Bankruptcy is an option that must be taken with full awareness of all the consequences. It is a life altering decision and should be given a great deal of thought. Moreover, it is a very tedious and complex process and in order to be fully aware of what all filings for bankruptcy entails, it is best to seek counseling regarding bankruptcy.
Bankruptcy Counseling - What it Entails
A lot of consumers do not have a clear understanding of the complexity involved in filing for bankruptcy. They are either unaware or ill-advised about the entire process and the possible consequences filing for bankruptcy. Bankruptcy counseling programs provide the consumer with the following information:
- Information: Counseling programs discuss bankruptcy in detail. There is a lot more to it than just signing papers. These bankruptcy counseling programs highlight everything in order to keep consumers fully informed.
- Eligibility: There is a common misconception among people that anyone is entitled for bankruptcy. In point of fact, not everyone is eligible for bankruptcy. There is a minimum criterion that consumers have to meet in order to be considered for this relief. The requirements are even stricter for business establishments.
- Paperwork: Filing for bankruptcy is a very tedious process and involves a great deal of paperwork. Bankruptcy counseling programs familiarize people with the type of forms and documents required.
- Restrictions: There are a number of restrictions that come during and after filing for bankruptcy that many consumers are totally unaware of. Bankruptcy counseling, discusses those restrictions in detail.
- New Laws and Regulations: The rules are not the same as they were before. The recent recession and the decline in the U.S economy have paved the way for stricter, tougher regulations making it extremely difficult for any business to declare bankruptcy at will. Bankruptcy counseling programs provide the latest information on what the rules say and what they mean.
- Other Options: More often than not, consumers attending these programs learn that they are other solutions to their financial worries instead of filing for bankruptcy. A bankruptcy stays on the consumer's credit for up to ten years.
- Life After Bankruptcy: Life after bankruptcy is not the same as before. In fact, it is a lifestyle changing decision. These programs shed light on the lives of people living their life after bankruptcy. This gives consumers a good idea of what they are getting themselves into.
- Is Bankruptcy for You: This is ultimately what the entire program is all about. These programs help in determining if one should really take up bankruptcy. No matter how desperate a consumer's financial situation is, bankruptcy should always be taken up as the last option.
Considerations While Choosing a Bankruptcy Attorney
- Qualification: The bankruptcy form should be conversant with the rules and regulations of the state, especially with reference to bankruptcy. One should check the qualification of the bankruptcy attorney.
- Experience: Experience makes an attorney perfect at getting approval for the bankruptcy. It is only with the help of experience that an attorney can tell the debtor about when to file bankruptcy. Sometimes the situation may not be conducive enough for filing bankruptcy.
- Efficiency: This is one of the most important factors to be considered before availing the services of any bankruptcy attorney. Over the years, it has been proved that one should trust the word of mouth of those people who have availed the services of that attorney. One should try to find out the success ratio of the attorney, in other words efficiency.
- Affordable: The debtor should ask the cost of the services in the very first meeting with the attorney. Prior to the first meeting the debtor should inquire on the phone whether the attorney offer the first bankruptcy counseling session free and without any obligation.
- Ethics: All bankruptcy attorneys are not the same. You may find some attorneys resorting to unethical practices. Some offer their services at nearly a fraction of the prevailing market rate, while there are some that make wrong promises. This is just to lure the clients and make money. Some of the attorney have hidden expenses and do not make the debtor awareness of this in the first meeting. A good bankruptcy attorney is always clear and transparent with the client.
Documents to be Enclosed
If you are filing Chapter 7 or Chapter 13 bankruptcy, you will enclose the following documents in the bankruptcy petition:
- Schedules of assets and liabilities
- Bank statements
- Retirement plan statements
- Other sources of income
- All creditors and the debt
- Child support
- Legal Judgment
- Statement of financial affairs
- Pre-bankruptcy credit counseling proof
- Last 60 days of paystubs
- Most recent tax return
- Associated filing fees
- The service will help you work out an affordable repayment plan.
- They help you work out an after bankruptcy plan to afford for comfortable living with the repayment plan in mind.
- They help you determine what assets you can retain and what will have to be given up.
With all the help and counseling you receive from bankruptcy services, you can rest assured things will get better. Whether you file or work out a payment plan, you will find their services very useful. They are there for you and will help to work out the best plan of action for your budget and lifestyle.
Bankruptcy Counseling Vs Credit Counseling
Credit counseling is powered by different agencies with groups of professional financial advisers. Credit counselors would usually provide the client an option as to how he would like to restore his arrears with a particular creditor. Most credit counselors go for repayment plans, wherein a thorough investigation will be done on the customer's income and expenditure. Upon determining your ability - or disability - to pay, they will coordinate with the creditor on your behalf. Most financial institutions and lenders recommend the use of credit counseling.
This is because creditors have more chances of collecting back debts from customers when they are under counseling. When a customer files for bankruptcy, specifically Chapter 7, there is hardly any chance for bank collection agents to get back the money owed by the borrower. As with most financial transactions, you still have legal liability over decisions made through credit counseling. You will be able to directly manage the impact of your actions to your credit report.
Bankruptcy, on the other hand, is subdivided in different chapters. Filing for bankruptcy is often the best choice for people who are facing repossessions and foreclosures. Unlike credit counseling, which usually deals with minor arrears such as bank account delinquencies, bankruptcy is commonly the last resort for those who have a big amount of debt. The costs and effects of bankruptcy are more taxing compared to credit counseling. An individual's credit report can easily be tainted by bankruptcy as soon as the filing takes place. This is reflected in your credit report for ten whole years and may also be the cause of rejection for future credit applications.
In order to qualify and be declared as bankrupt, a person needs to submit the proper forms in federal court, and go through extensive legal proceedings. Instead of getting a mere credit counselor to assist you with the paperwork, a bankruptcy attorney is needed to help you go through the entire process. Although there are services that provide free legal assistance, spending a lot for your bankruptcy case usually provides more benefits in the end. The concept of bankruptcy is also something that needs to go through further thought and consideration on the part of the person being subjected to the case.
The Bankruptcy Process
- Filing the Paperwork: The first step in the bankruptcy process is filing the petition. The petition is a detailed list of your financial standing and includes information about your income, assets, debts and bank accounts. The petition is also the most crucial document in any bankruptcy case. If there is any information missing or inaccurate on the petition, the case may be dismissed, leaving you without the protection bankruptcy offers.
- Credit Counseling: Laws require that anyone filing for bankruptcy attend and complete a credit counseling course. The course is also known as a debtor education course and teaches you about budgeting, money management, other debt relief options and how to use credit wisely. The course is usually around 90 minutes long and can be completed in person or online.
- Meeting of Creditors: After the paperwork has been filed a 341 Meeting Of Creditors will be held. This meeting is conducted to provide a forum for anyone involved in the bankruptcy to ask questions or dispute information. Your creditors are allowed to attend the meeting and ask questions about the details listed in the filing. However, creditors do not always attend the meeting, which waives their right to dispute information in the future. The Trustee will be in attendance and it is their job to be a mediator between you and the creditors if any payments or assets are to be given.
- Court Decision: Once the Meeting of Creditors has been completed, any assets have been liquidated and everyone in attendance is in agreement, the bankruptcy court will make its ruling. In a Chapter 7 case, the court may either
- Discharge the debts, relieving you of the liability to the debts or
- Dismiss the case, returning your debt liabilities to your responsibility.
A case may be dismissed for many reasons including failure to comply with the requirements or fraud. In some cases, you may be able to re-file after your case has been dismissed. In a Chapter 13 case, the court may either
- Discharge the debts after you have satisfied the debt repayment plan or
- Dismiss the case, returning your debt liabilities to your responsibility.