How can I face filing bankruptcy? I feel ashamed.

Edited-Photo-iStock_000001692734SmallcopyFor most of my clients the realization that they might need to file bankruptcy happens slowly, after much deliberation. The fact is people want to pay their bills. But over a lifetime things happen. Filing bankruptcy should be reserved for those once or twice in a lifetime situations when it is absolutely necessary.

The bankruptcy laws are meant to give a person a fresh start. The alternative is to remain trapped beneath an ever increasing tangle of debts. The founding fathers of our country did not want this. They wrote into our Constitution that the Congress shall write the bankruptcy laws. What could be more American than that?

I have seen the relief that people feel after their first office visit. At last, they have made a decision to do something about a troubling situation. Someone is on their side, who can advise them about the pro’s and con’s of bankruptcy relief.

The bankruptcy laws do not fit everybody’s case, and more times that I can count, I have advised people to take a different path. But bankruptcy has the virtue of being Federal law.  The creditor who wilfully disregards the bankruptcy stay does so at extreme risk.

I see my job as helping people, who are in trouble. Making an appointment with a bankruptcy attorney is the an important first step toward taking control of an unmanageable situation.

What happens in the Meeting of Creditors? What should I expect?

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Within 2 weeks of your filing Chapter 7 or a Chapter 13 bankruptcy you will receive a notice in the mail scheduling your “Meeting of Creditors.” You are required to attend. At the meeting you will be sworn under oath and examined by your case Trustee. Your attorney will be sitting next to you and your creditors have the right to ask you questions, however, in the vast majority of cases the creditors do not show up.

The agenda of the Meeting of Creditors includes the following:

You must identify yourself by presenting a picture ID and Social Security card. Tip: As you approach the Trustee place you ID and SS card on the desk when you sit down.

After you are sworn in:

You must affirm that you read your bankruptcy petition, signed it and that the information it contains is true and correct.

You must affirm that you listed all of your assets and your debts.

You must affirm that you read the “Bankruptcy Information Sheet.” This is part of your Bankruptcy Petition that informs you of the various chapters you can file under, the effect and consequences of receiving a bankruptcy discharge and warns you about bankruptcy fraud. Your Attorney will have given you a copy.

At this point the Trustee may ask additional questions to find out if there are non-exempt assets of sufficient value to justify his administering them for the benefit of your unsecured creditors.

Your attorney will have provided the Trustee with a copy of your latest Income Tax Return and Bank Statements covering the date you filed bankruptcy. The Trustee may have questions about them or may have questions about inheritance property, the value of your automobiles or your home.

The Trustee will then call out to see if there are any of your Creditors in the room who wish to question you. Usually, there are none.

Then the Trustee will “announce his intentions,” that is whether he or she will disclaim, provisionally disclaim, or administer any interest in your property.

With that the Trustee concludes the meeting. If the Trustee asks for more documents he or she will give you 10 days to provide them. Afterwards, your attorney will be available to answer any questions you may have about the meeting.

Your examination by the Trustee usually takes no longer than 5 minutes and if the Trustee is not running late you should be free to go within a half hour of the scheduled time of your meeting.

 

What papers should I bring when I see my attorney?

JohnMenszer-8123For your initial visit with your bankruptcy attorney you may not need to bring any papers because he or she will be getting the general overview of your financial picture. That said, to file your Chapter 7 or Chapter 13 bankruptcy the following documents will eventually be required.

I’ve listed them by category.

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What is a reaffirmation agreement? Do I need one?

What is a reaffirmation? Do I need one?

A creditor may contact your bankruptcy attorney about signing a reaffirmation agreement. This can happen with any secured debt, but is usually seen in the JohnMenszer-1030665 context of vehicle loans. The reason for the creditor’s request is this. In a Chapter 7 bankruptcy the debtor’s personal obligation to repay his or her debts is extinguished in the discharge. This isn’t good for the secured lender because if the debtor fails to make future car payments the bankruptcy discharge prevents the creditor from going after the debtor. Without the reaffirmation agreement the lender could still repossess the automobile, but frequently the wholesale value of the vehicle is worth less than the outstanding amount of the loan. The creditor’s solution is a reaffirmation agreement.

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Should I file a Chapter 7 or a Chapter 13 bankruptcy?

_1130795 copyIn the Eastern District of Louisiana, half of the cases filed are Chapter 7s and half are Chapter 13s. Whether you file a Chapter 7 or a Chapter 13 case will depend on your goals for the bankruptcy and whether the law allows you to file a Chapter 7. Under the Bankruptcy Reform Act of 2005, Congress felt that too many debtors who had the means to pay their creditors were taking advantage of the Chapter 7 liquidation. Under the current law there are income limitations, the “Means Test”, which force certain higher income families to file a Chapter 13, when they would rather file a Chapter 7 bankruptcy.

I generally recommend looking at a Chapter 7 first. A Chapter 7 is cheaper, faster and imposes less restrictions on the debtors. A typical Chapter 7 will be over in four to five months, whereas a Chapter 13 lasts from 36 to 60 months. During that time the Chapter 13 debtors will not be able to use credit cards, will have to turn over each year’s income tax rebates and to make payments each month to the bankruptcy trustee.

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Do I need an attorney to file bankruptcy? Can I do it myself?

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The short answer is you don’t absolutely need an attorney: There are forms for filing bankruptcy on the internet. You can file your own bankruptcy case with the clerk’s office. You can legally represent yourself at meeting and hearings. But you shouldn’t file without an attorney. Why? Because almost everyone who files their own bankruptcy case gets bad results. Without exception, I have seen unrepresented cases get into trouble with the clerk’s office or the trustee’s office which results in deficiency notices, re-scheduled meetings and ultimately results in either their cases being dismissed or else their trying to bring in an attorney later. It may be tempting to think that one can save the cost of hiring an attorney by doing it yourself, it is not.

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Luxury items you cannot afford to keep. Can filing bankruptcy help?

We can’t afford to keep our RV, our third car and our condo.  How can filing bankruptcy help us?

When times are good it is a common to load up on debts that later becomes unaffordable and then paying for the  luxury items may imperil a person’s ability to afford necessities.  The good news is that filing bankruptcy may help solve these problem..  You may already know that unsecured debts like credit cards, payday loans, and bills are dischargeable by filing Chapter 7 and Chapter 13 bankruptcies.  What about secured debts like automobiles and houses?

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I’m self-employed and want to file bankruptcy. What do I need to know?

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Whether you file a Chapter 7 or a Chapter 13 bankruptcy you will be required to produce your “payment advices” for the six month period prior to the month you file your bankruptcy. Payment advices is the bankruptcy court’s term of art for documents that show your income. For those who receive a paycheck it means the check stub that shows their gross and net income. But you are self-employed, you don’t receive a check stub.

You will be required to produce Profit and Loss Statements (P&L) for each of the six months prior to the month your bankruptcy case is filed. If you use Quick books you can easily generate P&L statements for the court.

But what if you do not use Quickbooks. For example, say you are a self-employed gardener, you get paid in cash, and your profit is what you have left over after you pay your helpers, your gas and your tools. You can still file bankruptcy. You are going to have to reconstruct the financial picture of each month to the best of your ability. Hopefully, you kept good notes about the addresses you worked and how much you were paid. And you kept receipts.

You will be asked to produce bank statements, usually for the three months prior to and including the month in which you file bankruptcy.

In a Chapter 7 bankruptcy you will be required to produce your last year’s tax return. In a Chapter 13 bankruptcy you will also be required to attest to the fact that you filed the prior four years of tax returns.

The bankruptcy trustee may look at the P&L statements, the tax return and the bank statements to see that they are consistent. The bankruptcy trustee can also request more information.

When you file bankruptcy you will be signing a sworn statement that the information you provide is true and correct subject to the penalty of perjury. So it is important that you give your attorney accurate and complete information. In this way you case will progress smoothly through the court system. Your attorney is there to help you work through them if problems arise.