A Bankruptcy Lawyer’s Blog

If you think that you have nothing now, the new bankruptcy laws could even shrink that! The new bankruptcy law overhauls the laws that were modified in 1978. It not only tightens the requirements for those who want to file for bankruptcy but for their attorneys as well.

These are several of the major changes that were initiated under the new bankruptcy law:

• Means Test You now have to show that you are not abusing the use of bankruptcy. This test calculates what you make per month minus certain expenses that are allowed. The median income will vary from state to state. If you fail the means test, then you must file for Chapter 13 bankruptcy.

• Expense allowances Guidelines are put forth by the IRS for allowable expenses, and they are stingy. The food allowance is approximately $200 a month, and the housing allowance is approximate $800 a month.

• Residency requirements There are state and federal bankruptcy laws, and some state laws are more lenient than others. Texas and Florida have very generous homestead allowances. The new bankruptcy law discourages you to look around for the best deal. You are not permitted to file for bankruptcy in a more favorable state unless you have resided there for a minimum of two years.

• Mandatory credit counseling Another change that came with the new bankruptcy law is that you have to take a credit counseling course that has been approved within 180 days of filing for bankruptcy. Sorry to say, this is not a free course. The cost of this course is approximately $75.00.

• More paperwork In order to prove that bankruptcy is necessary, the consumer will have to present much more documentation. Such things a debtor must provide are: a list of all unsecured and secured creditors, proof of taking the credit counseling course, a detailed list of ones expenses and monthly income, liabilities and assets, the most recent tax return, photo ID and pay stubs.

• Hefty legal fees A bankruptcy attorney must now certify that their clients figures are accurate. If they prove not to be, the lawyer as well as the client may face sanctions. This means that your attorney must do more investigating and fact-checking to make sure your information as well as his certification is above-board.

Is it best to have a bankruptcy attorney when and if it comes time to file for bankruptcy? There is certainly no legal requirement stating that you have to retain a lawyer. However, you would be very foolish not to do so. If you choose to file on your own, and forget to file certain documents, your case can be subject to dismissal and you will need to start again from the very beginning. As an example, a couple recently tried to file for bankruptcy online. They were not exactly sure if we should have filed jointly or just the husband. They were doing it on their own and really goofed things up and now they are paying for it! Please do not do this in an attempt to save some money because it will only come back to haunt you in the end. It is in your best interest to have an experienced bankruptcy attorney working for you.

Bankruptcy is when a person makes a legal declaration stating that one is legally insolvent. This article will deal with voluntary bankruptcy. This is where a debtor files a petition stating they are unable to meet their creditors requirements.

If you have the notion that if you file for bankruptcy, it will be the magic bullet you were looking for to solve all of your debt problems, then think again! You are being badly misled by someone if that is what you think. Filing for bankruptcy can come back to haunt you for many years, and this decision is not something that you should take lightly.

This step should only be taken after you have given the matter careful deliberation and analysis. You should also do research to see if there are other alternatives available such as debt consolidation, grace periods, and loan deferment to see if it is possible to avoid bankruptcy. Filing for bankruptcy should be a last resort and not the first step.

First of all, there are some distinct disadvantages if you file for bankruptcy:

1. Your credit history will be ruined for up to ten years. This means that you will not be able to get any credit, secure jobs, rent apartments, and order utilities among other things.

2. Some people think that when they file for bankruptcy their debt will be eliminated, you will become debt-free and you will be able to have a clean slate and start fresh. Sad to say, this is not the case.

3. You will find that after you file for bankruptcy, you will be charged a higher interest rate by banks and other financial institutions.

4. A social stigma is attached to people who have filed for bankruptcy. You will find that family members and close friends will suddenly choose to avoid you.

How can you avoid bankruptcy? Here are several things to consider:

• Do extensive research and explore other options and alternatives that may be available to you. You must humble yourself and contact your creditors to see if you will be able to work out another payment plan while you try to work out your financial problems. Tell them you want to try to avoid bankruptcy.

• Explore options to see if you are a candidate for debt consolidation. This is one of the simplest ways to avoid bankruptcy.

• You are going to have to forever change your financial habits. You are going to have to make sure that from here on out you spend less than you earn.

• Lifestyle changes will have to be made if you want to avoid bankruptcy. There are many little things you can do to save money. Instead of subscribing to cable television, you will find that there are many good programs on regular TV channels that you can get by with just fine. Dont eat out so much, take your lunch to work, in order to conserve gas and save money limit the number of trips you take in your car and dont talk too long on the telephone.

• Try to save as much as you can as often as you can. The more you are able to save, the better it will be for you.

Again, filing bankruptcy should be your last resort, not simply "another option" to consider solving your financial problems. Although bankruptcy may be your only option, you owe it to yourself to check out all your options, and to be aware that there are negatives that accompany bankruptcy, as described above.

Bankruptcy attorneys estimate that one in every 53 U.S. households filed for bankruptcy in 2005. Most of these people didn't lose the farm in Vegas or drink away their life savings. Chances are their financial problems stemmed from one of three sources: job loss, divorce, or unexpected and expensive medical emergencies.

Most homeowners who file for bankruptcy do not lose their homes. Bankruptcy laws are designed to satisfy creditors and protect debtors. Putting a family out on the street helps no one.

Ted Janger of The American Bankruptcy Institute stresses that, It is important to have competent counsel advise you, both about the choices among chapters and about how best to make sure that bankruptcy operates to solve your financial difficulties, rather than just as a hiatus.

Establishing Credit After Bankruptcy

For people who got into trouble with credit, the thought of using it again can be frightening. Its a catch-22. To be considered a good candidate for a new mortgage or car loan, consumers have to rebuild their credit. If they dont, when a prospective lender looks at their credit report, all they will see is the bankruptcy. There wont be a new track record of handling credit responsibly or of improved financial management skills.

It doesnt seem logical, but after people have successfully filed for bankruptcy, they will receive a flood of new credit offers. If they accept a few well chosen ones and pay more than the minimum payment each month, this will appear as positive data in their credit report.

One form of new credit would be a first mortgage refinance or a new second mortgage. Either transaction would depend on the amount of equity in the home and be subject to any guidelines established by the bankruptcy court.