Get Out Of Debt

In this age of living on credit cards it is not surprising to find that more and more people are filing for bankruptcy. In order to prevent the misuse of bankruptcy claim a new law called the “Bankruptcy Abuse and Consumer Protection Act,” was passed in 2005. If you are in a serious and genuine financial problem, the right thing to do is file for bankruptcy. But before you do that you would have to find yourself a cheap bankruptcy lawyer who can explain to you all the finer points of the new law and can get you a good deal.

Where to Find a Bankruptcy Lawyer

Your quest for finding cheap bankruptcy lawyers can start with your family and friends. Those who have gone through the bankruptcy experience can recommend some names. You will get an insight into how competent the lawyer is. If you know an attorney, he/she might be able to refer you to some good lawyer.

Bankruptcy is a complex legal process; therefore, it is essential to have a lawyer who can put forward legal methods to either wipe out the debt by liquidating your assets and distributing them amongst your creditors, or develop a repayment plan. Usually the first consultation with a bankruptcy lawyer is free, so make sure you put forward your real financial situation before him/her. Once you have hired a lawyer, provide him/her with a list of all the debts that you carry. This would include credit cards, medical bills, loans, cars, etc. Make sure you have your bankruptcy lawyer explain to you all the details of the new law. If you have any questions, do not hesitate to ask.

Choosing a Good Bankruptcy Lawyer

A good bankruptcy lawyer will give you expert advice on how to get your financial situation back on track. A good lawyer will help you with repayment plans and debt management. Before you finalize your choice make sure you share a comfort level with your bankruptcy lawyer.

You want a lawyer who understands the system and will do a good job to represent you. It may cost you a little more but you get what you pay for. Your local bar association can probably help you decide whether a proposed fee is fair with the local standard. You can also browse online to compare some services to get an idea how much it would cost you to hire a lawyer.

The quick and dirty definition of bankruptcy is when a person who is unable to pay their debt goes to court seeking relief. If you are the petitioner, the court must determine if your debts are truly beyond your ability to pay. Then, depending on your case, either the court discharges the bulk of your debt or sets up a payment schedule that is in your best interests but does not entirely absolve you of the responsibility of paying your creditors.

While that might be a simplified explanation of bankruptcy, it is one of the most complicated consumer legal issues you might encounter. Part of the complexity is due to the regulations, the fact that there are different types of bankruptcy petitions, and the process to administer the petition within the court system.

The other aspect that cannot be ignored is the negative stigma attached to bankruptcy. You have not owned up to your debt, you are trying to cheat your creditors out of money, etc. It is true that some people are looking for an easy way out to not pay their bills, but the fact of the matter is that bankruptcy is a legitimate legal proceeding to reorganize your debt.

In order to decide whether bankruptcy is the right course of action, the first thing you need to do is separate the emotional response from the financial response. Then go consult with a lawyer. Bankruptcy law changed significantly last year, and your first and best source of information is always going to be someone who is aware of the legal ramifications and, in fact, whether or not bankruptcy is the best financial choice in your situation.

Credit Cards

Unless your credit cards are paid off in full before you file, chances are you will not be able to use them again after you file (and even then, the creditor may cancel the credit card.) This is not a call to action to charge up your cards the month before you file. For one, the courts may recognize that as bad faith and order you to pay those recent charges in full instead of discharging them. Two, the act of bankruptcy is intended to give you the means to show more financial responsibility and charging your cards to the max is rarely a sign of responsible spending.

However, your credit card companies will stop collection calls on your delinquent credit card accounts, and your attorney can handle all the contact with credit agencies. This is one of the most powerful benefits of a bankruptcy: the “automatic stay.” This means that all attempts to collect all debts by all entities must immediately cease.

Other Types of Debt

If you have foreclosures or garnishments, the collection actions on those will stop as well. Secured debt, i.e. mortgages and car payments, cannot be eliminated through bankruptcy. The debtor has the choice of catching up on arrears and continuing to make payments, surrendering the collateral and owing nothing, or “redeeming” the collateral with a lump sum payment of the balance due or current value, whichever is less. If reading that is already overwhelming, just know that secured debt is still your debt after you file.

In the immediate future, your credit will take a severe hit, so the likelihood that are you are extended credit after you file is slim. That does not extend indefinitely into the future. The point of bankruptcy is also to give you a chance to rebuild your credit, and sooner than you expect, you might be eligible for some forms of credit. Although something large like a mortgage on a home will probably be five years or more away.

You should also be aware that there are certain types of debt that will not be wiped clean no matter your situation. You will almost always owe on student loan payments, even in bankruptcy, as well as back taxes from the last few years. Child support and alimony are two other types of debt that you will continue to owe.

Public Disclosure of Debt

If embarrassment is your main concern, then you should know that most court proceedings are public record, can be researched by just about anyone, and in some cases, the information about your claim will show up in newspapers. Public disclosure is part of the legal process, and it should not stop of you from declaring bankruptcy if it is a sound financial decision.

A report of bankruptcy does stay on your credit report for ten years. It stays that long to discourage people who are only filing to get out of obligations they never intended to pay to begin with. Though it is possible to file multiple bankruptcies in a lifetime, for most individuals, one time should be sufficient to get you back on track financially.

The Next Step

The two most common petitions for individuals are Chapter 7 bankruptcy and Chapter 13. This is where a conversation with a lawyer is critical so that you can understand the differences between the two and get information on your eligibility for Chapter 7. The 2005 Bankruptcy Reform made it more difficult for individuals to qualify for Chapter 7 bankruptcy.

In general, Chapter 7 discharges the bulk of your debt (the exceptions were mentioned earlier) and Chapter 13 is essentially a court ordered payment plan to handle your debt. There is a court supplied formula that determines what the monthly payment should be in Chapter 13. It is based on the income and expenses of the debtor. If the plan is approved, after 60 months of steady payments whatever remains unpaid is discharged.

If you are overwhelmed by your debt, then the best thing to do is think carefully about the ramifications of filing for bankruptcy. First, separate the financial and emotional issues, and have a conversation about each separately. It is important to talk to someone who is familiar with bankruptcy law, and advisable to seek out a lawyer in any case to address the financial implications.