If you're afraid to answer phone because your creditors have been calling every night; and you're worried that one of them is going to call your boss and tell him you're a deadbeat; and just trying to pay off your bills leaves you almost nothing for food - it time you thought about bankruptcy!

With a small amount of money, a lawyer (and even he's not necessary a lot of time), and a careful evaluation of your assets (what you own) and your liabilities (what you owe), you too can make a new start with help of Federal and State bankruptcy laws. But don't rush into this without carefully determining which is right way for you, for there are several different ways to stop your creditors cold, and choosing wrong way can result in your losing much more than you might otherwise have to.

Straight Bankruptcy Usually Costs Less, and It's Quick!

If you have very few assets, and lots of debt, and not enough income to pay debts off, even on an extended plan (more about that later), then you will probably have to file straight bankruptcy. You must file proper forms (or "schedules") which you can purchase from any really good office supply stationery store in your nearest city, especially one in a district where there are lawyers' offices.

Bankruptcy is not a very complicated court action, so don't be too afraid of it. You will need to know which district you live in for Federal Court purposes; look in telephone (white pages) under U.S. Government - Courts, and locate U.S. District Court in your nearest city. Probably that court has jurisdiction; but check this out by phoning Clerk of Court and asking him, giving him you home address. You will have to fill out several "schedules" or lists of your creditors: creditors having priority, creditors having security, and creditors having unsecured claims without priority. You must list every creditor, for any one that is not listed can still sue you and collect, even after bankruptcy! If you don't know if a debt is secured (backed up by a related asset, like refrigerator bought on an instalment loan) or unsecured (made only on your personal reputation, with no related asset), ask creditor. Include as a creditor name of anyone for whom you co-signed a loan or note, and anyone who co-signed for you.

What Will You Have Left?

Will you be put out in cold without food, clothing and a house to live in after your creditors get paid? Not at all - because most State bankruptcy laws allow some of your assets to be "exempt" from being used to pay your creditors! You must check specific laws of your State, but usually, house you live in, tools of your trade, your personal clothes (within reasonable limits) and certain specific basic home furnishings are all not taken away from you. In fact, in this totally absurd world we live in, many States now permit you to also keep your TV set(!), because, apparently, they regard it as a necessity for life!

Where to File

Once you have all forms filled out and notarized, bring them to Clerk of U.S. District Court in your district, along with $50. You don't have to notify your creditors - Clerk does that, while also reminding them that now that you have filed bankruptcy papers, they may not press you for any more money, but may come to your hearing.

Usually your creditors don't show up, since by that time you have filed bankruptcy, you have very few nonexempt assets left that they are interested in. Whatever assets you do have that are not exempt (if any) must be sold under Court's supervision. Any money thus realized is added to whatever cash you may have had at time you filed (if any) and total amount (which might be, and often is, as low as $50 or $750 is divided up by trustee appointed at your hearing and your creditors get paid on a pro rata (proportional) basis to amount you owe them. If your assets add up to an amount that, for example, only allows each creditor 3 1/2 cents for every dollar of debt you owed them, then that 3 1/2 cents is all he gets!

About three months after you have filed, you adjudged "bankrupt". and you can start over again to incur, pay bills and establish a new credit record. Be careful, however, about talking to your old credits at this time. They may offer to help you out by extending new credit, and manoeuvre you into signing "reaffirmation" of your old debt! Ready anything you sign very closely, and don't agree to repay any debt that you have already discharged through your bankruptcy!

Lawyers for Complications

There are some people who should definitely hire a lawyer to help them through their bankruptcies, especially people who have assets like real estate that they want, somehow, to keep. Aside from real estate, if you have been accused by any creditor of fraud, you should also have a lawyer handle your case. If you decide you don't need a lawyer to handle your bankruptcy, you are still responsible for filling out all of forms accurately and completely, and every bit as carefully as if a lawyer had done them. Leaving out a creditor's address from a schedule, or forgetting a loan you co-signed can bring lawsuits against you even after your bankruptcy. So be careful, and if you find bankruptcy process is too complicated, do see a lawyer!

Keeping Your Assets Instead

Don't admit you're desperate, even if you are! Look like you couldn't care less whether they'll lend you money, like you haven't got a care in world. Dress really well, in your most impressive clothes, when you go to bank. Allow plenty of time, so you don't have to rush in at last minute, but can afford to saunter in, as if you're doing them a favor just considering borrowing money from their lousy institution. If it's a country bank, where you can be seen as approach bank, drive up and park, be sure to arrive in a good car, squeaky-clean and highly-polished, even if you have to borrow your Aunt Martha's Cadillac just for day.

Arrive primed with all information bank wants to know in order to approve a loan (lease or mortgage) for you. If you know that you've got some points in your history over last five years that will hurt your application (such as not long enough in your present job, not long enough in your present residence, inadequate salary, etc.) try to figure out how you can improve those areas before you go to see loan officer (to find out what questions may give you trouble, try and get a blank form ahead of time...even from another bank, if you don't want to let your bank know what you're considering).

If you've only been a few months on job, but your company small and closely-knit, see if you can get boss to agree to a little white lie, such as that you've been employed for two years. If you've only lived where you are now for a month, see if your mother's willing to have you list her address and telephone as address where you've been living for last three years.

If your salary's not high enough, but you get paid overtime quite regularly, see if your company bookkeeper will allow you to list your salary at what it averages out to, including overtime.

If you've got an unexplained break in your job history, where you were actually out of work, don't list it that way--say you were working for yourself running a small business from your home (give it an impressive-sounding name, and list your best friend's name, address and phone number if they want to check with your employer at that time).

In short, to get credit it isn't so important to have financial stability as it is to appear to have it. Follow this rule, and getting credit should be easy.

Here are a few tips that may be of great help to you, it they fit your situation.

*If you're getting a lease, normally only a landlord is involved, and most landlords who want to rent our their property will go along with you, even if your credit rating's not so hot, providing you look O.K., speak in a decent and reasonable manner with them, and have at least first month's rent and security deposit.

*If a bank won't give you a loan, don't despair! Their standards for credit are very fussy. But commercial finance companies aren't so particular. They charge more interest, but they may come through with loan.

*If finance company won't help you, there's always last resort, your friendly pawnbroker. He'll loan cash on watches, jewelry, furs, musical instruments, guns and everything else of value, Doesn't matter what your credit rating is!

*If you want a loan to start a new business, or increase capitalization of an existing one, and bank doesn't want to do it, try one of companies that offer to lend venture capital for just these purposes. You can get a good list of a large number of these companies in this book: Venture Capital, The Source-book of Small Business Financing, edited by Leroy W. Sinclair, published by Technimetrics, Inc., 919 Third Avenue, New York, NY 10022.

Mortages-the ins and outs

Let's say you've decided it's time you got more space for your family. You don't have a lot of cash saved up, and you don't know your way around housing market and complicated mortgage terms. What to do?

You're probably already friendly with a banker who knows you from your previous loans. Start with him. Ask him questions. Get his best guess about amount of money you would have to put down as a down payment on a conventional mortgage. If you can't meet that, you may be willing to put up with some red tape and get an FHA or VA mortgage if you qualify-lower down payments, lower closing costs (which have to be all cash, and can run over $1,000!), and a longer time to pay loan off (30 years, compared with 15 or 20, or sometimes 25 years, on a conventional mortgage). For more information on these Government-guaranteed mortgages, write to:

Further Reading