Sometimes, the formal and legal declaration of
personal bankruptcy is the best way to go when
you're "snowed under" with bills, and you just
can't see your way clear to survive.
Actually, bankruptcy
allows you to make a fresh start. Generally, it
takes only a small amount of money, a careful
evaluation of your assets and your liabilities.
In many cases, a lawyer is not necessary.
If you have very few
assets, mountains of debt, and not enough income
to meet your obligations, then your best bet is
almost always the filing of straight bankruptcy.
What you'll need is the proper forms "S3010
Bankruptcy forms, for an Individual Not Engaged
In Business." These can be purchased from any
full-line office supply store, especially in an
area serving attorneys' offices.
You'll need to know
which district you live in for Federal Court
purposes - so look in the white pages of your
telephone book under U.S. Government - Courts -
and take down the address of the nearest U.S.
District Court. Check it out to be sure that
your residence is in this court's jurisdiction.
You then fill out the
forms you purchased, listing all of your
creditors - those with priority being listed
first - meaning those who have extended credit
to you against some sort of security or
collateral, followed by those who have extended
credit to you on just your signature or
reputation. You must be sure to list all of your
creditors because any that you fail to list,
will be able to sue you and collect even after
the bankruptcy has been adjudicated. At the same
time, be sure to include the names of anyone and
everyone you may have co-signed a note or a loan
for, as well as anyone who may have co-signed
for you.
The laws governing
personal bankruptcy vary in all states, but
generally, a bankruptcy judgment will not take
away the house you live in, basic home
furnishings, a car that's necessary towards your
gainful employment, nor the tools of your trade.
Check these things out to be sure against the
list of items regarded as the necessities of
life by your state.
When you've got all the
forms filled out, and notarized, you take them
to the Clerk of the U.S. District Court in your
jurisdiction. You pay the clerk $50, and from
there, you're home free. The clerk notifies your
creditors, and reminds them that being as you've
filed bankruptcy papers, they cannot bother you
about your debts anymore.
However, they are
invited to your hearing. Usually they don't show
up, because by that time, you have very few, if
any, nonexempt assets left that they are really
interested in.
But, whatever assets
you do have that are nonexempt, will be sold by
the Court to appease your creditors. Any money
realized from these sales is then added to the
total amount of money you may have turned over
to the court at the time of your filing, and
divided equally amongst your creditors according
to priorities.
After all of this has
taken place, and usually about 3 months after
you've been adjudged bankrupt, you can start all
over again to incur debt, pay bills and
establish a new credit rating. However , you
should be especially careful about talking with
your old creditors because they may attempt to
maneuver you into signing a "reaffirmation" of
your old debt. The thing to do is to be sure
that you carefully read anything you affix your
signature to, and don't agree to pay on any debt
that has already been discharged through your
bankruptcy!
In some bankruptcy
filings, it is definitely advantageous to hire
an attorney to represent you. This is especially
try for people who have assets such as real
estate they want to protect, and/or people who
has been operating home-based businesses or been
accused of fraud. Remember this, if you decide
to process your bankruptcy without a lawyer,
then it is your responsibility to fill out all
the necessary forms accurately and completely,
and every bit as precisely as if you had paid an
attorney to do it for you. Leaving out a
creditor's name or address or forgetting a loan
that you co-signed for, will surely bring on
litigation against you even after your
bankruptcy has been adjudicated. Be sure you
understand all the papers, ask the Court Clerk
for advice, and if you run into problems, then
take it in to an attorney.
Besides the regular
bankruptcy laws, there's also a little-known and
little-used method of getting reorganized with
your debt, particularly when you've got a steady
job and just need more time to straighten your
indebtedness out. This is the wage-earner's
provisions of Chapter XIII of the Federal
Bankruptcy laws.
Basically, these
provisions allow you to make new arrangements
with your creditors and pay off all your debts
over a new 3-year period of time. When you filed
for indebtedness relief under the provisions of
this law, nothing is recorded permanently on
your credit record. You get to keep all your
assets, but you must pay off all your debts.
But, so long as the Court grants you relief
under these provisions, and you pay your
creditors according to the repayment schedule
agreed upon by the Court, your creditors cannot
bother you. Even if they have begun a suit
against you, once the Court has given you
relief, they cannot touch you! Once you've filed
under these provisions, your creditors are
immediately restricted from even contacting you,
and get only what the referee or trustee doles
out to them.
Often-times, if a
creditor threatens to sue you, the most
effective thing you can do is to tell him
frankly that if he sues you, you'll have no
other alternative except to file bankruptcy
papers. In many instances, this will cause him
to take a second look and to do whatever he can
to assist you in paying him the money you owe,
but over a longer period of time, and at smaller
monthly payments. The absolute bottom line is
that your creditors know only too well that if
you do file for bankruptcy, their chances of
receiving even half of what you owe is
practically nil. Thus, it's in their best
interest to do everything they can to help you
to continue making payments on the amount you
owe, regardless of how small those payments may
be.
When a creditor does
sue you, and gets a judgment against you, he can
then get a court order directing the sheriff to
seize your personal property and sell it, with
all monies realized going to the creditor to
satisfy your debt. When they see this about to
happen, many people connive to make themselves
"judgment proof." In other words, they hide
their assets or move them out-of-state before
the sheriff or marshall arrives. This is
illegal, but is done as often as not.
Many creditors will
attempt to "garnishee" your wages. This is done
by getting a court order directing your employer
to set aside part of your wages or salary every
pay period and turn it over to him. First, of
course, he has to find out where you work; and
even then, in most states, there are limits set
relative to how much a creditor can garnishee
for your wages.
If you have no job, and
no visible assets, or you live in a state where
your wages cannot be garnisheed, your creditors
actually have very few ways of ever collecting
from you.
Many techniques used by
creditors and collection agencies are illegal. A
creditor or agency can write letters to you;
call you once a day in quest of a payment; and
even knock on your door to ask about a payment.
But he is forbidden by law to harass you or
invade your privacy, or use deceptive means to
get you to pay your bills. He cannot use foul
and abusive language over the telephone, tell
anyone besides you the reason for his phone
call, inconvenience you or in any way threaten
your job or your reputation in the neighborhood
where you live.
Still, the best idea
for reorganization and settlement of your debts
when you find yourself in an untenable position,
is in-person visits and explanations of your
situation with your creditors, and a desire to
explore other possible ways of mutual
satisfaction without involving collection
agencies or bankruptcy. Give it a try - it's a
lot easier than most people realize.
