In these unpredictable economic times, bankruptcy is a topic that’s on the minds of many people. If you’re struggling with overdue car payments, a burdensome home loan, mounting credit card debt, or constant harassment from debt collectors, bankruptcy might be a solution to alleviate these financial pressures.
As an attorney, I often come across the same questions from the individuals I meet: “Should I file for bankruptcy? Will it actually help me? Will I lose all my belongings?” Let’s address some of the most frequently asked questions:
What is Bankruptcy?
Bankruptcy is a legal process that offers individuals who are unable to repay their debts a fresh financial start. When you file for bankruptcy, it immediately puts a stop to creditors’ attempts to collect debts from you, at least until the debts are properly addressed according to the law.
How Can Bankruptcy Help Me?
Bankruptcy can potentially:
-Eliminate the legal obligation to repay most or all of your debts, giving you a fresh financial start.
-Halt foreclosure proceedings on your home, providing an opportunity to catch up on missed payments (although mortgages and other property liens still require payment).
-Prevent repossession of your car or other property, or force the creditor to return repossessed items.
-Stop wage garnishment, debt collection harassment, and similar actions by creditors.
-Restore or prevent termination of utility services.
-Allow you to challenge fraudulent claims by creditors or claims that demand more than you actually owe.
What Can’t Bankruptcy Do?
However, it’s important to note that bankruptcy cannot:
-Eliminate certain rights of “secured” creditors, who hold collateral (such as a mortgage) for loans. -While you can make payments to secured creditors through bankruptcy, you generally need to continue paying the debt to keep the collateral.
-Discharge debts with special treatment under the bankruptcy law, including child support, alimony, most student loans, court restitution orders, criminal fines, and most taxes.
-Protect cosigners on your debts. If someone cosigned a loan for you and you discharge the loan in bankruptcy, the cosigner may still be responsible for repaying the debt.
-Discharge debts incurred after filing for bankruptcy.
Will Bankruptcy Eliminate All My Debts?
Bankruptcy will generally wipe out most of your debts, but there are exceptions. Debts that usually cannot be discharged include child support or alimony payments, most government fines and penalties, certain taxes, student loans (unless you can prove “undue hardship”), debts not listed on your bankruptcy petition, and debts resulting from fraudulent or malicious actions.
Will I Have to Go to Court?
In most bankruptcy cases, you only need to attend a meeting called the “meeting of creditors.” It’s a simple procedure where the bankruptcy trustee and any attending creditors may ask you a few questions about your financial situation and bankruptcy forms. Creditors rarely attend this meeting. In some instances, you might have to appear at a hearing if complications arise or if you dispute a debt. Chapter 13 cases may also require a hearing for the judge to approve your repayment plan.
Will Bankruptcy Affect My Credit?
Filing for bankruptcy will appear on your credit record for ten years from the date your case is filed. However, since bankruptcy eliminates your old debts, you may be in a better position to pay your current bills and potentially obtain new credit.
It’s crucial to ensure that debts discharged in bankruptcy are correctly listed on your credit report with a zero balance. Any debts incorrectly reported as owing money can negatively impact your credit score and make it more challenging or costly to obtain credit. It’s advisable to review your credit report 3 to 6 months after your bankruptcy discharge and dispute any incorrect information with credit reporting agencies.
Should I Use a Document Preparer?
Using document preparation services, also known as “typing services” or “paralegal services,” is not recommended. These services are usually offered by non-lawyers who charge a fee to prepare bankruptcy forms. However, problems often arise because non-lawyers cannot provide advice on complex bankruptcy cases and usually offer no assistance once the bankruptcy process begins. Furthermore, there are many untrustworthy operators in this field who provide incorrect advice and defraud consumers.
How Do I Find a Bankruptcy Attorney?
When seeking a bankruptcy attorney, remember that the person advertising the cheapest rate may not necessarily be the best option. Many excellent bankruptcy lawyers don’t even advertise. During your initial meeting with a bankruptcy attorney, be prepared to answer questions such as:
-What debts are causing you the most trouble?
-What significant assets do you have?
-How did your debts arise, and are they secured?
-Is any action imminent, such as foreclosure, repossession, wage garnishment, or utility service termination?
-What are your goals in filing for bankruptcy?
The Bankruptcy Department at Davis Miles McGuire Gardner PLLC offers bankruptcy consultations where we can discuss these questions, explore your options (whether bankruptcy-related or otherwise), and provide guidance tailored to your situation. To schedule a consultation, simply call (480) 733-6800 and ask to speak with a bankruptcy attorney.