Bankruptcy filings
The US Bankruptcy code received a facelift in late 2005 and ever since bankruptcy proceedings have become rife with complications. The new law passed in October last year was intended for a purpose. It was targeted to reduce abusive use of the bankruptcy code which debtors sought as an easy alternative to a life specked with overwhelming debts. It has become more important than ever to present a case of bankruptcy filings, impeccably furnished with supporting documents to the appealing court. A case can be dismissed if found wanting for some of those essential details that the court deems as crucial.
Preparation and timing are the dual necessities for filing bankruptcy. If there are potent signals prompting an impending bankruptcy such as, falling behind mortgage or loan repayments, defaulting credit card payments, overdrawing on homes equity, having enormous student loan debt, maxing out credit cards, or inadequate or no medical coverage then it is likely that you are heading towards one. When personal efforts at reigning in broken finances are of no help it is prudent to start looking out for a lawyer who can succor you through this. However, it is advisable to seek help sooner if you are faced with other court charges such as mortgage foreclosure, car repossession, or wage attachment that are discernible threats to loss of property. Ideally, a person who foresees bankruptcy as a strong possibility must plan a course of action six months prior to bankruptcy filings.
Avoiding common mistakes in bankruptcy:
Running up credit cards or taking cash-out advances: The American Bankruptcy Institute advises against the use of credit cards before filing bankruptcy. Certain debts charged on credit cards 90 days prior to filing are non-dischargeable. Moreover it is considered fraud under the bankruptcy law to continue to make purchases on credit cards in spite of ones knowledge that the debt wont be discharged. Using credit cards recklessly before bankruptcy filings may leave you under obligation towards those charges.
Ignoring pending lawsuits: It is a grievous mistake to underplay the importance of ongoing court proceedings before filing bankruptcy. Until your bankruptcy case is filed and the court issues a stay order it is your responsibility to fight for rights and guard your property from liens.
Transferring property: Bankruptcy can be unnerving. Some people in a clumsy effort to protect their assets as home, car, cash, jewelry give them away to a friend or family member. A bankruptcy trustee may be able to reverse the transfer if it was intended to hide assets from the creditors. Meanwhile such fears can be baseless as exemptions under the bankruptcy law may automatically protect your home, cars etc.
Liquidating retirement account: It is unadvisable to cash in on your retirement fund to pay off your debts or to attempt reduce assets before filing bankruptcy. You may still be able to discharge debts and keep your retirement fund secure for future purposes.
Withholding information from your lawyer: Concealing details can outrage your attorney. Under the new law, attorneys are held against higher accountability standards and any misrepresentation of client information may result in them being heavily penalized. Besides loss of assets, case dismissal and criminal charges could be some of the added setbacks. Confiding and confessing to your attorney in this regard could pay off.
Preparation for filing:
Find an attorney:
The convoluted paths of a highly involved case as bankruptcy, often has people bewildered. Affording a bankruptcy lawyer can be an expensive enterprise but it is worth the expense. It is often recommended to start looking for a lawyer a month in advance of filing bankruptcy.
Getting the right attorney to help you through troubled times is paramount. In order to ensure this it is highly recommended to look for attorneys certified by the American Bankruptcy Institute. Check for his experience in the specific field. Winding up with a whack or a novice is the next bad thing after bankruptcy.
Observing attorneys in action can give a fair idea of the legal process in bankruptcy and also how these attorneys work. At the court, mark out the locals that specialize in this form of law. Discuss with other debtors in court and share experiences. It might help you determine who can provide the best representation of your case at court.
Asking questions to find out who best suits your needs may also be helpful. Questions revolving around an attorney's experience, expertise and accessibility are vital. Evasive attitudes are obvious red flags and be warned to abstain from such lawyers.
Do not settle for the cheapest lawyer even though you are on a shoe-string budget. Explore your area for an idea in prevalent rates. Contact your local bar association to determine whether a proposed fee is justified. In cases where affording a lawyer is out of financial bounds check with a legal aid bureau or bar association for pro bono service or service for free.
Gather financial documents:
The new law has tightened the loopholes by requiring mountains of paperwork to curb abusive practices that were rampant under the old bankruptcy code. Under the new law a case can be dismissed if found wanting for documents and information. So an organized pile of crucial documents not only smoothes out an intricately detailed process but also saves time and money. Here is a checklist of documents and information needed:
A list of assets, debts and lawsuits.
Addresses and account numbers of unpaid bills and accounts sent to collection agencies
Names and addresses of all your creditors
Paperwork reflecting amounts and identities of those who owe you
Bank statements from the past three months
Pay stubs or unemployment checks from the last six months
A divorce decree, if applicable
Cancelled checks sent to creditors
Court order for child support and alimony, if applicable
History of correspondence with creditors
Tax returns from the past three years
Titles for vehicles.
Experts recommend filers to start amassing documents two weeks in advance from the day of filing.
Pre-filing credit counseling:
The new law has made participation in pre-filing credit
counseling mandatory. It must be accomplished within six months prior to filing bankruptcy. A debtor can seek assistance from a government-approved credit counseling agency in his or her district for help in this regard. The list of credit counseling agencies can be procured from places as the federal bankruptcy court and the U.S. Trustees office.
Credit counseling sessions are usually of 90 minute duration. Counseling is offered face to face, over the phone or via the internet. The debtor is awarded a certificate upon completion of this program which must be included with the aforementioned paperwork.
Experts suggest seeking counsel from a bankruptcy credit counselor before visiting a bankruptcy attorney. That can open the debtor's eyes to other options besides bankruptcy which some of the profit-seeking bankruptcy attorneys are most inclined to suggest. There is nothing like eluding bankruptcy if alternatives can succeed in dispelling your financial hardships.
Bankruptcy costs:
The bankruptcy process can be expensive. It is very crucial for bankruptcy filers to have a realistic picture about expenses in filing bankruptcy. Costs include the attorney's fee, the bankruptcy filings fee, and now credit counseling fee. Charges may vary from state to state.
A Chapter 7 filing can cost you as low as $800 to as high as $1,500. Costs for filing a Chapter 13 bankruptcy are set by the local bankruptcy court and can range from $1,500 to $3,500.
Besides a court filing fee for a Chapter 7 bankruptcy filing is $299; a Chapter 13 filing is $274.
Bankruptcy counseling services also come for a cost. Each of these courses - the pre-filing credit counseling and the pre-discharge financial education course - costs $50. The debtor must attend these courses regardless of his inability to pay.
Additional fees can mount overall filing expenses. Any last minute calls for changes or alterations are subject to extra charges.
Bankruptcy can be strenuous but planning an approach can take away the additional pricks that commonly accompany such litigation procedures. Chart out a course of action ahead of time and watch yourself breeze through it.
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