Wipe Out Your Debts!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
If you've fallen behind in paying your bills, but you don't want to declare straight bankruptcy, you may want to clean up your financial mess instead through Chapter XIII of Federal Bankruptcy Laws. Also known as Wage Earner Plan, Chapter XIII differs from straight bankruptcy in two most important ways: you must pay off entire amount of your debts (no 10 cents on a dollar here), and within a 3 year period. but good part is you are not declared "bankrupt", so no one ever knows that you needed relief under any part of Federal Bankruptcy Acts.
