Bankruptcy: Know when to make use of this legal weapon

Bankruptcy can be a way out for those individuals or businesses who can no longer pay their creditors. It is a federal law based judicial course of action by which a debtor can get respite from his/her debts. However, in some bankruptcy cases, your assets can be used to pay off your debts.

Though federal courts have exclusive jurisdiction over bankruptcy cases, certain cases are dependent upon state laws where claims and exemptions are coupled.

Table of contents

• What are the types of consumer bankruptcy?
• Should you hire a bankruptcy attorney?
• How much does bankruptcy filing cost?
• What property is exempt in bankruptcy?
• Who chiefly manages your bankruptcy case?
• How long does bankruptcy last?
• How bankruptcy affects your credit rating?
• What is BAPCPA?

Jul 22, 2012 - Service review by client BH from CO. website

"Priscilla has always been great to work with. She answers calls and questions immediately. I am on Disability and have low income and lot's of debt. I finally decided that Bankruptcy (chapter 13) is the only way I can ever get my life back on track. The only reason I stayed as long as I did with you is because of Priscilla. She deserves to be acknowledged for her hard work and compassion. I will miss her."
Rating: 4.8 out of 5 based on 150 reviews.

The Federal Reserve's research shows record high household debt if compared to disposable income, and which is badly threatening the financial health of American households and could lead to immense household delinquencies and bankruptcy filings.

Source: www.abiworld.org

Additional Resources

• Chapter 7 Vs Chapter 13
• Recent Changes to Bankruptcy Law
• how to file for bankruptcy
• Bankruptcy Filing Fees
• Example of fee credit
• Means Test
• The Automatic Stay
• The 341-Meeting
• How to rebuild your credit score after bankruptcy?
• Faqs on Bankruptcy
• Bankruptcy Terminologies

What are the types of consumer bankruptcy?

When it comes to filing bankruptcy, you come across several options. Choosing the right one for your particular situation is always very difficult. An experienced attorney can help you with your bankruptcy filing after analyzing the type of debt, your disposable income and your assets.
To begin with, the two most common types of consumer bankruptcy that you can consider are Chapter 7 and Chapter 13.

Chapter 7: Straight Bankruptcy/Liquidation: Chapter 7 is basic liquidation bankruptcy for individuals and businesses. This is also referred as straight bankruptcy as this is the simplest and fastest form of bankruptcy available.

Chapter 13: Adjustment of an Individual's Debts: Chapter 13 bankruptcy is a court determined repayment plan for individuals having a steady source of income. In this kind of bankruptcy, a debtor usually repays some or all of his/her debt.

Should you hire a bankruptcy attorney?

There is no law that asks you to hire an attorney for bankruptcy help when file for bankruptcy. In fact, 10%-15% of people who file bankruptcy represent themselves. However, if you think of representing yourself in the court, you should have a good understanding of the bankruptcy proceedings, as after the enactment of BAPCPA in 2005, the filings have become much more complicated and time taking. Even if you make a minor mistake while filing out the paperwork, it might result in dismissal of your case.

It is only an experienced bankruptcy attorney who properly knows things like how to list your assets, how to value your assets, what exemptions to use to make sure your property is protected, how to calculate your income, what documents to include when you file your petition, and what documents you need to provide the trustee before the meeting with creditors. Therefore, an experienced attorney can always help you make the most out of your bankruptcy.

In order to simplify what benefits you may get by hiring an experienced bankruptcy attorney, we have prepared a small comparison below:

	Hire Bankruptcy Attorney	Do It Yourself (DIY)
Free initial consultation
Protection from creditor harassment
Appropriate legal advice (asset protection, valuation of assets, listing exempted property, etc..)
Protection from mistakes while preparing bankruptcy forms
Absolute peace of mind

How much does bankruptcy filing cost?

Though bankruptcy is a possible way to shed off financial burdens to the maximum extent possible, there is nothing called affordable bankruptcy. In addition to the court fees, you need to pay for the attorney fees (in case you hire). In Chapter 7, you have to make a payment of $200.00. While in Chapter 13 bankruptcy, the court fee is $185.00. However, you needn’t pay anything to get your case filed with the bankruptcy court. Rather, you have to pay the fee sometime later after the filing.

What property is exempt in bankruptcy?

Under the federal bankruptcy law, certain properties are exempt in a bankruptcy case. While some others are allowed if taken into consideration individual state law. However, still each case is determined after analyzing the debtor’s individual circumstances. Exemption of property in bankruptcy is a major and intricate issue and this is why getting help of a bankruptcy attorney is always recommended. Again, before you list your assets and request for exemption, a pre bankruptcy counseling with an experienced bankruptcy attorney is significant. Take a look at the US State Bankruptcy Laws to see what exemptions are available to you.

Who chiefly manages your bankruptcy case?

Though filing for bankruptcy is a court based procedure and one needs to file with a federal bankruptcy court to get going with it, much of the procedure is administrative and completely managed by a court appointed trustee. The debtor’s presence is only required during the ‘creditor’s meeting’ or ‘341 Meeting’ where the creditors raise questions about the debtor’s debts and assets.

In Chapter 7 bankruptcy, it is the duty of the trustee to preserve the value of the estate, maximize the return for the creditors, determining if the debtor has any hidden assets or committed any kind of bankruptcy fraud, and liquidating any non-exempt assets to pay off the creditors. While in Chapter 13 filing, the trustee is responsible for receiving the debtor’s monthly payments and distributing those among the creditors in appropriate proportion.

How long does bankruptcy last?

The length of time that a bankruptcy proceeding may take completely depends upon the type of bankruptcy that a petitioner selects. If you are opting for Chapter 7 or ‘liquidation’ bankruptcy, it’d take around four to six months to complete. However, if opting for Chapter 13 bankruptcy, the completion period is relatively higher. As per federal law, the maximum period that is allowed for the completion of a Chapter 13 plan is anything between 36-60 months.

Does bankruptcy affect your credit rating?

Bankruptcy filing can have disastrous effects on your credit score and will stay there in your credit report for long 10 years. This is why it is always advisable to seek professional bankruptcy advice before you file. However, if you are thinking of filing for bankruptcy, it’s obvious that you are far behind on your payments, and your credit score is already is a bad shape. If you have late payments and unpaid debts, it’ll stay there on your credit file for 7 long years. Nevertheless, if you file bankruptcy, it doesn’t necessarily mean that you won’t be able to acquire credit within or after the 10 years period.

What is Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA)?

The Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), which came into effect from October 17, 2005, vastly amended the U.S. Bankruptcy Code. This act made numerous changes to the bankruptcy law, thus making it much more complex and unattainable than ever before. BAPCPA has drastically changed the bankruptcy process and rules by introducing some complex pre bankruptcy hurdles like credit counseling, financial management, tax returns, and most importantly - the means test.

US State Bankruptcy Laws