Bankruptcy, Debt and Consumer Law

How do I know if I should consider filing for bankruptcy?
Filing for bankruptcy is a serious matter that can have long-term effects on your credit rating and it should be considered carefully. People who are having trouble paying their debts sometimes consider bankruptcy as a strategy for resolving this situation.

An individual, called a debtor, usually files bankruptcy to obtain a discharge, which will wipe out his or her debts so that they will not have to be paid. Once the bankruptcy begins, creditors cannot try to collect debts from the bankruptcy debtor or sue the debtor to obtain a judgment without obtaining the bankruptcy court’s permission. With a few exceptions, the creditors have no claim on the debtor's future income or future assets
Types of Bankruptcy
There are two main types of bankruptcy cases generally used by most consumers. These are referred to by their chapter number in the Bankruptcy Code. Determining which type of Bankruptcy to file is based upon numerous factors and analysis, including but not limited to amount of income, amount of assets, amount of debts, types of arrearages and goals of the debtor.

Chapter 7: This is a liquidating bankruptcy, the most common bankruptcy case. In return for having debts discharged, the debtor must turn over to the bankruptcy trustee all property except for certain assets which applicable state or federal law allows the debtor to keep as exempt. The trustee sells the property and distributes the proceeds to the creditors according to priorities established by law. Very often there is not enough money to pay for anything more than the costs of administration, and the creditors will receive nothing. The principal advantage of Chapter 7 is that the debtor emerges from bankruptcy without any future obligations on his or her discharged debts.

Chapter 13: This case often used by individuals who want to catch up past due mortgage or car loan payments and keep their assets. In Chapter 13, the debtor must propose in good faith to pay all or part of the debts from future income over a period of time ranging from three to five years. If the court approves the plan of payment, the debts may be settled in this manner, even if the creditors are not willing to go along with the plan. If the debtor makes the payments as required, he or she will not have to surrender property to the trustee.

Using a Chapter 13 can be strategic for a debtor as compared to a Chapter 7 bankruptcy. Some of the debts not discharged in a Chapter 7 will be discharged once the debtor completes a Chapter 13 plan. Also, the debtor can pay most non-dischargeable federal taxes over the term of the Chapter 13 plan. However, Chapter 13 can only be used by an individual debtor, only if the total debts owed are less than certain limits for secured and unsecured debts. An individual engaged in business not as a corporation might use Chapter 13 to pay debts or settle them over a period of time while he or she continues to own and operate the business. Generally, businesses and very high debt or asset individuals may need to look to other Chapters of the bankruptcy code for protection.
How long does the bankruptcy process take?
A chapter 7, no-asset case, with no adversary proceedings filed, can take about 100 days. A chapter 13 case typically takes 3-5 years until completion.
Will I have to pay income taxes on the discharged debt?
No.
If someone acted as a cosigner for me, are they liable for my debts if I go through bankruptcy?
If you are filing Chapter 7, the cosigner will be liable. If the debt is a consumer debt and you are filing Chapter 13, then the co-signer may not be liable. Ask your attorney to clarify how a co-signer will be affected by your filing.
Can a married person file for Bankruptcy individually?
Yes. Married persons can file for bankruptcy either individually or jointly.
What about my credit rating?
The bankruptcy filing is picked up and noted by the commercial credit reporting companies. Federal law limits the length of time that this information may be carried on a report. Today, the limit on reporting bankruptcy filing is 10 years. Also, the law prevents certain governmental units and agencies from discriminating against persons who have filed bankruptcy. Again, a lawyer can give you guidance in this area.

After filing bankruptcy, some people have found that if they timely make the payments they are left with, such as the car, house, rent or utility payments, then they can begin to re-establish their credit. However, individual credit ratings are based on overall credit history, as well as income and assets, and it may be harder for some people to re-establish a good credit rating than it is for others.
Errors on my credit report have not been corrected with the credit reporting agency. What can I do?
It depends on your situation. You can visit the credit reporting sites for information about how to handle disputed errors but, if that has not worked, a consumer debt attorney could give you advice about how best to remedy the problem.
Alternatives to Bankruptcy
Bankruptcy is not the only method of dealing with too much debt. In some situations another way might be more advantageous to the debtor than filing bankruptcy. Such alternatives may include an out-of-court settlement with creditors, reduction of payments to creditors, attaining help from a consumer credit counseling service, consolidating debts, or payment of debts by sale of assets or borrowing on assets. However, these methods require some cooperation from creditors, and the chances of success are greater if the debtor attempts these alternatives soon after financial difficulties begin.
Do I Need a Lawyer?
As in any court, individuals have a right to represent themselves before the Bankruptcy Court. However, bankruptcy is a complex area and involves many considerations, including whether to file, the election of the appropriate chapter, the use of exemptions, understanding all of the protections of the Bankruptcy Code and using them to the debtor's advantage. The right decision for you depends on an evaluation of your family status, your assets, your obligations, and other factors. It is a very serious step that could affect you for the rest of your life. It is possible in a bankruptcy that a debtor will lose all assets and still come out owing all of his or her debts. A lawyer can explain to you how the process works and can help you reach an intelligent decision.

Some debtors use non-lawyer bankruptcy petition preparers or filing services to complete the schedules and documents which must be filed with the bankruptcy petition. While this may cost less initially than consulting an attorney, these non-lawyer services by law cannot give legal advice before or after the filing, and cannot represent the debtor in the Bankruptcy Court.

If you are contemplating a Chapter 7 or Chapter 13 case, then you need to consider hiring an attorney. Certain complexities in the law make it extremely difficult for a debtor to successfully conclude a Chapter 13 case without the assistance of an attorney.

A corporation cannot represent itself in a bankruptcy case and must be represented by an attorney.