Bankruptcy can help you to stop creditor harassment, relieve the stress of overwhelming debt, and obtain a fresh start.
Deciding whether to file a Bankruptcy Petition is a serious legal decision which should only be made after careful consultation and reflection. If you decide to file, you must prepare thoroughly, so that your filings are complete and accurate in all respects.
The first choice you have to make is what kind of Bankruptcy to file.
Federal law provides several options, and each kind of Bankruptcy is referenced by the number of the chapter of the United States Bankruptcy Code which governs it.
CHAPTER 7, the so-called liquidation proceeding, is usually rather straightforward, provided the debtor has been properly counseled and is well prepared. A Chapter 7 Trustee is appointed to examine your Petition, Schedules, and Statement of Financial Affairs, with a view toward determining whether there are any non-exempt assets he can sell to pay your creditors. Chapter 7 is the type of Bankruptcy commonly filed by individuals with debts that are primarily consumer obligations. Chapter 7 is the least expensive Bankruptcy option in terms of legal fees incurred, and the entire Chapter 7 proceeding is usually concluded in a relatively short period of time.
CHAPTER 13 is available to individuals with regular income (from, for example, wages, social security, pension payments). In Chapter 13, a percentage of your debts is paid back in monthly installments pursuant to a Plan over a period of three to five years, and a discharge of the debts is not granted until all of the payments have been made. A Chapter 13 Trustee is appointed to administer your case. Chapter 13 is often chosen by individuals whose incomes are too high to file a Chapter 7, who have valuable assets that they might not be able to keep if they filed Chapter 7, who want to cure mortgage defaults, or who have filed a prior Chapter 7 too recently to file another Chapter 7. There are many other reasons why it may be preferable to file Chapter 13 rather than Chapter 7 in certain circumstances, and the choice of whether to file Chapter 7 or Chapter 13 should ONLY be made AFTER CONSULTATION WITH A QUALIFIED BANKRUPTCY ATTORNEY. The legal fees for filing a Chapter 13 are higher than those charged for a Chapter 7, but lawyers often agree to have a portion of their fees paid in monthly installments under the Chapter 13 Plan.
Whether you file a Chapter 7 or a Chapter 13, the Petition, Schedules, Statement of Financial Affairs, and other required documents are prepared using information you provide concerning assets and liabilities, income and expenses, and the complete state of your financial affairs. It is absolutely imperative that all of the information you submit is truthful and complete. Bankruptcy fraud is a federal crime which is vigorously prosecuted by federal law enforcement officials, and you can go to federal prison if convicted of Bankruptcy crimes. If you are honest and forthright and follow the legal advice of a competent Bankruptcy attorney, you should have nothing to worry about.
When the Petition and Schedules are filed, certain property owned by you will be claimed by you as “exempt,” meaning that it cannot be used by the Chapter 7 Trustee to pay your creditors. An understanding of the exemptions available to you is crucial. The exemptions available to you depend, in large part, upon the law of the state in which you reside (or have resided for a specified period of time). There are federal Bankruptcy exemptions provided for by federal statute, but each state can vote to “opt out” of the federal exemptions and instead provide that its own state law exemptions will apply to its residents who file Bankruptcy. In some states you can use either the federal Bankruptcy exemptions or that state’s exemptions. There are also federal nonbankruptcy exemptions which can be used even if you are using state exemptions. Bear in mind that you cannot summarily move to a state and upon arrival avail yourself of its exemptions. You must satisfy certain residency requirements to qualify for a state’s exemptions. Make sure you understand which exemptions you qualify for based on the duration of your residence before you file. Failure to understand completely the available exemptions before you file, or failure to claim the proper exemptions, can have serious negative consequences, including unnecessary loss of property. There is no substitute for consulting a competent lawyer concerning exemptions.
A Bankruptcy Discharge means that all of the debts listed on your Schedules have been wiped out, except for certain kinds of debts that are found to be non-dischargeable. In deciding whether to file Bankruptcy and, if so, which Chapter to file under, the dischargeability of your debts must be considered carefully. How much of your total debt consists of non-dischargeable debts? Do you have significant debts that can be discharged in Chapter 13 but not in Chapter 7 ? A qualified Bankruptcy lawyer can advise you concerning the vital issue of dischargeability.
As you contemplate the prospect of filing a Bankruptcy Petition, bear in mind that the timing of the filing of the Bankruptcy Petition can be critical. When the Petition is filed can affect a range of issues, including the dischargeability of certain debts and the availability of certain exemptions. Making the decision of when to file involves the consideration of numerous legal issues, and if you make the wrong decision you may lose valuable property rights.
You may ask: Should I hire a lawyer, do it myself, or hire a non-attorney bankruptcy preparer? Be aware that preparing a Bankruptcy filing involves the exercise of legal judgment, and if mistakes are made you can pay dearly for them. ONLY a LAWYER can give you legal advice concerning the exemptions to which you are entitled, the timing of filing the Petition, the possibility of discharging certain categories of debts, the chapter of the Bankruptcy Code under which you should file, and many other critical issues. A non-attorney bankruptcy preparer CANNOT provide you with any of the legal advice you need. So, unless you feel confident that you have a thorough knowledge of all of the legal issues relating to filing Bankruptcy, you should hire an experienced Bankruptcy lawyer. Only a competent lawyer can advise you concerning the numerous pitfalls and nuances of the Bankruptcy process.
Michael Laucello was formerly a member of the Bankruptcy Department of one of New York State’s largest law firms. He will give you the benefit of his extensive Bankruptcy experience in a thorough, unhurried consultation.
CALL Mr. Laucello at (315) 853-8399 or 1 (800) 283-5297 (free call nationwide) to schedule a FREE Bankruptcy consultation.