Many people in this country who are affected by job loss, divorce, high medical and energy bills, and loans with high rates of interest find themselves in deep financial trouble and in need of help. Your situation is not unique – in 2005, over 2 million consumers filed bankruptcy in America.
The bankruptcy system was put in place to allow people to have their debts wiped out and start again. Bankruptcy Reform went into effect in the fall of 2005 which changed the process somewhat, requiring you to submit more information, obtain credit counseling, and fill out a “means test” form to see whether a certain amount of debts can be repaid. But rest assured – despite all of the changes, the bankruptcy system is still firmly in place to allow people who are in trouble financially to get a fresh start.
Just before the new bankruptcy law went into effect in October 2005, there were a number of reports in the media that didn't really tell the full story about bankruptcy reform, and left people with the impression that bankruptcy would be difficult or impossible to file. However, a ground-breaking study by Best Case Solutions in July, 2005, showed that the vast majority of consumers who filed bankruptcy under the old law would still have been able to file under the new law. (See Best Case Scenarios, Summer 2005.)
Bankruptcy Reform was designed to stop people who could repay a significant portion of debt from filing bankruptcy under chapter 7, a legal process that wipes out debt. But as it turns out, most people who file bankruptcy are in real financial trouble, and can’t pay back debts. They weren’t filing bankruptcy to get out of paying– they simply couldn’t pay.
If you can’t pay your bills and are in real financial trouble, consider meeting with a bankruptcy attorney. You may be eligible to file a Chapter 7 bankruptcy where most debts are discharged, or a Chapter 13 repayment plan, where part or all of your debts are repaid with future earnings over a 3- to 5-year period. An experienced bankruptcy attorney can examine your financial situation and discuss alternatives with you, and determine whether you are eligible to file and under which chapter.
Please don’t! Filing bankruptcy on your own can be a disastrous move. You may unknowingly submit incomplete information, you may miss a deadline, you may not claim all property as exempt to which you are entitled (thus not protecting it from creditors), or you may attempt to file under the wrong chapter. New forms required by bankruptcy reform are more complex and less-straightforward than some of the older forms, and require deep knowledge of the law. If you don’t completely adhere to or understand the law and procedures, your case could be dismissed without debts being discharged.
An experienced attorney will guide you through the process to make it as painless as possible for you, and help you achieve your desired goal: to get back on your feet again while protecting your property, wherever possible.
The fee you pay to your lawyer is money well spent. After all, most creditors will have attorneys representing them who know the system and the rules - don't you want a lawyer on your side to protect your rights?
You can check our Bankruptcy Attorney page, or contact your local bar association and ask for a listing of bankruptcy attorneys in your area. Your local yellow pages will also list attorneys by specialty.
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As the new bankruptcy law begins to be tested and put into practice, some of the questions and concerns raised by the bankruptcy community are starting to find answers. And while the bankruptcy process is certainly more complex in the post-bankruptcy reform world, at least one fear of consumer advocates has turned out to be unfounded. The credit industry successfully lobbied for the requirement that consumer debtors undergo credit counseling as part of the bankruptcy process. The hope, (and the fear of those on the side of the debtor), was that consumers would be talked out of filing bankruptcy and into repayment plans.
But the credit counseling provision isn’t having the desired effect. As reported in the Washington Post in January, the vast majority of consumers undergoing counseling don’t get steered into repayment plans, and counselors are concluding that bankruptcy is the best option for the consumers they see who've already met with bankruptcy attorneys.
A recent study by the National Association of Consumer Bankruptcy Attorneys (NACBA) found the same thing. NACBA interviewed credit counselors about more than 60,000 consumers who had been counseled as part of the bankruptcy process. And they didn’t find the deadbeats the law was supposed to weed out. Instead, 97% of those consumers were found to be incapable of repaying any debt, and four out of five were wiped out financially by events beyond their control – job losses, medical expenses, or death of a spouse. See www.bestcase.com/whatsnew.htm for more information.
A new report by the Aite Group, an independent consulting group, states that bankruptcy reform is unlikely to change the volume of bankruptcies. Eva Weber, author of the report, states "the most immediate and obvious impact of BAPCPA has been the glut of filings that took place immediately prior to the enactment of the new law in October, 2005. Once those filings have made their way through the system, a return to normal in terms of bankruptcy filings seems likely." (See www.bestcase.com/bkreform.htm for a link.)
We think so, too. Consider the following: