Should you or should you not to file for Bankruptcy?
A good Bankruptcy Attorney will make this decision based upon a careful consideration of your problems and a comprehensive analysis of your financial circumstances.
Circumstances to consider are:
2. How much money you may make in the future; and
Your Attorney should assist you in ensuring that no relevant facts are overlooked and review with you the advantages and disadvantages of filing. If there are other options available to a client, such as, out of court restructuring, refinancing, consolidation or lump sum payment to settle debt, then a good Bankruptcy Attorney should point out these alternatives.
Advantages and Disadvantages of Filing for Bankruptcy
A good Bankruptcy attorney will explain to you the advantages and Disadvantages of filing for Bankruptcy.
Advantages of filing the Bankruptcy:
The Automatic Stay
The automatic stay with limited exceptions stays all suits and collection activities or creditors. Therefore if you have received a lawsuit or collection notice from firms such as:
A bankruptcy filing will stop all collection and local activities initiated by these creditors such as harassing phone calls, wage garnishments, income executions and property seizures.
All of the debt of the filing debtor incurred prior to the filing of the bankruptcy will be discharged.
Interest stops
Interest stops accruing on your debts. The high interest rates many credit card companies charge you with are stopped once you file.
Disadvantages of Filing for Bankruptcy
Bad Credit
The credit-reporting agencies can and will report and keep on their records for a period of ten years the fact that I filed for Bankruptcy. Therefore, for the next ten years after your filing of bankruptcy, any application you make for credit may and most probably be denied.
Most people already have bad credit when they get to the point of deciding to file for Bankruptcy. In my experience, the typical a bankruptcy client has numerous unsatisfied judgments and various other derogatory information on their credit. Thus my typical client already has bad credit and needs to clear their debt. Also remember, the filing of a bankruptcy, although probably one of the most derogatory items you could find on a credit report, will not prevent a person from rebuilding their credit in the future.
Liability for other co-debtors
You may be held liable on your spouse’s debts even if those debts appear in your spouse’s name alone and even if those debts were incurred without your consent or knowledge.
The solution to this problem is to add those debts of your spouse to your bankruptcy case if you are married.
You might not get your discharge
On occasions people do not get their discharge after filing. This can happen when:
Motions are made pursuant to Bankruptcy Code (“Code”) Section 522(f) to avoid liens on exempt property might be filed by Creditors. The Trustee may take an action taken by the against you or third parties to avoid preferences (Bankruptcy Code Section 547), fraudulent transfers (Code Section 548) and/or post-petition transfers (Code Section 549).
Also the Trustee may take an action against you for your failure to cooperate with the Trustee to provide information.
MORE BANKRUPTCY CODE FACTS
The current bankruptcy law which was enacted by Congress in1978 is called the Bankruptcy Code. This Code was amended by Congress in 2005 as the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.
There are nine Chapters of the Bankruptcy Code. My office focuses on Chapter 7 and Chapter 13.
The Bankruptcy Code refers to the person in need of bankruptcy assistance as “the debtor.”
The automatic stay is an important part of the bankruptcy law as it provides most debtors with relief from collection activities once the bankruptcy case is filed. Certain debtors, like those that file in a repeated manner may not be protected by the stay.
Once a debtor obtains a discharge under the bankruptcy code, the debtor’s debts under a Chapter 7 case will under most circumstances be wiped out. The creditors (the people owed money) are forever prevented from attempting to collect on the discharged debts.
Chapter 7 is referred to as a “Straight Bankruptcy.” A Chapter 13 case is a reorganization case often used by individual debtors to save their homes. A reorganization case gives the debtor the opportunity to restructure debts and to pay creditors through a Chapter 13 plan so long as this plan is approved by the Bankruptcy Court. Under Chapter 13, an individual debtor will often pay back only a percentage of prepetition debts.
CHAPTER 7
With limited exceptions, all natural persons and business entities are able to file for Chapter 7. A prerequisite to filing is that the debtor must obtain, within the 180 day period of filing, a Certificate that they have complied with the Credit Counseling requirement of the Bankruptcy Code.
A Chapter 7 case can be dismissed or converted to a Chapter 13 case if the Court finds abuse in the filing of the case. A finding of abuse may be made if the filing debtor fails the Means Test or files a bankruptcy petition in bad faith.
Once the debtor files a case under Chapter 7 a Trustee is appointed and the job of this Trustee is to liquidate the assets of the debtor (or to make a finding that the debtor has no assets to be distributed) and distribute the proceeds, if any, to creditors. The Trustee may also make a finding that although the Debtor has assets these assets are of inconsequential value or burdensome to the estate.
Not every asset a debtor possesses will be liquidated. Some assets are exempt under the bankruptcy code.
The goal of the Chapter 7 discharge is to give the individual debtor a “Fresh Start.” As mentioned before the recent amendments to the Bankruptcy Code make it more difficult for consumer debtors to obtain this discharge. A debtor with income above the requirements set forth in the means test may have to file a Chapter 13.
If you are faced with any of the above problems, I would suggest that you contact an Experienced Brooklyn, New York Bankruptcy Attorney, like me, George M. Gilmer, Esq., if you have any questions.