How Your Bankruptcy Attorney Can Help You Regain Self-Sufficiency
Even though bankruptcy is usually the financial strategy of last resort, it does offer you some relief to start over. Your attorney will want to help you attain the three objectives to a successful chapter 7 bankruptcy and reap the most benefits from its legal provisions. This will help you obtain a renewed goal of self-sufficiency.
The three goals are:
1. Obtaining Time and Protection to Regroup
When your bankruptcy petition is filed, you will come under the protection of the automatic stay, which stops creditors from initiating court actions, garnishing your wages, and foreclosing on or repossessing your assets. It may keep you from being immediately evicted if you are a renter, or having your utilities shut off. This protection has its limits, but it will give you time to consult with your lawyer on the best way to handle individual problems.
2. Getting Rid of Suffocating Debt
Chapter 7 bankruptcy is a liquidation bankruptcy so some of your possessions may be taken that exceed the exemption (assets that can be set aside) amounts and sold by the bankruptcy trustee (legal official appointed by the judge to oversee your case) and the proceeds will be divided to pay your debts.
Your debts will be categorized as priority or non-priority, secured or non-secured, and dischargeable or non-dischargeable. Credit card debt is a good example of the non-priority unsecured type and it usually will be discharged or erased when approved by the judge in the final proceeding. Getting rid this type of debt may enable you to better take care of your necessities and secured debts.
There are certain types of debt (unsecured priority debts) that are not ordinarily discharged in bankruptcy. Some of these include:
- Administrative bankruptcy expenses,
- Student loans,
- Certain taxes,
- Alimony, and
- Child support.
If you have been making honest efforts to find adequate employment and pay your student loans, you can file an adversarial proceeding to get all or part of the student loan debt discharged. This is not an easy feat to accomplish, so you need to consult your attorney to help you decide if it would be worth the effort.
Secured debt refers to debts that have collateral assets attached to them, such as vehicles. To keep any of these assets not covered by an exemption, you will have to catch up on payments and reaffirm your debt. It may be that a longer payment period with smaller payments can be negotiated with the creditor. The affirmation plan must be a reasonable one that will convince the judge that you can handle it, or it will not be approved.
3. Keeping the Assets You Need to Start Over
As you go through the bankruptcy process there are "exemptions" that you can use to keep the things you need. This often includes a certain amount of allowable cash, home equity, clothes and personal belongings, tools of your trade, and household furnishings/goods, health savings accounts, retirement accounts, and a "wildcard" exemption. You will have some leeway on what to count so your lawyer will advise you on how to use these to your best advantage.
Since bankruptcy is a federal provision, lawmakers have tried to make it as uniform as possible. However, the states still retain the right to develop their own list of exemptions and can insist you use theirs. These states will give you the option of choosing the federal exemptions instead: Alaska, Arkansas, Connecticut, District of Columbia, Hawaii, Kentucky, Massachusetts, Michigan, Minnesota, New Hampshire, New Jersey, New Mexico, New York, Pennsylvania, Rhode Island, Texas, Vermont, Washington, and Wisconsin.
Along with guiding you on the above objectives, your attorney (such as Glaser Steven J atty) can also give you specific counsel on what mistakes to avoid before, during, and after bankruptcy. He or she can also be tapped for advice on how to rebuild your financial standing in the years to come.