Vested Interests - Bankruptcy May Not Be Good

Filing for Bankruptcy May Not Be Such A Good Idea: Consider your options first

It's a good bet if you're reading this article you might be in financial trouble and contemplating filing for a personal bankruptcy. Just saying the word Bankruptcy sends shivers down your spine! Why? Because as a society we are preconditioned to the stigma and "unknown" consequences attached to the bankruptcy process. Horror stories of bankruptcy have been passed down through the generations! Everyone has heard some tale of how "so in so" lost everything. Hopefully this article will help you understand exactly what bankruptcy "protection" entails and viable alternatives to the process.

Yes, I said protection! That is why the United States Congress originally instituted the Federal Bankruptcy Code. But what is actually protected? As I shall discuss later in this article, the type of protection afforded depends on which type of personal bankruptcy you file or, in some cases, are required to file by a federal bankruptcy court. Despite the protections afforded to a debtor, please note that filing a bankruptcy should be a last resort! Bankruptcy actions have devastating affects on your long-term credit and your purchasing power for up to ten years!

In addition to filing costs and attorney fees, a notation is added to your credit report stating you filed for bankruptcy. This notation will remain on your credit report for seven to ten years, depending on the chapter you file. This could make it difficult to obtain any type of loan or credit card. Even if you are able to obtain new credit, it will generally come with an unconscionable interest rates and repayment terms.

Filing a bankruptcy, of any type, sometimes leads the debtor to emotional issues of guilt, low self-esteem and even shame. Filing a bankruptcy can also affect your ability to rent an apartment or in a growing number of states, obtain affordable insurance. In some fields of employment, filing a bankruptcy could affect your ability to get a job or a promotion.

There are many alternatives to bankruptcy proceedings. These alternatives, if available to you, may prevent creditors from taking more of your of property and or help you repair your credit, solving your financial situation and avoiding, in part or in whole, the negative effects bankruptcy can create. Please take the time to review these alternatives, as one of them may be appropriate for your financial situation.

With this in mind, timing is critical to determine if it is appropriate for you to file for bankruptcy protection or whether you would be better off seeking relief through one of the other methods discussed in this article.

Complete a Personal Financial Statement and Understand the Situation.

1. Prioritize your assets. Make a list and decide which assets you want to keep and which ones you need to get rid of! Stick to the list!
2. Which liabilities are reported to credit bureaus? Pay those if you plan to refinance your home soon to get some equity to pay off the higher credit card bills!
Act to Avoid Bankruptcy:

So now your situation seems hopeless. What should you do? Contact a debt relief professional to help you resolve your situation. While an attorney who concentrates in debt reduction negotiations might be your first choice, very few of these attorneys actually exist! Finding a good lawyer to handle general litigation can be very difficult. Finding an attorney experienced in both bankruptcy filings and debt reduction negotiations can be down right exhausting! Very few attorneys have any expertise and experience in both of these fields. For instance, you might find that a law firm, advertising itself under the yellow pages "bankruptcy" heading, can complete the paperwork to file a Chapter 7 or 13 but they either do not know about or simply won't discuss other options that might be effective in your financial situation. Many lawyers that regularly file bankruptcy petitions have never done these types of negotiations. Some are unaware of the settlement potential of a client's case. Others understand the "debt settlement" concept but are either inexperienced or lack the necessary talent to effectively complete the negotiations. Be aware that filing bankruptcy paperwork in volume can be quick, easy money for the law firm set up as a "mill". Self investigate your attorney's practice. If possible talk to the paralegals and secretaries to get a feel for the volume of work the firm does. Ask your attorney to explain your settlement options both pro and con.

No matter what you decide to do, take charge of your situation. Educate yourself by learning about the various debt options. It's a known fact that lawyers generally try to push you toward a bankruptcy filing, while consumer agencies lean against it in favor of negotiated settlements with creditors. While you may be capable of doing your own negotiations you might think twice about it. There is an old adage, He (or she) who represents themselves, has a fool for a client! This saying has a lot of truth in debt situations because a debtor is emotionally involved in his or her own situation and may not have the mental stamina to properly negotiate to the lowest amount of repayment possible. Creditors are aware of this fact and will take full advantage of it when ever possible.

If your situation has come to the point that you need a lawyer, do not hesitate to get one. In a Chapter 13 filing, most lawyers will receive their fee directly from the money you pay the trustee under the repayment plan. In a Chapter 7 filing, many lawyers require an initial smaller retainer fee and allow you to pay the balance after your debt has been discharged and you can better afford to pay them. If you still cannot afford a lawyer find a non-profit organization such as Consumer Credit Counseling Service in your yellow pages. Beware of individuals or for profit agencies offering credit counseling services for a fee. While some are legitimate with noble intent, others may not possess the knowledge and skill necessary to handle your financial situation in a manner most beneficial for you. Many for profit credit agencies may just take your money and refer you to a lawyer with whom they have a fee arrangement. In many states, unless the referring credit agency is a state licensed referral service. This type of fee splitting or "bird-dogging" is illegal.

As discussed later, many debtors ignore their problem far too long and cause themselves even greater harm! If your situation is out of control, get some help from either a credit agency or a lawyer as soon as possible. Otherwise your situation will only get worse! Remember to ask the right questions needed to determine what the best solution is for you! Don't let anyone talk you into a solution just because "it's what they do".

HOW DO YOU KNOW IF IT'S TIME TO CONSIDER BANKRUPTCY OR AN ALTERNATIVE?

So, now that you know some general information, how do you know if you should actually file for bankruptcy or participate in an alternative to bankruptcy? Most people have one of the following situations that cause them to contemplate this action:

1. Loss of job
2. Divorce
3. Adverse civil judgment
4. Aggressive bill collection
5. Excessive medical bills
7. Excessive home mortgage adjustable rate increases.

Deciding to file for personal bankruptcy is a difficult decision that should not be made lightly. Most often individuals file because of unforeseen twists in life like excessive medical expenses, massive credit card debt, divorce, a death in the family or even loss of employment. Often times the mental and emotional exhaustion of these situations leaves individuals unable to deal with the financial aspect, causing the need for personal bankruptcy.

Before considering personal bankruptcy, other alternatives should be considered as well. These may include debt consolidation, temporary forbearance on loans, or even finding a new job or a second job to help pay for expenses. If debt consolidation, a new job or forbearance does not make a difference in the level of financial stress, then personal bankruptcy can be considered.

One point that many individuals do not take into consideration is that personal bankruptcy does not make financial problems magically disappear. On the contrary, even after filing for personal bankruptcy, it will remain on credit reports and scores for ten years afterwards. This can make getting back on the right track difficult as many creditors will not approve those with personal bankruptcy on their record.

As well, many individuals have a difficult time adjusting to the lifestyle changes required after filing. Depending on the type of personal bankruptcy filed, individuals may be required to live on a budget with a strict creditor repayment schedule. Other individuals may lose all luxury items, including furniture, automobiles or even recreation possessions like a boat or jet skis.

The two primary types of personal bankruptcy are Chapter 7 and Chapter 13. Basically, for those individuals who are in debt but not completely floundering, they may want to consider Chapter 13, or a repayment and reorganization plan. The court system will work with the individual towards collecting all creditor debts due and then setting up a strict repayment schedule. If payments cannot be made, then repossession of material goods will begin to take place.

For those who are absolutely absorbed by debt, Chapter 7 may be the best option. This type of personal bankruptcy will require a liquidation of assets, except for those exempt items. Exempt items are usually considered "necessities of life" such as a car to get to work or a computer if the person uses this to make a living. Through Chapter 7 the court system will break up debts into dischargeable and non-dischargeable debts.

Dischargeable debts are those debts that will be taken off of the debtor's records. The debtor will no longer be required to pay. If a debt is non-dischargable, it means the debtor will still be required to pay even after filling for personal bankruptcy. Non-dischargable debts are debts of public policy or because of the debtor's wrongdoing. These could include child support payments or criminal court costs.

Since personal bankruptcy is one of the most important decisions an individual may ever make financially, it is best to spend time researching and speaking with professionals to discuss the best avenue to take. There are a variety of different professionals who can offer more in depth knowledge of the subject, such as bankruptcy lawyers, legal aide services and even online bankruptcy agencies. Any of these are excellent options to begin finding out important legal information regarding personal bankruptcy.

Vested interest: 1. Law. A right or title that can be conveyed to another. 2. A group that has a vested interest.