This post will primarily deal with Chapter 7 bankruptcy and 13 bankruptcies. Chapter 11 business reorganization bankruptcies are a different animal all to themselves. You will follow the steps below when you file for a personal or as it’s sometimes termed ‘consumer’ bankruptcy for debt relief.
STEP 1 – Assessing Your Case
In order for the attorney to be able to properly assess your case, an initial interview will gather the following information:
- Copies of three years of your most recent tax returns.
- The amount of income tax that you may owe.
- The amount of domestic support obligations in any arrears.
- What is your home worth and the balance owed on recorded mortgages and the amount of monthly installments that you are behind.
- How much are your cars worth and the amount that you owe on them.
- An approximate of balances that you owe on all your bills including credit cards.
- A copy of pay stubs for the last 60 days.
- Your home mortgage documents.
- The certificate of title on any motor vehicles you on.
- In court papers for lawsuits you are involved in.
- Divorce, domestic support orders or marital settlement agreements.
- Documents showing the amount of income from any sources.
STEP 2 – Finding Creditors
Begin finding your creditors. In most cases you know who you owe money to. Remember, you only receive a discharge for those creditors you list in your bankruptcy schedules, notwithstanding the correctness of the amounts owed. You have outstanding invoices and bills which detail the amount of money owed, the account numbers and their contact addresses. In a few instances, you may be unsure of any outstanding balances. You want to be sure that there are not any old or forgotten debts. Again, creditors you do not include on your bankruptcy documents will not be discharged.
Order credit reports from all three of the major credit reporting agencies. Some creditors may have not reported to all the agencies, and some are missed by others.
STEP 3 – Choosing an Experienced Attorney
Interview and decide on an experienced attorney. Now that you have all your information gathered, you can interview attorneys well-armed about your specific circumstances, and you will receive informed answers to your questions.
After deciding on an attorney, ask them for a worksheet of all information they are going to need. This will require you to gather as much information as possible. The answer to all these questions is going to wind up in the bankruptcy filing, so it is important to have accurate and timely information.
STEP 4 – Credit Counseling
Arrange for credit counseling. Ask your attorney for local recommendations. BARF or BAP requires you have a certificate from an approved credit counseling agency within 180 days of your petition filing for chapter 7 bankruptcy.
STEP 5 – The Questionnaire
Many law firms will give you a questionnaire to complete at home, click on the link for an example. Fortunately, you have already taken a big step toward completing this paperwork by gathering the data in Step One. It’s important to complete the questionnaire accurately. Remember this information is going to the bankruptcy court and it will be reviewed and even sometimes audited. Take your time.
Return your paperwork to your attorney and they will make up the official documents and pleadings from the questionnaires you have completed. When they give you the draft, take it home and review it thoroughly and make any corrections before you return it to the attorney.
STEP 6 – Filing the Petition
Once all the documents are complete, you and your attorney assess your situation and will decide on the actual date to file the petition and pleadings with the court. There are several considerations that may come into play as to the filing, or petition date. For example, you may have recently lost your job. You may want to delay the filing so your average income for the last six months would be lower, thereby making it easier to pass the Means test. Your attorney will guide you to this decision.
Once you do file, the section §362(a) automatic stay kicks in. The stay simply means that creditors are forbidden to take any action against you. Collection calls and actions will stop immediately. It usually takes about 7 to 10 days for the courts to notify your creditors. If you receive collection calls, simply tell them you have filed for bankruptcy and they will receive their notice in the mail in a few days.
TO BE CONTINUED: Next Blog Post – Information about the automatic stay provision.
More than eight billion credit card offers are mailed to consumers each year. Most of us get several offers for new credit cards every week. In addition, credit cards are advertised everywhere. We see advertisements on television, the Internet, at sporting events, in restaurants, and increasingly on college campuses and even in high schools. In the past, you rarely got new credit card offers if you had credit problems.
Lenders reviewed credit reports and chose not to offer credit to consumers they considered bad risks. More recently, lenders buy huge mailing lists and offer credit to everyone on the list without an individual evaluation of their credit history.
They offer credit cards to anyone with an adequate credit score, whether or not you can afford the credit or are already over-extended. Credit card offers can be very enticing. Nearly every offer promises some special benefit with a new card. In some cases, the offer is for a low rate. In others, no annual fee is promised. Still others advertise free goods or services, low minimum payments, frequent flyer miles, cash back, special member privileges, and contributions to schools or favorite charities.
The Downside to Taking On Too Much Credit
- Avoid accepting too many offers. There is rarely a good reason to carry more than one or two cards. You should be very selective about choosing cards that are best for you. Having too much credit can lead to bad decisions and unmanageable debts. Opening too many new credit card accounts can also lower your credit score.
- Look carefully at the interest rate. You should always know the interest rate on your cards and should try to keep the rate as low as possible. It is often hard to do this, because the terms are so confusing and sometimes misleading. Credit card lenders usually have several interest rates for a credit card. They also constantly change their rates.
- Beware of subprime credit cards. Instead of turning you down because of bad credit, some lenders will offer you subprime credit cards. These cards generally come with very high interest rates, other expensive fees, and low credit limits
- Fees, fees, fees. Other terms of credit may be just as important as interest rates. Credit card companies now impose a number of different fees—late payment fees, fees for exceeding a credit limit, annual fees, membership fees, cash advance fees, balance transfer fees, even fees for buying lottery tickets with a card—and keep raising these fees every year. These fees significantly increase the cost of a credit card, so that a card that appears cheaper with a low APR could end up being much more expensive.
- Look for the grace period. Most credit cards offer a “grace period” or “free ride period,” the amount of time in which you can pay off purchases without incurring finance charges (cash advances usually do not have a grace period). Without a grace period, finance charges begin accruing immediately, and a low rate may actually be higher than it looks.
Avoiding Credit Card Problems
Do not use credit cards to finance an un-affordable lifestyle. If you are constantly using your card without the ability to pay the resulting bill in full each month, consider whether you are using your cards to make an unreasonable budget plan work. No one can live forever by borrowing without a plan to pay off the resulting debts. If you get into financial trouble, do not make it worse by using credit cards to make ends meet.
Finance charges and other fees will add to your debt burden. However, using a credit card in a period of financial difficulty is preferable to taking out a home equity loan and putting your home on the line.
Do not get hooked on minimum payments. If you pay only the minimum, chances are that you will not be paying down your debt, or that you will be paying it off very slowly. For example, a $1,000 balance with an 18% annual percentage rate will take nearly 20 years to pay off if you make a minimum payment of 2% of the monthly balance. Also, lenders reserve the right to increase the minimum payment at their option. This means that you can budget for a $50 minimum payment only to find out that the new minimum payment of $100 applies.
Do not run up the balance in reliance on a temporary “teaser” interest rate. Money borrowed during a temporary rate period of 6% is likely to be paid back at a much higher permanent rate of 15% or more. If you can afford to do so consistently with your budget plan, make your credit card payments on time. Avoid late payment charges and penalty rates if you can do so without endangering your ability to keep up with higher priority debts.
Many lenders will waive a late payment charge or default rates of interest one time only. It is worth calling to ask for a waiver if you make a late payment accidentally or with a good excuse. Avoid the special services, programs, and goods which credit card lenders offer to bill to their cards.
Most of the special services such as credit card fraud protection plans, credit record protection, travel clubs, life insurance, and other similar offers are a bad deal or are overpriced. Beware of unsolicited increases by a credit card lender to your credit card limit. Some lenders increase your credit limit even when you have not asked for more credit. Do not assume that this means that the lender thinks you can afford more credit. Lenders generally increase the limit for consumers that they think will carry a bigger balance and pay more interest.
Avoid cashed check loans. Another credit offer to avoid takes the form of a check mailed to your home, usually by your credit card lender. When you cash the check, you not only accept high interest rate credit, but also get stuck with a big balance on a new account right from the start.
Bankruptcy can pave the way for a more secure retirement for debt-ridden older adults. It is natural to have many questions about the decision to file, especially when it involves factors like your social security income and retirement accounts. Call the Harris Law office today at 775-786-7600 for a free consultation, also visit our new Facebook Page for more information.