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Bankruptcy - Should I File?

If you have looked into other alternatives available to remedy your situation, and none of them are feasible or practical for you, then filing a bankruptcy petition may be the most responsible step to take.

In considering whether to file for bankruptcy, you should ask yourself the following questions:

  • Do you ever use one form of credit, such as a credit card or debt consolidation loan, to make payments on other debt?
  • Do you ever borrow to meet regular expenses, such as food and utility bills?
  • Can you barely make the minimum required payment on credit cards or other debts?
  • Are you receiving calls or letters from creditors or collection agencies?
  • Are you being sued, or are your creditors threatening to sue you?
  • Are your wages being garnished, or are your creditors threatening a garnishment?
  • Are your financial problems impacting your health or relationships?
  • Are you using one-quarter or more of your take-home income to pay credit card bills and personal loans (excluding mortgage payments)?
  • Are your revolving credit cards charged to the limit?
  • Have you bounced more than one check in the past year?
  • Are you behind on house or auto payments?
  • Are your creditors threatening to repossess your car?
  • Is your mortgage in foreclosure?
  • Are you behind on your taxes or do you owe the IRS?
  • Do you owe medical bills you cannot pay?

If you answered "yes" to one or more of the preceding questions, you should consider seeking some form of debt relief. This could include negotiating with creditors, seeking credit counseling, or filing for bankruptcy. (NOTE: Please be careful in dealing with third-parties who promise to "fix" your credit, to reduce the amount of your debt, to cut your interest rates, to pay your bills for you, or to do anything that does not make common sense. Check references, contact the Better Business Bureau, and deal only with established, reputable and licensed credit counseling agencies or services.)

Filing for Bankruptcy. Your credit card debt, medical bills or other unsecured debt is overwhelming, and you have no reasonable prospect of ever paying it back. In this situation, the most responsible step to take for you and your family may be to file for bankruptcy protection through the United States Bankruptcy Court.

TYPES OF BANKRUPTCY. There are several types of bankruptcy protection which may be available to you. Each type has its own requirements for filing and is designed to a debtor with different kinds of help. It is important to select the type of bankruptcy which is best suited to your needs.

Chapter 7 - "Liquidation": Sometimes referred to as a financial "fresh start", Chapter 7 offers the qualified debtor with an opportunity to be released from the obligation to repay most, many or even all of his or her debts. The debtor is allowed to keep all of his/her "exempt" property but the debtor's "non-exempt" assets can be taken by the bankruptcy trustee, and sold to pay as much of the unsecured debt as is possible. In many instances, the debtor may be able to all or most of his/her property. Some debts, including recent taxes, educational loans, and child support obligations cannot be discharged.

Chapter 13 - "Wage-earner Plan": Chapter 13 is designed to help you repay all or a portion of your debts under a court supervised repayment plan. If your repayment plan is approved, a fixed amount of your wages will be withheld from your paycheck each month, and used by the bankruptcy trustee to repay your creditors. Chapter 13 is an alternative form of bankruptcy protection which may save your house or your car if you have fallen behind on your payments and are facing repossession or foreclosure. When you file Chapter 13 a repayment plan is set up and you pay back your missed mortgage payments and missed car payments. You also pay back any other debts that you may owe, however, sometimes a payment plan can be created where you pay back less than 100% of the debt.

Other Types of Bankruptcy: Chapter 7 and Chapter 13 bankruptcies are the most common types of consumer bankruptcy filings. There are other types of bankruptcy protection available, including Chapter 11 ("Reorganization") and Chapter 12 ("Family Farmer"). Consult your attorney if you feel these may be applicable to your situation.

SHOULD I FILE CHAPTER 7 OR CHAPTER 13? You must qualify or be able to file for the type of bankruptcy protection you seek.

QUALIFICATIONS (Basic):

Chapter 7 - To qualify to file a Chapter 7 bankruptcy, you must not have filed a prior Chapter 7 bankruptcy within eight (8) years of the date of filing a new bankruptcy, and, if a majority of your debts are consumer or non-business debts, you must have an income below certain levels (i.e. You must pass the "Mean's Test").

Chapter 13 - To qualify to file a Chapter 13 bankruptcy, you must have a regular source of income, and you cannot have more than $360,475 in unsecured debts or more than $1,081,400 in secure debts (Note: These debt limits are adjusted periodically). Additionally, the debtor must be an individual. A debtor who is engaged in business as a sole proprietor may file a Chapter 13.

CHOOSE THE RIGHT TYPE FOR YOU: You must ultimately decide for yourself whether filing bankruptcy is the proper action to take, and if so, which Chapter is better for you. A few of the factors to consider are as follows:

• If you are not making more money than you need for your current living expenses (you have no "disposable income"), Chapter 13 may not be a realistic option;

• Chapter 7 has the advantage of wiping the slate clean, and enabling you to embark on your "fresh start" immediately, but you may have to give up some of your assets; and,

• If you have a particular asset that you want to keep that is valued above the allowable exemption, then Chapter 13 may be the only alternative. For example, if you own a house with significant equity and you don't want to lose it, Chapter 7 may not work; or

• If your debts are primarily consumer debts, and if your budget reveals that after filing bankruptcy your income substantially exceeds your expenses, it is possible that the United States Trustee could file a motion to dismiss the Chapter 7 case for "substantial abuse." In such a case Chapter 13 may be the better alternative.

FIRST STEP IN FILING:

  • Pre-bankruptcy Consumer Credit Counseling: Prior to filing for bankruptcy, the law now requires that you take a course or seminar from a qualified consumer credit counseling agency. The course is designed to assist you in evaluating your credit/debt situation, and to help you determine the best course of action for your particular circumstances. You must obtain a certificate of completion of this course before you can file a consumer bankruptcy case. The course can be completed "on-line" on the internet at a number of credit counseling agencies. (Examples: Hummingbird Credit Counseling at www.hbcce.org or Consumer Credit Counseling at www.ccc.org)

SECOND STEP IN FILING:

  • Contacting the Right Attorney: A consultation with a Georgia bankruptcy attorney can provide you with the information you need to determine which option best addresses your circumstances. As a solo practitioner, I am able to give more time and personalized attention to my clients. I will personally communicate with creditors or banks to resolve your issues. Your case will never be handed down to a legal assistant or other staff member.

NOTICE: The services or benefits offered are bankruptcy relief under the provisions of the U.S. Bankruptcy Code. We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.

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Joseph W. Segraves, Attorney at Law
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