People often wonder “How do I get from here to there” in connection with resolving financial difficulties by way of filing a bankruptcy petition.
Our office has, over the years, streamlined this process so that it is as “user friendly” as possible.
Basically, a client will call our office making inquiry as to possibility of filing bankruptcy.
A “Financial Difficulties Information Sheet”, similar to the one found below, will be provided to the prospective client.
Once the requested information has been gathered, a free consultation is provided, during which time the attorney reviews the documentation and discusses the problems presented.
Also at that first meeting, which generally takes an hour or less, the attorney proposes alternatives for resolving the problem. The alternatives are typically the filing of a Chapter 7 bankruptcy, a Chapter 13 bankruptcy, or taking steps to resolve the problems outside of a formal bankruptcy proceeding.
If a formal bankruptcy proceeding is determined to be appropriate, the attorney will give the client additional “homework”.
A second meeting (called BR2), is then scheduled, during which time the bankruptcy documentation is carefully reviewed and signed by the client.
The bankruptcy documentation is then filed, and the bankruptcy process has begun. A Chapter 7 bankruptcy typically involves one very short hearing and is concluded, under normal circumstances, within three and a half months after the original filing. A Chapter 13 bankruptcy filing, which involves repayment to creditors over a period of time, typically also involves a simple hearing followed by payments into the Bankruptcy Trustee for a period of three to five years.
Thus, the logistics of filing bankruptcy are not nearly as daunting as one might think.
During the course of a bankruptcy proceeding Debtors are quite often presented with the opportunity to sign a Reaffirmation Agreement. A Reaffirmation Agreement essentially takes a debt out of the bankruptcy discharge and “re-ups” the debt, so that whatever debt is involved does not “go through” the bankruptcy.
A typical reaffirmation agreement is in connection with a loan on a vehicle.
Reaffirmation agreements are obviously a great benefit to banks, credit unions, and other financial institutions because the obligation is still “good” on the financial institution’s books and records.
However, reaffirmation agreements are generally not in the best interest of debtors.
Think about it – why would you file bankruptcy and then take some debts out of the bankruptcy. It would be, for that particular debt, as if you didn’t file bankruptcy at all!
Suppose you own a 6-year-old vehicle worth $12,000.00 with a debt against the vehicle of $18,000.00.
If you signed a reaffirmation agreement, you would be required to continue paying on the car loan even if the car “died” six months after your bankruptcy was over.
Competent bankruptcy attorneys, except in unusual circumstances, generally advise against signing reaffirmation agreements.
Of course, every situation is different, and reaffirmation agreements are sometimes beneficial, or at least not too harmful.
As a general rule, however, I do not recommend signing reaffirmation agreements. There are other alternatives which can be discussed during the progress of a bankruptcy case.
FINANCIAL DIFFICULTIES INFORMATION SHEET
Thank you for your inquiry regarding your financial difficulties. At our initial consultation we will discuss what action, if any, might be appropriate in your situation, and we will also agree upon a fee arrangement. There is no charge for the initial consultation. Please bring with you to the initial consultation as much of the following information and material as possible.
- Fully completed list of creditors, including name, address, account number (if applicable) and amount. Please bring the actual bills themselves, if available.
- A list of all of your property, as detailed as possible, including reasonable value of each item, including vehicles, real estate and personal property.
- Paycheck stubs or other indication of regularly received income (Social Security, retirement, unemployment compensation, etc.).
- Monthly budget, showing average monthly household expenses, including,
a. Rent or house payment;
b. Electricity, heat, water, sewage, cable TV, telephone;
e. Laundry and cleaning;
f. Medical and dental expenses;
g. Transportation expenses;
h. Insurance (auto, life, health, etc.);
i. Recreation, clubs, entertainment;
j. Child support and/or alimony;
k. Car or truck payments;
l. Charitable contributions.
- Copies of tax returns for the past two tax years, or W-2 forms if returns are not available.
- Copies of all documents regarding loans and other credit transactions, if easily available.
This information is necessary in order for you to receive the most complete advice about your situation. Please gather all you can, but don’t feel the need to cancel your appointment just because some information is not available.
Please call if you have any questions.