A revised Bankruptcy Code, enacted in 1978, took effect on October 1, 1979. The Code consolidated some chapters of previous laws pertaining to business reorganizations and sought to streamline the administration of the bankruptcy courts, but its most sweeping changes involved personal bankruptcy. This revision made bankruptcy a more attractive option for both personal and business debtors, primarily because it increased the amount of assets that could be exempt from liquidation.

The revised Bankruptcy Code generally accommodated and regulated three primary kinds of bankruptcy: corporate, personal, and farm reorganization.

Corporate bankruptcy
Corporate bankruptcy laws are extremely complicated. For this reason advice should be sought from a qualified attorney. Generally corporate bankruptcy fits within three chapters of the Bankruptcy Code:Chapter 7, Chapter 11, and Involuntary Bankruptcy.

Chapter 7—If the bankruptcy judge does not believe a company can realistically become viable, he or she can choose to dissolve the corporation or business under Chapter 7 of the Bankruptcy Code. In so doing the business is inventoried and, under the supervision of a bankruptcy trustee appointed by the court, the business is dissolved and the assets sold to satisfy the creditors. In most instances the creditors will receive only a percentage of the original outstanding debt.

Chapter 11—This Bankruptcy Code section details how a corporation or business can file for federal bankruptcy protection and reorganization under its existing management, while it continues to operate as it works out a plan to repay its creditors. Normally a business has three to five years to repay its creditors a minimum of what the creditor would have received if the business liquidated under Chapter 7.

Involuntary Bankruptcy—The Bankruptcy Code permits creditors to file a bankruptcy petition and force a debtor business to answer in bankruptcy court. This procedure allows creditors to force a debtor who has assets but refuses to pay the creditors into court. Although involuntary bankruptcy can be forced on an individual or a business, it is more common with business bankruptcy.

Personal bankruptcy
As with corporate bankruptcy, individual bankruptcy should be filed under the advice and the direction of a qualified attorney. Individual bankruptcy generally is covered in three chapters of the Bankruptcy Code: Chapter 7, Chapter 11, and Chapter 13.

Chapter 7—The purpose of a Chapter 7 bankruptcy is to allow a person to obtain a fresh start, free from creditors and free from the pressures of overwhelming debt. Basically Chapter 7 is a plan for personal financial dissolution. As with a business Chapter 7 bankruptcy, a court-appointed trustee takes possession of all nonexempt property and assets, converts them to cash, and distributes the funds to creditors. Exempt items include specified items, a certain amount of money dictated by the trustee, and some personal effects. Most debtors are able to keep property they need to get on with their lives. After filing for relief under Chapter 7, an individual debtor might, as dictated by the trustee, receive a discharge.

A discharge permanently prohibits creditors from attempting to collect those secured and unsecured debts listed in the bankruptcy filing. These could include past due mortgage or rent payments and penalties, credit card debt, medical bills, or consumer loans. However, some debts are non-dischargeable. These could include some federal and state taxes, school loans, alimony and child support, criminal restitution, or debts for death or personal injury caused by driving while intoxicated from alcohol or drugs. If individuals receive a discharge under Chapter 7, they cannot receive another discharge under Chapter 7 for the next six years.

Chapter 11—Although individual debtors can choose to file a Chapter 11, this type of bankruptcy is extremely complicated, plus there may be advantages to filing under a different chapter. A qualified attorney should be able to advise whether Chapter 11 is judicious.

Chapter 13—Chapter 13 of the Bankruptcy Code is intended to allow individuals to reorganize and operate under court protection from their creditors. Individuals are eligible for Chapter 13 if their debts do not exceed certain dollar limits set forth in the Bankruptcy Code and if they have a steady income.

Under a Chapter 13 bankruptcy filing, a debtor must promptly file a repayment plan and get the court’s approval of the plan. Any creditor may object to the plan. The debtor, along with the court-appointed trustee, must work out any objections to the plan before the court will approve it. The typical repayment term of a Chapter 13 plan is three to five years. The debtor makes regular payments to the trustee, and the trustee then distributes these monies to creditors according to the terms of the plan.

After completion of the plan, the debts listed in the bankruptcy are discharged except for some taxes; alimony and child support payments; student loans; certain debts, including criminal fines and restitution and debts for death or personal injury caused by driving while intoxicated from alcohol or drugs; and certain long-term secured obligations.

Farm reorganization
Chapter 12—The Chapter 12 bankruptcy law was created to help family farmers who need to reorganize their debts, while keeping and working their land. This type of bankruptcy is meant to assist farmers who have the potential to reorganize and to allow them relief from heavy debt burden and at the same time allow farmers to pay their creditors what is deemed reasonable.

The rules for Chapter 12 bankruptcy are modeled closely after those of Chapter 13 bankruptcy. A Chapter 12 case may be filed only by certain family farmers and businesses. A trustee is appointed, but the farmer usually remains in possession of the farm while formulating a plan. A farmer may choose to convert a Chapter 12 case to a Chapter 7.

Conclusion
God’s Word clearly says that believers should be responsible for their promises and repay what they owe. “When you make a vow to God, do not be late in paying it, for He takes no delight in fools. Pay what you vow! It is better that you should not vow than that you should vow and not pay” (Ecclesiastes 5:4-5). But in the meantime individuals or businesses may be faced with no alternative other than to seek court protection from creditors. However, court protection is the last alternative. A Christian must be willing to accept the absolute requirement to repay every debt. Even after discharge, if the creditor allows the debt to be paid, the debtor needs to arrange to pay off the debt, even if it takes an entire lifetime to satisfy the debt.

Dozens of specially trained agents work on the third floor of DCM Services here, calling up the dear departed’s next of kin and kindly asking if they want to settle the balance on a credit card or bank loan, or perhaps make that final utility bill or cell phone payment. The people on the other end of the line often have no legal obligation to assume the debt of a spouse, sibling or parent. But they take responsibility for it anyway. “I am out of work now, to be honest with you, and money is very tight for us,” one man declared on a recent phone call after he was apprised of his late mother-in-law’s $280 credit card bill. He promised to pay $15 a month.

Dead people are the newest frontier in debt collecting, and one of the healthiest parts of the industry. Those who dun the living say that people are so scared and so broke it is difficult to get them to cough up even token payments. Collecting from the dead, however, is expanding. Improved database technology is making it easier to discover when estates are opened in the country’s 3,000 probate courts, giving collectors an opportunity to file timely claims. But if there is no formal estate and thus nothing to file against, the human touch comes into play.

New hires at DCM train for three weeks in what the company calls “empathic active listening,” which mixes the comforting air of a funeral director with the nonjudgmental tones of a friend. The new employees learn to use such anger-deflecting phrases as “If I hear you correctly, you’d like…” “You get to be the person who cares,” the training manager, Autumn Boomgaarden, told a class of four new hires.

For some relatives, paying is pragmatic. The law varies from state to state, but generally survivors are not required to pay a dead relative’s bills from their own assets. In theory, however, collection agencies could go after any property inherited from the deceased.  But sentiment also plays a large role, the agencies say. Some relatives are loyal to the credit card or bank in question. Some feel a strong sense of morality, that all debts should be paid. Most of all, people feel they are honoring the wishes of their loved ones.

“In times of illness and death, the hierarchy of debts is adjusted,” said Michael Ginsberg of Kaulkin Ginsberg, a consulting company to the debt collection industry. “We do our best to make sure our doctor is paid, because we might need him again. And we want the dead to rest easy, knowing their obligations are taken care of.”

Finally, of course, some of those who pay a dead relative’s debts are unaware they may have no legal obligation. (emphasis added) Scott Weltman of Weltman, Weinberg & Reis, a Cleveland law firm that performs deceased collections, says that if family members ask, “we definitely tell them” they have no legal obligation to pay. “But is it disclosed upfront — ‘Mr. Smith, you definitely don’t owe the money’? It’s not that blunt.” DCM Services, which began in 1999 as a law firm, recently acquired clients in banking, automobile finance, retailing, telecommunications and health care; DCM says its contracts preclude it from naming them. The companies “want to protect their brand,” said DCM’s chief executive, Steven Farsht. Despite the delicacy of such collections, he says his 180-employee firm is providing a service to the economy. “The financial services industry is under a tremendous amount of pressure, and every dollar we collect improves their profitability,” he said.

To listen to even a small sample of DCM’s calls — executives played tapes of 10 of them for a reporter, electronically edited to remove all names — is to reveal the wages of misery, right down to the penny. A man has left credit card debt of $26,693.77, the legacy of a battle with cancer. A widow says her husband “had no money. He pretty much just had debt.” Asked about an outstanding account of $1,084.86, a woman says the deceased had no property beyond “some tools in the garage” and an 18-year-old Dodge.

Not everyone has the temperament to make such calls. About half of DCM’s hires do not make it past the first 90 days. For those who survive, many tools help them deal with stress: yoga classes and foosball tables, a rotating assortment of free snacks as well as full-scale lunches twice a month. A masseuse comes in regularly to work on their heads and necks. Brenda Edwards, one of DCM’s top collectors, spoke with a woman in New Jersey about her mother’s $544.96 credit card bill.  “She had no will, no finances, nothing,” the daughter said. “Nothing went to probate.” The $200 in the checking account was used for funeral expenses. But the woman also said the family “filed a form with the county,” indicating that perhaps there was a legal estate after all. “Is anyone in the family in a position to pay this?” Ms. Edwards asked, adding: “I’m not telling you it needs to be paid at all.” The woman reached a decision. “I will talk to my brothers and sisters and we will pay this,” she said. Ms. Edwards has a girlish voice that sounds younger than her 29 years. “If you plant a seed and leave on a good note, they’ll call back and pay it,” she said.

DCM started a Web site called MyWayForward.com to provide the bereaved with information, tools and, some day, products. “We will never sell death. But it’s O.K. to provide things that could be helpful to the survivor,” Mr. Farsht said. Death will be the end of one customer relationship but the beginning of another. Some survivors are surprised, and a few are shocked, that they are hearing from a collector. Eric Frenchman, an online consultant, said a DCM agent inquired about his late father’s $50 Discover card balance before the bill was even due. Since Mr. Frenchman had been planning to pay it anyway, he emerged from the experience vowing never to get a Discover card himself.

The major deceased-debt firms say such experiences are rare. Adam Cohen, chief executive of Phillips & Cohen Associates of Westampton, N.J., said his team of 300 collectors “are all trained in the five stages of grief.” If a relative is more focused on denial or anger instead of, say, bargaining, the collector offers to transfer him to the human resources company Ceridian LifeWorks, where “master’s level grief counselors” are standing by. After a week, the relative is contacted again. DCM executives say some of the survivors not only gladly pay but write appreciative notes. They offered up a stack, with the names deleted, as proof. One widow wrote that a collector “was so nice to me, even when I could only pay $5 a month a few times.” Saying that money was “so tight” after her husband died, she added: “It was very hard for me, and to get a job at my age. Thank you.”

There are many factors that should be taken into account when considering filing for bankruptcy.

1. Figure out what bankruptcy options you have. There are types of bankruptcy most commonly used by individual filers in the United States:

• Chapter 7 bankruptcy is a bankruptcy proceeding that can wipe out many of your debts in a three to six month period. However, you may lose some of your personal property. You can find out more by looking at Bankruptcy Overview: Chapter 7.
• Chapter 13 bankruptcy is a bankruptcy proceeding that can be more complicated than Chapter 7 bankruptcy. In Chapter 13, you will be required to make a repayment plan based off of your income, showing how you will pay off your debts in the next three to five years. You can find out more by looking at An Overview of Chapter 13 Bankruptcy.

2. Consider your alternatives. Bankruptcy is not for everyone. Indeed, many unnecessary bankruptcies are filed each year. You should sit down with your financial documents and consider your situation carefully before making a decision. You may find that you do not need to file bankruptcy because you are judgment proof, or that you can fix your financial woes with a few simple changes.

3. Ensure that you are eligible to file for the type of bankruptcy you want to file. There are certain requirements that you must meet in order to file for certain types of bankruptcies. For example, you may not be able to file for Chapter 7 bankruptcy if your income is high enough to pay off your debts through Chapter 13. Also, if your income is too low, or your debts too high, you may not be able to file for Chapter 13 bankruptcy because you cannot show that you are able to meet your repayment plan.

4. Find out what debts will and won’t be forgiven. There are certain types of debts, such as child support, alimony and tax debts, that cannot be wiped out through a bankruptcy proceeding, no matter whether you file Chapter 7 or Chapter 13. Be sure that the debts that you have are types that can be addressed in bankruptcy before you file. It won’t do you any good to file only to find out that bankruptcy will afford you no protection.

5. Figure out what will happen to your home if you file for bankruptcy. Before filing for bankruptcy, you should always sit down and try to figure out what will happen to your home if you do file. If you are already having problems making your mortgage payments, perhaps they will become easier if some of your other debts are forgiven. However, if you have a lot of equity already invested in your home, you may lose your home if you file for Chapter 7 bankruptcy. On the other hand, if your income is high enough, you may be able to file for Chapter 13 bankruptcy and include your mortgage payments on your repayment plan.

6. Figure out what will happen to your other property, like your car. What happens to your other property during a bankruptcy proceeding will depend upon what you have done with your property, as well as the property exemption laws that are available to you. If, for example, you put up your boat or your car as collateral on a loan, this makes that loan secured and the creditor may still be able to take your property even if you are in bankruptcy. Also, only certain types of property are protected by exemption laws in Chapter 7 bankruptcies. Before filing, study the exemption laws carefully and make sure you will keep what you need to survive.

7. Find out if your credit card debts will be wiped out. Bankruptcy has become an effective tool for wiping out credit card debt. You should figure out if your credit card debt will be wiped out by a bankruptcy proceeding before you file. If you lied on a credit card application or spent well beyond your means, bankruptcy may not be able to forgive your credit card debt.

8. Ensure that your pension plans are safe. Most pension plans and life insurance policies are protected by state laws in a bankruptcy proceeding. Before filing for bankruptcy, it would still be a good idea to find out whether your pension plan (401(k), IRA) and/or life insurance policies will continue to be protected.

9. Make sure that any co-signers are not stuck with your debt. You should go back through all of your debt agreements to make sure that no one that co-signed for any of your loans will be stuck making payments on your debt. It does no good to go through an entire bankruptcy proceeding only to find out that your brother or parents are stuck making the payments that you are unable to make. Generally, Chapter 13 bankruptcy will protect any co-signers to your debts, but Chapter 7 will not.

10. Your personal life will be invaded. Bankruptcies are notoriously intrusive into personal lives. In order for bankruptcy to work, you will have to show the bankruptcy court every aspect of your financial life. In addition, other people may find out about your bankruptcy. In Chapter 7 bankruptcy, it is likely that some of your personal property will be taken and sold in order to pay off your debts. Also, in a Chapter 13 bankruptcy, you will probably have to ask permission to spend your own money for the next three to five years.

These are some of the starting points for you to think about when asking yourself, “is bankruptcy a good idea for me?”

So, what needs to be done in order to actually get the court to issue the discharge paper?

Like so many of the bankruptcy processes, this can vary from district to district, even in the same state!

Additionally, it may make a difference to the process depending on what else occurred during the bankruptcy.   For example, if you own a home and were using the Chapter 13 to “strip” the second deed of trust or mortgage, then you want to make sure that everything is done to eliminate that debt and the lien on your property.

In most districts, you will need a specific filing to accomplish this.  In the Eastern District of California, where I practice, to eliminate the lien requires either the agreement of the lender on the Second deed of trust or an adversary complaint.

Under current law, you can also get a statement, signed by the court, that your mortgage is up to date. This is a great thing to have if you started the Chapter 13 when you were behind in the house payments.  Without that determination, the lender will often come back after the Chapter 13 plan is over and claim that you have other charges that haven’t been paid like “attorney’s fees incurred to review the bankruptcy” or “property valuation charges.”   It’s certainly better to have the court resolve those issues before closing the case rather than fight them out later.

There is a lot to consider before the case is closed.  A good bankruptcy attorney will have counseled you about these issues and be there to help you.  Make sure he or she is paying attention, and don’t just assume it all happens automatically.

A discharge and the closing of your bankruptcy is a great thing.  Make sure it is done right.

The Bankruptcy Code requires a debtor to list all creditors in his bankruptcy schedules.  However, a “creditor” is typically defined as someone to whom the debtor owes money.  Specifically, 11 U.S.C. § 101(10)(a) defines a creditor as an “entity that has a claim against the debtor that arose at the time of or before the order for relief concerning the debtor.”

So, if the debtor has a credit card with a zero balance, the issuer of that card IS NOT A CREDITOR, and therefore, the debtor need not disclose his bankruptcy to that credit card company.  BUT, that’s not the end of the story.

Card issuers write very one-sided credit card agreements that seem to get modified all the time.  The Terms and Conditions always includes the following language:

Default – You and your Account will be in default of this Agreement if:  . . . you become insolvent, assign any property to your creditors, or go into bankruptcy or receivership . . .

Cancellation of your Account – We may cancel your Account or suspend your ability to use the Account at any time, with or without any specific reason and with or without prior notice to you as permissible by applicable law.

So, even if a debtor has a zero balance credit card, the issuer has the absolute right to cancel it, but how does the credit card issuer know the debtor filed bankruptcy if the debtor does not give the issuer notice of the bankruptcy?

Credit card companies use sophisticated systems, like Automated Access to Court Electronic Records (AACER), to provide virtually instant data of new bankruptcy filers.  They compare multiple pieces of debtor information with their account holder databases.  If enough pieces of a debtor’s data match an active account, the credit card issuer assumes a match.

Once the credit card company has a match, does it always close the credit account?  I honestly don’t know, but I do know that debtors often use zero balance credit cards after filing.  Maybe the card company is making the decision to keep the account open or maybe they failed to make a match.  In either case, it is important to know that, despite not listing a zero balance credit card in the bankruptcy schedules, the credit card can get cancelled.

by Russell A. DeMott, Charleston Bankruptcy Lawyer

In “Budgeting After Bankruptcy (Part One),” I explained that the purpose of budgeting: to create wealth.  It boils down to spending less than you make.  The difference increases your net worth.

But how do I do this?

First, don’t sweat the small stuff.  Most financial articles about budgeting stress tracking all of your expenses. How much do you spend on utilities, food, clothing, entertainment, etc?  Tracking every penny is a great idea, but the problem is that almost no one does it, or will do it. People have jobs–sometimes more than one–kids, parents, and other responsibilities.  Most folks just aren’t going to do this.  Call me a budgeting heretic, but I’m going to embrace reality here. You don’t need to do it–at least not obsessively.

Second, DO sweat the big stuff. You just got your bankruptcy discharge. Let’s talk about big expenses: house and cars.  Maybe you’re current on that $2400 a month mortgage on the house you have little to no equity in.  Maybe you’re also current on those two auto loans as well.  But do you need these things?

Sure you need a house, but why not consider renting one for $1500 a month?  Why not let one car go?  (Remember, you discharged the debt in bankruptcy if you did not reaffirm the debt.)  You can rent for three years and save over $32,000 in mortgage payments plus maintenance costs, which can be very significant.  After the three years is up, buy a home with a payment of $1500 or so per month. This strategy is especially wise if your home is “upside down” and you have no equity in it.  I regularly see folks who owe $300,000 on a home worth only $225,000.  If you’re in this situation, why keep the home?

The same goes for cars. Why have a $450 per month car payment on a car in which you have no equity?  That might be a reasonable payment for your family car, but two $450 payments? (Or worse yet, one payment of $450 and one for $600!)  You get the picture. These are large, significant expenditures you are making each month and they do not create wealth.  This is the “big stuff” you need to sweat.

$455,646!

Huh? Welcome to the power of compounding! You’d have $455,646 if you took $12,000 per year ($1,000 per month) and put it in a 401(k) or IRA for 20 years–let’s say from the time you’re 45 to the time you’re 65, normal retirement age.  This assumes NO increase in contributions–just the $1,000 per month we saved on your house and car payments and assumes only a 6% return.  The fact of the matter is that your house is a huge expense.  Same for your cars.  Yes, you need housing and transportation, but don’t let these rob you of your ability to save.  Know the difference between needs and wants!

So think big!

The bottom line here is that you should start the budgeting process by targeting large expenditures before you worry about the small ones.  In “Budgeting After Bankruptcy (Part Three)” we’ll discuss how to implement this strategy.

You know that you see the light at the end of the tunnel, but are you sure it is not the headlight of the oncoming train?  Here are some sure signs that you are heading straight for bankruptcy

1. Denial – Life is good, I my job is stable, I’m making all my payments and I am not in default of anything.  Really?  Take a look around.  How any people do you know have retired from the same job they started at age 25?  What would happen to your finances if you suddenly got sick and could not work?  Or your employer decides to close up shop and move production overseas?  Have you taken any time to think about the future and what it might contain?  What does retirement look like?  What contingency plans do you have if your situation suddenly goes very wrong?  Bankruptcy is never a first choice, but it may be the only choice when you fail to plan.
2. Liabilities exceed assets.  Do this simple exercise:  Write down a list of everything you owe.  Not what you have to pay every month such as utilities and food, but what you OWE and who you owe it to.  Now write down a list a everything you own.  You don’t have to get detailed, but a house, cares, bank accounts, general furniture and other possessions should be relatively easy.  Now put a value of what you might be able to get for those items if you had to suddenly sell them.  Not what you paid for them, but what you could reasonably expect to get if you threw everything in the driveway and had a tag sale.  Put aside sentimental blue, put aside the “investment” value – what is your stuff really worth?  Now subtract the total of your debt from your assets.  Is that a negative number?  For 95% of all U.S. residents, it is.  Bankruptcy might help you dump some of those debts while allowing you to keep some of those assets.  It can improve your bottom line.
3. Expenses exceed income.  Bow lets undertake a similar exercise.  First, write down all sources of income you get in a month.  Net pay, not gross.  What is the amount you have available to use.  Now write down what it cost to live every month.  Food, lights, heat, rent/mortgage, gas for the car, insurance, etc, but not your debt payments.  Total that all up.  Now subtract that total from your total income.  Is that a negative number?  Now add up all your debt payments and subtract that from the number.  Even more negative?  Or maybe the number only goes negative when subtracting the debt payments.
4. Savings are non-existent.  When looking at the assets/liabilities review outlined in step 2 above, was a savings account part of your asset picture?  Is there room in your budget determined in step 3 above for some savings plan?  Part of the way to avoid denying that there will ever be a problem is planning for one to happen.  Flat tires or illness can never be expected, but you can plan for them.  If you have a savings plan to cover the cost of that halt tire replacement or the unexpected doctor bill or prescription drug, your budget can absorb the unexpected expense.  Some experts recommend starting with a $1,000 savings account, others recommend saving at least three months of income for the unexpected loss of a job.  If your budget does not allow for a savings plan, then a bankruptcy may change your expenses enough to start one.
5. Look at your history.  Once you start to change your thinking about your finances, it is sometimes hard to get away from kicking yourself.  Remember, this is not about blame.  It is about taking the blinders off and looking at reality.  You bought your home for $100,000 ten years ago and now you owe $200,000 on it.  While it is important to understand that you spent $10,000 a year more than you earned by taking money out of your home, don’t let it drag you down.  Instead look at how you are going to pay off your 30 year mortgage now that you are 40 years old before you reach 70.  Who wants to be paying a mortgage when you are retired?  Maybe you don’t care, but then it is important to look at your mortgage payment as ask yourself whether you would pay that amount in rent for that home.  Since you are never going to pay off the loan that is what you are effectively doing.  Only by looking backward can you charge the behavior you need to succeed going forward.  Bankruptcy is a way of recognizing the mistakes you have made in the past, accepting them and making the changes you need so you don’t continue repeating them.  Insanity is sometimes defined as repeating the same behavior and expecting a different result.

Believe it or not, a bankruptcy attorney can help you avoid bankruptcy, by helping you fix some mistakes that you are making.  At the very worst, you can see what the effects of a bankruptcy are and know what hurts and what helps.  Bankruptcy is not a mark of personal failure, but rather a mark of acknowledgement and a chance to fix your mistakes before they are too late.

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by Susanne Robicsek, North Carolina Bankruptcy Attorney

If you are filing for bankruptcy but you have an asset that you don’t have information about, can you just put down “unknown” and leave it at that?   That depends.

The short answer is that you can file your bankruptcy case without all your information, meaning it is possible to do it, however I don’t recommend it under most circumstances.

First and foremost, filing bankruptcy without having all the information you need could get you into a lot of trouble or complicate your case, depending on the circumstances, why, and how it is done.  You don’t want your case to turn into a train wreck, but sometimes you don’t have a choice.

Problems you might face may be something as simple (but humiliating) as being verbally reprimanded by a Trustee at a creditors meeting for not having the information on the bankruptcy petition, or it might involve more serious problems like motions, litigation, contempt/sanctions, and to being taken to court to have the judge determine what to do.

Unresolved issues in a bankruptcy case can drag out the bankruptcy proceedings for a long time, and tie up the debtor in court for months or even years.  The trustee can subpoena records from the people who may have information about assets of a bankruptcy estate, and they can also depose or sue to get some answers.

In some circumstances, the debtor may not only face monetary costs, loss of property, and denial of discharge - but they can also face bankruptcy crime prosecution.

Bankruptcy fraud is a federal crime, and not something to be taken lightly.

I know it is frustrating having to deal with providing all the information your attorney asks for, but I assure you that it is done for your protection.   When they choose to seek protection from creditors by using the bankruptcy laws, debtors are required to provide accurate information on the petition.

If the answer really can’t be found, then “unknown” might be the only answer you can give, but it also carries some risks.

If someone is tempted to list property as unknown because they simply don’t want to go to the trouble of finding information, they might just find themselves having to explain why they did it to a judge.

I can assure any debtor that they want to avoid potential problems in their bankruptcy case, to the extent that they can do so.  One certainly doesn’t want issues to come up that could have been avoided with a little legwork.

In the rare situations that you just can’t come up with what something is worth and there is no way to find out, the only thing to do may be to list a value or asset is as “unknown.”

That might be appropriate for something whose value can not be determined – like a one of a kind object that no one knows what it is worth, or for property that a client would have to incur high costs to appraise.

Sometimes it isn’t even an object, but is a legal claim that’s worth hasn’t been determined yet.

In those cases, the client should provide as much information as possible to the trustee and cooperate as much as they can.  They should only do this if they understand that they are handing over the property to the court for sale, no matter what the value is.  They should be prepared for the trustee to take control of the property and sell it for whatever they can get.

Listing something as unknown is not something you should so without making every attempt to get the answers first.  You should be as forthright as possible, be prepared to hand over the property to the court for liquidation to pay your debts, and it is not something you should do it without discussing with your bankruptcy lawyer.

This can also depend on the type of case that is filed.  Chapter 7 trustees take control of property that is the debtor can’t keep, and they sell it to pay towards the debts.

Chapter 13 trustees don’t ordinarily take and sell property.  In Chapter 13 bankruptcy cases, the debtor is ordinarily the one who will retain or sell the property.  That means that the debtor might be required to come up with a plan, find a value, or figure out how to sell the asset – even if it is difficult to do.

Once the case is filed, you can’t easily turn back if you find out that you just handed over something that could have paid off your debts in full.  I don’t normally recommend giving up property without having a general idea of what you are giving up but how much you owe, what protection are looking for with the bankruptcy filing, and what benefits you get are all factors to weigh.

For example maybe someone isn’t sure of a value but they are pretty sure it is worth no more than $X.    If the debt owed to creditors is many times more than what you think the property is worth, you might determine that filing makes sense whatever the property is worth since you know you are going to be discharged from your debts.

So even if you aren’t quite sure of values, disclose as much as you can, know what your goals for filing are, and know what you are giving up.  Provide as complete and accurate information as you can to increase the chance of a quick and smooth journey through bankruptcy.

Typically, many people turn to friends, family or coworkers for a referral when they need a Lawyer. But again, because of the personal nature of bankruptcy, many people avoid disclosing to friends and family the need for help. Traditionally, the yellow pages were the number one source for information when locating a Bankruptcy Attorney. With the increase of multimedia and internet access, finding an attorney is as easy as typing in the word ‘bankruptcy’ in your favorite search engine. Literally, thousands of resources are available at your fingertips. With all this information available, how do people decide which attorney to choose? The four key areas that a consumer should understand before they hire an attorney are as follows:

The first key area to consider is personality…Here are a few things to think about when choosing a Bankruptcy Attorney. The most important thing that a consumer should look for in a Bankruptcy Attorney, or any professional for that matter, is personality. Not, do they have a good personality, but rather, are they easy to speak with and do they speak at a level that is easy to understand. As referred to above, bankruptcy can be a very difficult decision for most consumers and can cause a lot of anxiety. Having an attorney that can make a consumer comfortable will help the process of filing for bankruptcy much less stressful.

The second key area…Look for an attorney that focuses primarily on bankruptcy. As with many aspects of the law, the practice of bankruptcy law is becoming more and more specialized. Gone are the days when an attorney could hang out a shingle and handle all types of matters. Bankruptcy does not have to be the only area that they practice in, but it should be their primary focus.

The third key area is availability and accessibility is another aspect to look at when choosing an attorney. 24/7 access is not necessary when picking an attorney, but knowing when are good times and how to contact them with a question or concern is critical to ease the anxiety of bankruptcy.

The fourth and final key area … Process is another important aspect when choosing an attorney. What is their process for dealing with new and existing bankruptcy clients? Many attorneys have a process that they follow to make sure that everything is accomplished in a given time period. Knowing their process will help the consumer understand what is happening, which again helps lower the stress. Consumers should be comfortable with the process so that the bankruptcy can go as smooth as possible.

Remember when consumers are looking for the right person to assist them, they should carefully consider who they choose. Personality, Focus, Availability and Process are four key areas that a consumer should understand before they hire an attorney.

For many people, just the thought of the word bankruptcy puts a shiver up their spine. Because of a lack of understanding about what bankruptcy actually means, they take the view that bankruptcy is something to be avoided at all costs.

The reason for this is that there are many miss-conceptions about the affects of declaring bankruptcy. However, in reality for many people it can be an extremely effective way of getting out of debt.

Will I lose my belongings if I go bankrupt?

One of the main miss-conceptions is that after declaring bankruptcy you will have to sell all of your household belongings and be left with virtually nothing.

This is simply not the case. Once you are bankrupt, you are normally allowed to keep all of your household goods. This includes all your electrical appliances, furniture and clothing.

The only time that anything in your home is at risk is if it has a particularly great value. For example if you had some extremely valuable antique furniture. However the reality for most people is that they do not have any items of extreme value like this.

Can I have a car in bankruptcy?

You can continue to own and use a car if you are bankrupt. The only issue is that generally speaking the value of the car should not be more than about £1000.

If your car is worth £1000 or less and you need it for getting to work and other reasonable family requirements, then you will normally be able to keep it.

Of course many people have cars worth more than £1000. If this is the case then generally you will have two options. You can sell the car and buy a cheaper one. The excess funds could then be used to pay for the cost of your bankruptcy or given to the official receiver.

Alternatively a third party such as a family member or friend could pay the difference between £1000 and the value of the car to the official receiver. In this way they are buying back the official receivers interest in the car on your behalf and you will then be allowed to continue to use it.

If your car or other vehicle is worth more than £1000 but is a tool of your trade. For example it is a commercial vehicle or used as a taxi then you will be able to keep it.

Will I have anything left to live on?

Another myth when thinking about bankruptcy is that the court will somehow take all of your wages and you will be left with nothing to live on.

There have been headlines over the past few years in the press suggesting that if you go bankrupt you will be left with £10 a month. This is simply untrue.

At all times when you are bankrupt you remain in control of your money. You are allowed to operate a bank account and you are responsible for maintaining all of your living expenditure payments.

You will only have to make payments towards your debts if you can afford to do so.

Once you are bankrupt, the official receiver will review your income and your reasonable living expenditures. They can only ask you to pay any extra money you have left over after your living expenses are paid for and then only for a maximum of three years.

What if I am a home owner

One of the major miss-understandings is that if you are a homeowner you will automatically lose your home. This is simply not the case. However you do need to consider the implications of bankruptcy a bit more carefully.

The key thing to think about is whether there is any equity in your property or not. If there is little or no equity in your home or it is in negative equity, then you will almost certainly be able to keep the property.

If you do have considerable equity in your property, this does present more of a problem because the official receiver is entitled to realise that money for the benefit of your creditors. However even then it may not mean that your property has to be sold.

The best thing to do if you are a homeowner is take advice from an expert before deciding to declare bankruptcy.

What about the stigma of bankruptcy?

A key concern for many people when they think about Bankruptcy is what other people will think. However the reality of bankruptcy today is that it is just as private an agreement as the alternative popular debt solution the Individual Voluntary Arrangement.

Bankruptcy is not advertised in the local newspaper. This rule changed a number of years ago. As such it is extremely unlikely that local friends or neighbours will find out you are bankrupt unless you tell them. Your employer will not be told.

Once you have declared bankruptcy your name and address are listed in the Insolvency Register. This register is publically accessible via the internet.

As such if someone wants to find out if you are bankrupt, they can do so relatively easily. However the key is that they would need to make the specific enquiry, they are unlikely to find out by accident.

Bankruptcy should not be taken lightly

Of course, declaring yourself bankrupt is not something that you should undertake lightly. The solution is by no means right for everyone and you need to fully understand the implications for your own personal situation.

However the reality is that the affects of bankruptcy have changed considerably over the last few years.

Nowadays bankruptcy should no longer be considered as a last resort solution. For many people bankruptcy is certainly the best solution to resolve their personal debt problem.