Should I File Bankruptcy?
For most people, the idea of filing bankruptcy may be unpleasant, but for many in these economic times it could be the best option. Two questions to ask yourself would be: How do I make that choice? How bad do things need to get before I throw in the towel and ask the Bankruptcy Court for a fresh start?

More than one million people filed for personal bankruptcy between September of 2007 and September of 2008, a staggering 30% increase over the prior year period. And thousands more Americans "are unofficially bankrupt" and reluctant to file. The sting of failure and the dread of ruined credit keep many people from filing bankruptcy. But those fears can prevent people from taking advantage of the financial protection offered by the bankruptcy laws, which in many instances, allow you to erase most of your debts while preserving assets like your retirement accounts (IRAs, 401(k)s, 403(b)s and most of your child's 529 college-savings accounts) and many times even your home and car. Instead, too many people delay filing until they are truly desperate. When surveyed, over 40% of bankruptcy filers said they struggled for more than two years over deciding whether or not to file bankruptcy. However, most bankruptcy attorneys will tell you that they wished people would have come to their office sooner, before they emptied their retirement accounts or lost their cars to repossession. The following is offered to help you in your decision making process.

BANKRUPTCY TIMELINE - What to expect before, during and after filing bankruptcy.

6 MONTHS - Warning! Bankruptcy approaching!

If two or more of the following signs apply to you, look out:

• You have no health insurance or what you have is inadequate for your needs.
  
• You have two or more credit cards with outstanding balances.
• You are charging more each month than you can easily pay off.
• You don't have an emergency fund to cover unexpected expenses or loss of income.
• You are paying only the minimum monthly payment on your debts.
• You have a high student loan debt.
• You are avoiding talking about finances with your spouse/partner.
• You have been turned down for credit or a loan.
• You are excessively using home equity loans to meet normal monthly expenses.
  

4 MONTHS - Alert! Bankruptcy around the corner!

If two or more of these apply to you, in addition to the previous bankruptcy indicators, trouble is just around the corner:

• You are skipping payments or not paying bills at all.
• You are getting cash advances from one credit card to make payments on another.
  
• You are using credit cards to pay day-to-day living expenses.
  
• You panic when faced with an unexpected expense.
  
• Creditors are calling you day and night about overdue bills.

3 MONTHS - Time to cut back.

You've established that you're heading toward bankruptcy.

• Avoid using credit cards as much as possible.
• Make sure that you don't charge for luxury goods (vacations, jewelry, Rolex watches) or take out cash advances within three months of filing.

2 WEEKS - Prepare to file.

Call my office to schedule an appointment. Collect the necessary documents and information needed for me to prepare your bankruptcy. Here's a checklist of documents and information needed:

• A list of assets, debts and lawsuits.
• Addresses and account numbers for all of your bills and collection agencies (include copies of payment coupons for vehicles, real estate loans and student loans).
• Names and addresses of everyone to whom you owe money.
• Paperwork showing anything anyone may owe to you (includes a copy of any divorce decree entered in the past year).
• Pay stubs from the last six months.
• Tax returns for the past two years.
• A copy of the title or memorandum of title for all vehicles owned. If you have a leased vehicle, a copy of the lease will be required.
• A time-stamped copy of the deed and all mortgages relating to any real estate that you own or have an interest in. These documents can be obtained from the Recorders Office from the county in which the property is located.

B-Day - File bankruptcy.

The debtor usually has wiggle room of between 15 to 30 days to provide the court with any missing documents that weren't present at the time the initial filing of the bankruptcy petition. The required documents which must be filed by the debtor include.

• The bankruptcy petition.
• List of creditors.
• List of assets and liabilities.
• List of current income and current expenses.
• If employed, the debtor is required to provide to the Chapter 7 or 13 trustee pay stubs for the 60 day period prior to the filing of the bankruptcy petition.
• For Chapter 7 Debtors: the debtor must file a statement of intent which informs the court and creditors whether he or she will keep property that serves as collateral or surrender such property to creditors.
• For Chapter 13 Debtors: the debtor must file a repayment plan at the time of the filing of the petition or within 15 days thereafter.

I prepare these documents and file them for you after consultation with you and after obtaining your written approval.

 

Timeline after Bankruptcy Petition is Filed with the Bankruptcy Court.

1 Day - Can complete financial management course.

The personal financial management course can be completed as soon as you file your bankruptcy petition and obtain a case number. For my clients, the cost of this course and the cost of the initial credit counseling course are included in the flat fee I charge for a Chapter 7 case and information as to how to complete the financial management course will be given to you at the creditors’ meeting. The course can be completed from the comforts of your home. Debtors have 45 days after the creditors’ meeting to complete the financial management course and provide a certificate of completion to me for filing with the court.

 

2 Weeks - Chapter 7: Can finance a vehicle.

For Chapter 7 filers, financing may be available as soon as the bankruptcy petition is filed. For Chapter 13 debtors, you may be able to get a car financed once payments are being made on your Chapter 13 plan, especially if the vehicle is necessary to help you make your plan payments.

20 Days - Creditors’ meeting.

The creditors’ meeting is run by the trustee, who places the debtor under oath and asks questions about the debtor's assets. Creditors are permitted to attend; however they rarely do.

Make sure to bring your Social Security card and a photo ID to the creditors’ meeting.

For Chapter 7 debtors, the creditors’ meeting usually occurs 20 to 40 days after the filing of the petition and can be as short as 5 minutes in duration.

For Chapter 13 filers, the creditors’ meeting usually occurs 20 to 50 days after the bankruptcy filing and can be as short as 10 minutes.You will be required to start making payments to the Chapter 13 Trustee 30 days from the date of the filing of your bankruptcy petition.

Attendance at the creditors’ meeting is required.

4 Months - Chapter 7: Discharge.

A bankruptcy discharge occurs when the court determines that a debtor is legally relieved from most of his or her debts and creditors cannot take any action to collect those debts. The discharge usually occurs within four months from the filing of the petition.

Chapter 7: Request annual credit reports (4 months and 1 day).

• Get a credit report from each of the three major credit reporting agencies (Equifax, Experian and TransUnion) immediately after discharge.
• Check for errors, missing information and an "included in BK" notification for pre-bankruptcy debts. If you find errors on your credit report, each of the three major credit reporting agencies will provide you with information regarding how to dispute such errors in writing. Neither the court nor I make any report of your bankruptcy filing to the three credit reporting agencies. Each of your creditors is under an obligation to report your bankruptcy and update the status of your debt with each reporting agency.

Chapter 7: Secured Credit Card (4 months and 2 days).

• Bankrupt debtors often can get a secured credit card immediately after discharge. Annual percentage rates charged on these types of cards range from between 15 to 25%

1 Year - Chapter 13: FHA insured mortgage.

Chapter 13 debtors are eligible for FHA insured mortgages after one year from the date they make their first plan payment, if all plan payments have been made on time and the debtor has received the court's permission.

18 Months - Unsecured credit card.

A former Chapter 7 debtor can switch to an unsecured credit card with more favorable terms 1 to 2 years after bankruptcy discharge, depending on positive re-established credit.

2 Years - Purchase home.

A Chapter 7 debtor can purchase a home 18 to 24 months after his or her discharge, depending on a positive credit history. Interest rates on the new home may be 2 to 3 points higher than conventional mortgage rates.

30 Months - Chapter 7: FHA-insured mortgage.

Chapter 7 debtors are eligible for FHA insured mortgages 2 years from the date of their discharge. Chapter 7 debtors are eligible for FHA insured mortgages 1 year from the discharge date if they are able to show that he or she is responsible with his or her financial affairs, the bankruptcy was caused by circumstances beyond his or her control and that the circumstances giving rise to the bankruptcy are not likely to happen again.

7 Years - Bankruptcy comes off credit report.

A bankruptcy stays on your credit report for 7 to 10 years, and then it is gone.