Six Common Questions We Hear Leading Up to a Bankruptcy Filing Decision
When is bankruptcy something to consider?
When your financial situation is causing you stress and you see no reasonable likelihood of prevailing, in light of your current challenges.
Two common circumstances help to illustrate this test:
- An individual is in over his/her head and can’t see a way to get out from under financial hardship. They begin to look for a way to “start over” in terms of their financial situation. Bankruptcy can help. Common bankruptcy results include paying back only the portion of your debt which you can afford (Chapter 13), or wiping out your debt entirely (Chapter 7);
- Constant creditor harassment is inhibiting your peace of mind. Whether by phone or mail, you feel you cannot get a moment to yourself. Filing bankruptcy will bring a halt to creditor collection communications. The automatic stay during your bankruptcy case stops all credit collection communication. The permanent injunction, after you receive your discharge, prevents any further contact.
Where do I start (before filing for bankruptcy?
After deciding to file, you must complete a course in credit counseling and receive a certificate, before you will be eligible to file for bankruptcy. The course is inexpensive (generally between 15 and 50 dollars, depending upon the agency which you use) and can be done online or by telephone but, you cannot file without that certificate. The certificate is “good” for only 180 days, so it is recommended that you obtain the certificate only after you have hired counsel and prepared draft schedules in order to assure that you will not have to repeat the course. Your attorney can identify the approved agencies which are authorized to provide this service. The agency will analyze your unique circumstances and aide you in a preparing and understanding an analysis of your present budget. This is one step in moving forward and overcoming financial hardship.
Do I need to continue to file tax returns before (and during) my bankruptcy proceedings?
Yes. Your bankruptcy attorney will ask you for the last several years of tax returns in order to assist with compiling your bankruptcy schedules. The trustee appointed to administer your case will ask your counsel for the last year’s taxes (at least) and taxes going forward if you are in Chapter 13 (in Chapter 13 your case remains pending for at least three years). Cooperation and transparency are essential when going through a personal or commercial bankruptcy. Failure to provide tax documentation in a timely manner can bring your case to a quick halt. All that being said, even if you are behind on your tax filings, contact the bankruptcy team at Shaines & McEachern and we will review your situation and help you get “bankruptcy ready” in short order.
How do I handle creditors during the bankruptcy process?
Direct them to call your attorney. If they know you’re working with bankruptcy counsel, they’ll stop attempting to contact you. Why? Because they don’t want to risk being in violation of the automatic stay imposed by your bankruptcy filing. Even an inadvertent violation can be costly for an over-aggressive creditor. Given what’s at risk, almost all creditors prefer to deal with your counsel, even prior to the bankruptcy filing. Therefore, if you get a call from a creditor, whether before or after you have filed a bankruptcy proceeding, you should inform the creditor of your filing (if appropriate), and let them know your attorney’s name and contact information. Finally, instruct the creditor to stop contacting you. They will. The threat of the automatic stay is strong enough that it can buy a debtor in bankruptcy, and even one just considering filing, some peace of mind.
Which creditors/debts should I list in my bankruptcy schedules/document(s)?
All of them. As mentioned, candor is the best policy and is the minimum expected of anyone availing themselves of the benefits of bankruptcy. Bankruptcy filings are public records and to obtain a discharge each creditor must receive notice of your filing. Nobody benefits more than the debtor from making full disclosure, so, why bother potentially compromising your own case by playing hide the ball with a creditor claim? When your creditors are listed, with full contact information, your attorney will be able to complete your schedules much more easily. Further, the discharge you receive will be as broad as it should be, including all creditors, not just a select few. It’s also important that your attorney and the court have a full understanding of the weight of all debts you’re carrying. After all, the idea is to put yourself in a better financial situation moving forward, so it’s essential that all involved have a complete and accurate picture of the scope of the challenges which you are facing.
In the short run, how will filing for bankruptcy benefit my situation?
In the short run, filing for bankruptcy will cease all of the demoralizing dunning letters and harassing phone calls which you receive from creditors looking to collect their debts. As mentioned, this is known as the automatic stay. If a creditor has filed a lawsuit against you that matter is halted, in order to allow you to enforce your bankruptcy rights, without interference, or complication. Among other things, the automatic stay stops creditors from attempting to foreclose or repossess your assets. This protective aspect of a bankruptcy filing is one of the greatest reasons that people avail themselves of the bankruptcy option.
While filing for bankruptcy isn’t a means to rid yourself of all your anxiety as it pertains to your financial situation, it can certainly alleviate much of that stress. The process itself can be demanding and is much more easily understood with an astute and capable attorney by your side. You will be treated with respect and guided through the process. The Shaines & McEachern bankruptcy team is here to do just that!
Contact us today if you have any questions on whether or not filing for bankruptcy is the right path for you.