruptcy, I have been doing some research into it. I am afraid that I have more questions than answers at this point. I have contacted an attorney who sent me a very thick envelope full of forms to fill out and a link to the CCCS Inc website to obtain a Credit Counseling certificate. I am not in any way advocating bankruptcy. I go into this hating every minute of it but I, at least, am going to go to the appointment and learn about the options.

Questions that you need to ask:

1. Is your income above or below the Median Income for your state? This will affect whether you can file a Chapter 7 or Chapter 13 bankruptcy.

If your income is above the Median Income, you might only be able to file Chapter 13 which will require you to pay your creditors what you can afford over 3-5 years
If your income is below the Median Income, you usually have the choice of Chapter 7 which liquidates all your debts and Chapter 13.

2. What is the Homestead Exemption for your state? The federal government sets forth Homestead Exemptions but each state has the option of accepting the federal amounts, setting their own or offering a choice between the two. There are some states that have much higher exemptions and some that are much less. In Virginia, the exemption is only $5000 whereas in Texas, it is almost unlimited.

3. Are you prepared to make a total accounting of your income, liabilities and expenses as well as your assets? While I knew that this would be necessary, I guess it did not realize the depth required. You will have to list all income, expected income in the future, all debts including personal debts to family or friends, and all your expenses. You will also have to make a list of all property including furniture, clothing, jewelry, etc and assign a replacement value.

4. Have you tried to work out a reasonable repayment schedule with your creditors? Call your creditors and try to work out a hardship schedule with your creditors. They may offer reduced interest and payments for a period of time to enable you to get back on your feet. This is a much better solution in the long run for both you and them. In my case, only one of my creditors has been willing to do this so far.

5. Have you looked into Credit Counseling and Debt Management Service? Be careful here. There are a quite a few out there and most are “for profit” organizations which means that they operate to make money. There are a few that are non-profit organizations such as Consumer Credit Counseling Service. These may offer a better way to pay off your debts than declaring bankruptcy.

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Financial Advice that I Did Not Want to Hear

cindys — Sun, 20 Jan 2008 21:02:00 +0000

Last week my financial advisor recommended that I consider and look into declaring bankruptcy. They don’t think that I will be able to climb out of this hole unless I do. It makes me sad to think about it. I feel like I am giving up and that doesn’t come easy for me but I guess that maybe I should give it some serious thought as I can’t see any other way and if the credit card companies take legal action and garnish what little income I have right now, I won’t be able to afford to eat or buy gas to go to work.

Even with the increase in business this week and assuming that it will continue for a few weeks, I am not quite able to pay the things like fuel oil, mortgage and groceries. If it continues to increase, I am looking at a few months to be able to actually start making regular payments again.

If I have not been posting as much as usual, it’s because I am struggling with this decision and feel like whatever I write is not so much educational as whining. I hate to whine.

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