ALTERNATIVES TO BANKRUPTCY
Avoiding bankruptcy is always a valid concern. As a general rule, we will always try to keep our clients out of bankruptcy if possible. That is why we always review a client’s financial situation thoroughly before recommending a course of action. Some clients call and simply say I want to file bankruptcy, what do you charge? We never answer that question until we first review the situation. Some lawyers may just put all of their financially troubled clients into bankruptcy. Not us. We find solutions wherever they are. Solutions to financial problems are not a one size fits all type of thing. Some clients may be able to negotiate with their creditors (i.e., obtain a mortgage loan modification or a forbearance agreement). Others may be able to refinance. Others may not be able to afford to carry their property any longer and may be better off selling. We try to work help my clients find the best choice for them. And for some, bankruptcy may be the best or only alternative. If that is the case, it is also necessary to determine which Chapter (7 or 13) will work best for you. This is not a simple area of law. There are many factors to consider, including whether any pre-bankruptcy purchases or transfers you may have made will cause you a problem later in bankruptcy. Is there sufficient income to fund a Chapter 13 repayment plan? Will the plan be 3 or 5 years (36 or 60 months)? Will the dividend to unsecured creditors be less than 100% (meaning that you could repay less than what you owe in Chapter 13)? Do you have all of the required documents that your trustee will require? There is a lot to consider! Making this decision without the advice of an experienced attorney is risky.
PROS AND CONS
There are benefits and burdens for those who file bankruptcy. On the plus side, you get the protection of the automatic stay. This stops all collection activity against you, all litigation and foreclosures. In Chapter 7 you can wipe out (discharge) many, but not all, debts. In Chapter 13, you can get 3 to 5 years to make a monthly repayment plan to catch up on debts in exchange for all this protection, a bankruptcy debtor must disclose all information pertaining to his or her financial condition. This disclosure includes all assets, liabilities, income and expenses. In addition, the assigned bankruptcy trustee must be given copies of the debtor’s last two tax returns and proof of income for the last six months, usually in the form of pay stubs. Self-employed debtors must also file a monthly operated report indicating their income and expenses. With the help of experienced counsel, most debtors find that the benefits far outweigh these obligations. Individuals who try to represent themselves in Bankruptcy Court are called “pro se debtors” and their cases almost always fail because they are not equipped to handle the responsibilities of Chapter 13. In Bankruptcy Court, it is a very foolish mistake to try to save some legal fees and represent yourself in a very complex area of law.