Here we are Part 5 of the series – Should I Go Bankrupt – and we can only hope this has made perfectly good sense to you but what if it hasn’t? Now what will you do? Well my best advice is if you are still struggling with the information we gave you, please send us a message and let us know what you would like to see clarified. However if it is not in the way we presented it and you just find this information overwhelming due to your own situation, then understanding the law around bankruptcy might be a great place to start. This is where legal counsel can help but before we end this series I think it is only fair that we touch upon some of the rules and laws.

Now we need to be clear this sort of stuff can be boring so we will attempt to keep you awake through the lecture. With all the legal forms and jargon, understanding bankruptcy law can be very frustrating. One of the primary laws that was passed in the United States in 2004 is the Bankruptcy Abuse Prevention and Consumer Protection Act -the law actually went into effect October 17, 2005 and since then has caused quite a stir in the Financial community.

One of the main objectives of this law was to reduce losses for credit card companies and the savings these companies would be rewarded as a result, was to be passed on to the customer of the companies through lower fees and lower interest rates – unfortunately this did not happen. The credit card companies seen record breaking profit margins and kept the wealth for themselves.

Some of the major changes to this law were:

- If you were filing for bankruptcy after October 17th, 2005 you would have to of filed tax returns for four years in a row prior to insolvency.
- Dis-chargeable debts, or those debts where personal liability is taken away by the courts, is more difficult to come by.
- Mandatory credit counseling session – Here is a quote from Wikipedia – “Credit counseling and debtor education requirements: Another major change to the law enacted by BAPCPA deals with eligibility. Section 109(h) provides that a debtor will no longer be eligible to file under either chapter 7 or chapter 13 unless within 180 days prior to filing the debtor received an “individual or group briefing” from a nonprofit budget and credit counseling agency approved by the United States trustee or bankruptcy administrator.”

Besides making it more difficult to qualify for Chapter 7 bankruptcy, or complete protection, the law imposes stricter rules and budgets on Chapter 13 debtors. Chapter 13 filing is that which allows you to keep some assets once proving you have limited debt and a steady income. This is preferable by those of you who are experiencing major financial difficulty but still have a means of paying for some assets.

The court will setup a repayment schedule and budget that allows for full repayment of mortgages or cars within a five year period. Should it be that repayment is simply not an option then you would have to file for Chapter 7 proceedings. Those of you who wish to file under Chapter 7 must meet certain eligibility requirements under a “means test.” (resource – Click Here )

Exempt items in a bankruptcy hearing are determined by the court and are usually items that are a necessity, such as a car to get to work. As well, the courts will distribute debts into two categories: non-dischargeable and dischargeable debt. To take it one step further non-dischargeable debts fall into two categories:
- non-dischargeable due to wrongful conduct on the debtor
- non-dischargeable due to public policy.

Wrongful misconduct by the debtor could mean theft or laundering money while public policy could include child support payment or court related judgements. When it comes to filing for financial protection, that particular protection is only extended so far. For the most part you will always be required to still pay your taxes, student loans, alimony, child support, court fees and fines imposed due to criminal acts. This is the place where many are misled in the Chapter 7 proceedings, as it is often referred to as “a fresh start”.

Another major point which needs to be made is that a record of bankruptcy will now stay on your credit report for approximately ten years in the United States. This makes it extremely difficult to become eligible for any type of credit, even a credit card, but especially a car loan or a mortgage for a house. Some creditors are willing to offer limited credit to bankrupt individuals however the interest rates and finance charges are usually through the roof. This makes it that much more difficult for you to get back on your feet.

Remember that bankruptcy is the last resort to get that fresh start you desperately need but it is not the best solution so we don’t want to come off as glorifying the process therefore you need to know the disadvantages along with the advantages. We are now concluding our series on “Should I go bankrupt” therefore, for specific bankruptcy law questions it is best to contact legal advice or a financial professional. Thank you for being a part of this series – we will continue to bring you up to date financial information which you can be assured will have a positive impact on your financial health.

In the past three parts of this 5 part series we have been talking around the question – “Should I Go Bankrupt” and throughout these messages we have suggested hiring a lawyer is a great idea if you can afford to. The thing is going through bankruptcy alone is very challenging, you can only ask so many friends and family, who by the way mean well but most, really haven’t a clue what they are talking about and will only steer you into trouble. (not intentionally)

You may think it is best to save a bit of money and do this whole thing on your own, but really when it comes to understanding the procedures, there’s no better voice than that of a lawyer. Here in part 4 we want to spend a bit of time talking about the right time to hire legal counsel.

What is the purpose of a bankruptcy attorney?

The main purpose is to help an individual or business go through the legal procedures for filing efficiently and with as few errors as possible. (Remember Lawyers are human and can make the odd error- hopefully not too many ) They act as your agent, working for you and keeping your best interest in the forefront, ensuring your claim is handled with care and accuracy.  In most state legal systems, you are not required to have a bankruptcy advisor for the legal proceedings however as most of these legal professionals specialize in financial law, it is not a bad idea to hire someone reputable.

Now if you already have a wealth of knowledge about the legal system and this is a cut and dry case, then maybe you would be ok without anyone helping you. But really most of you don’t have specialized knowledge in this area or about which chapter you should be filing under. You need to have the correct information and knowledge about which chapter you are to file under, otherwise you could be wasting a ton of valuable time.

One thing which you do need to keep in mind is, not all bankruptcy lawyers specialize in the same type of cases, so it is very important to find an attorney who can help you with the type of financial challenges you are facing. Some of these professionals work specifically with businesses, while others work solely with individuals. You need to be careful when choosing your advisor as you will want to find someone who is knowledgeable in the areas you need expert advise.

Should you feel that hiring someone is the right move for you, ask your local courthouse for names of legal professionals in your area and maybe get their opinion on the reputation of those individuals or better yet ask around your community if it makes sense to do so in your area, of course friends and relatives may know someone who can help.

Now if all else fails, take advantage of technology and research cases in your area to see which legal counsel most often represent individuals. This really is a great way to find out who the best lawyers may be, to help you with your financial needs. Thanks for joining us here today in Part 4 – Should I go Bankrupt – We will hopefully see you in Part 5.

The nagging question will continue on throughout the bankruptcy process as it is never easy for any of you emotionally, financially or even legally – Should I go bankrupt?
There is no easy answer as it depends on so many factors as to what your situation is – some of you will be more hopeful than others. The entire process will take alot out of you one way or another. One of the most difficult parts other than deciding what to do, is filling out the forms.

The forms are like a foreign language to most of you and most times are easier to understand when you have legal counsel to help you review them. For those of you filing in the United States here is a quick overview and understanding of the forms required. More than anything this will be a generalized overview to give you an understanding of the meaning of the forms, in the interest of time we will not be able to be specific on forms which are related to specialized proceedings. That type of coaching will have to be done in a one on one setting.

If you are an individual who is filing in the United States, most likely you will be filling out bankruptcy forms specifically dealing with either Chapter 7 or Chapter 13. Even as a business you may be filing for Chapter 7 or Chapter 13, although you may be filing for Chapter 11 as well. In any case, there are separate forms that need to be filled out with each chapter stating the intention to file under that particular chapter.

You will be required to fill out the following forms:

• Statement of Petition
• A list of all creditors
• Personal Income
• Personal Property
• Declaration of Penalty Under Perjury

If you are confused about which forms to fill out, your lawyer can help you with that process or another option is not to be afraid to ask the court system for guidance. Forms are fairly easy to identify as they are all labeled with a capital ‘B’ followed by a number. For example, B1 is the Voluntary Petition, B3A and B3B are applications to either waive the filing fee or pay in installments, and B4 is a list of the twenty largest unsecured claims. Even exhibits to these forms are labeled in this way, so form B1D, the Statement Of Compliance With Credit Counseling Requirement, is understood as exhibit D or form B1, the Voluntary Petition.

Form B9 is where the different types of bankruptcy forms begin to branch out. The main differences between the two types of consumer bankruptcy is that, under Chapter 7, all nonexempt assets are liquidated and any debts that remain unpaid are discharged. The first four versions of B9 indicate whether you are a corporation or individual, and whether you have any assets eligible for liquidation. The next four divisions of Form B9 involve filings for Chapter 11 reorganization, and depend on whether you are an individual or corporation. The remaining three B9 iterations are reserved for the less common Chapter 12 and 13 filings.

Even though asking the court for guidance is a great idea it may not be the most efficient way to handle things as the court system may be overwhelmed with other cases which they feel are more important making it very difficult to find answers to your questions about the related forms. In this case, you can always consult with legal advice, or even a financial service organization who can help you understand the paperwork better.

If you don’t plan to hire a lawyer to handle your case, it still can be worth the time to consult them regarding the paperwork. You may even want to consider an online service to aid in the process, as they can answer any questions you have and guide you through the entire process.

Thanks for reviewing today’s message – Should I Go Bankrupt – we hope to see you in Part 4. If you find these messages helpful please send us a note to let us know and if you want to provide other feedback related to our messages we welcome all responses.

Welcome to Part 2 of a 5 part series on Bankruptcy. Not only is bankruptcy a scary thought, but alot of you may not understand the process, or that legal counsel is recommended, so you have help sifting through the terminology and paperwork. You need to get it right the first time around so you can avoid making mistakes and allowing you to have a successful outcome of the entire process. You need to armed with the proper questions so you can get an answer to your overall concern of “Should I Go Bankrupt“, most of you aren’t sure of which questions you need to ask your lawyer. In this message we are going to focus on the kinds of questions you need to ask your legal counsel so you get the most out of your situation.

What questions should you ask your lawyer or trustee?

There are five (5) very important questions you need to ask counsel or your trustee before going into these proceedings:

1] What type of bankruptcy is right for you?

In the United States there are eight (8) different types of bankruptcy filing available. The two most popular filings are Chapter 13 and Chapter 7, however there are a variety of different details and rules which apply to each type of filing. A reputable and good attorney will be able to sift through your financial picture and recommend the best type for your situation.

In Canada there are several different types of filings with four (4) being the most popular which are:

• Personal Bankruptcy
• Debt Settlement
• Consumer Proposal
• Debt-Management Plans

Your trustee or lawyer should be well versed in the plan which best suits your needs therefore providing you with a successful outcome.

2] How do you file?

Where you file will be directly related to where your personal address is, assuming it is personal – this means you will file in the State or Province of your residence. If you plan to remain represented by an attorney or by a trustee, then their legal staff can help to prepare all of the related documentation in the proper State of Province. There will be a variety of forms to be completed and questions to be answered – make sure you hire reputable professionals.

3] What type of fees will you owe?

This is a very important piece of information which you need to get an accurate answer to, and while some legal firms charge an hourly fee and some charge a flat rate fee, you need to shop around for two things:

- The best price
- But also Quality Service – the lowest price is not always the best option.

There are court fees to consider, administrative charges for processing the paperwork, and in the US sometimes Chapter 7 fees to pay a trustee in charge of your account. In Canada all of these fees are combined into one charge, on average the fee paid to a Trustee is around $1700, depending on your situation this could be lower or a bit higher.

4] Where do you go to file your bankruptcy claim?

As we have mentioned in previous messages, each case is handled by the federal court system in the United States. This means that you will need to give your paperwork to the State courthouse. Your legal firm should be able to file this for you. In Canada, your trustee will take care of filing with the courts on your behalf.

5] What happens once you file your claim with the proper authorities?

Immediately after filing, the court system will send out notification to creditors of the pending client (this would be you). From this point forward, creditors are considered to have a “restraining order” against them therefore are not allowed to contact you while you are in bankruptcy proceedings. Depending on the type of hearing scheduled, deadlines will be set for each creditor which allows them to file a claim against you. Once they have their claim filed you and your creditor will be required to attend a hearing. Of course should you still have the nagging question “Should I go bankrupt“, then you need to be advised on this by counsel depending on the type of bankruptcy filed, so it is very important to be in contact with your legal adviser who can readily answer these questions.

To date we have discussed the need of creating a budget and how you can use the budget as a tool to pay off debt. For some of you once you have finished creating your budget you will realize how challenging your financial situation is. In one of our post we talked about making sure you do whatever possible to get your debts paid in full, and one of the strategies you should never use or at the very least put your effort forward to avoid is bankruptcy. Sometimes your financial health has deteriorated to the point where you have no choice but to throw in the towel. It doesn’t mean you are a bad person, so make sure you go easy on yourself as it is not the end of the world. The biggest thing is to learn from your mistakes and make sure take the positive out of your experience. At this point you ask a friend, family, a lawyer or even yourself, Should I go bankrupt? Well let’s see…

The idea of filing for bankruptcy is very scary but sometimes it is the only real solution left. Let’s take a look at the basics of bankruptcy so you can get a better understanding and ease your mind. Though this process is not easy, having the right information can make it a little less stressful.

In the United States the Federal Court Systems deal with all bankruptcy information and set the laws regarding the process. This does not mean that an individual needs to go to Washington D.C. to file, as each state will deal with individuals and businesses during the proceedings.

In Canada bankruptcy is a Federal law and except for Exemptions, which are set by the provinces and territories, is applicable to all provinces and territories. When you apply for protection the province or territory in which you live deals with the proceedings.

One of the most important pieces of information to know is that the courts don’t come to the individual or business to file, the individual or business need to go to the courts. In the United States you file a petition called a Statement of Intention or in Canada it is called an assignment in bankruptcy, this is where the debtor lets the courts know that they are applying for bankruptcy. Just because you file for bankruptcy protection doesn’t mean you will go all the way through the legal system. The courts or agents of the courts will need to gather important information through forms which need to be filled out by you.

By filling out all the applicable forms you are allowing the courts to review your credit history as you disclose current creditors, the balance of your debts, current and past work history. This information is reviewed by the courts and gives them sufficient information so they can make a determination as to whether or not you can proceed. Keep in mind in the United States you don’t have to hire an attorney to represent your case although they can be a great source of knowledge especially when you are not familiar with the proceedings and the definition of the laws. Most will not hire attorneys as they are scared of additional charges which they can’t afford, however most legal counsel are reasonably priced due to the circumstances.

In Canada you would be represented by a Trustee. The trustee will take you through the entire process step by step. During an initial consultation you will rarely be charged any fee as you are in the research stage. Once you have decided what action to take only then will you be required to pay a fee to the Trustee.

Most of the general public doesn’t have an understanding of the bankruptcy process and this causes misconceptions regarding bankruptcy proceedings and of course that is where the fear comes from. One common misconception is that all of your possessions will be taken by the courts. This is not true at all as you are allowed certain exemptions and items necessary for everyday living.

In part 2 we will discuss more about credit protection and what to expect which will help you get some answers to the question – Should I go bankrupt. See you in Part 2.