Consumer Bankruptcy Tips

Filing bankruptcy still is an option even under the newly-passed legislation
If you are facing legal action, do not procrastinate
Beware of debt counseling, credit repair, and bankruptcy-related scams
There is still hope if you are broke and can't afford to pay an attorney
Finding experienced bankruptcy attorneys
A knowledgeable bankruptcy lawyer is worth their wait in gold

Filing bankruptcy still is an option even under the newly-passed legislation

Congress passed new legislation that went into effect in October 2005. While it is true that the new law makes the process much more complicated, the basic right to file bankruptcy and most of bankruptcy’s benefits are still an option for most consumers. Unfortunately, the cost of filing for bankruptcy has increased, both in terms of fees you to have to pay the court and the fee you will have to pay your attorney.

If you are facing legal action, do not procrastinate

Even when people are faced with a foreclosure or car repossession, or are being sued, or are having their wages garnished, they do not often want to think about filing bankruptcy. Many people view filing bankruptcy as a difficult experience, especially before the person is fully informed and understands how filing for bankruptcy works. In most instances, once bankruptcy is explained by an experienced attorney, people are oftentimes relieved to discover that their situation can be resolved after all. Do not wait until after your house is foreclosed, your car is repossessed, or your wages are being garnished. Find out what bankruptcy relief is available to you sooner rather than later.

Beware of debt counseling, credit repair, and bankruptcy-related scams

Sometimes when people are in difficult financial dilemmas and they fear they cannot afford an attorney, they sometimes listen to the advice of unscrupulous non-attorney advisors or consultants who are more than willing to take their last remaining dollars. These scams appear in a number of types of businesses, but all offer the lure of a cheap, easy way to make financial problems disappear. They invariably leave the person poorer and, in many cases, much worse off than before. Here are examples of some of the many scams:

Bankruptcy Petition Preparers never provide very good service to bankruptcy clients. However, under the old bankruptcy law if you had a simple case the mistakes they made probably wouldn't cause your case to be rejected by the bankruptcy court. The effects of mistakes in a bankruptcy cases can be much more severe under the new bankruptcy legislation. Congress has made filing bankruptcy so complex and the legal knowledge to prepare a case is so important that typing services are simply unable to competently do the job in most instances. The preparers are generally unable to advise the debtor of ways to eliminate liens or pursue more complicated procedures. Bankruptcy preparers cannot go to court or defend the debtor if a creditor attempts to oppose the bankruptcy or take advantage of the debtor. Preparers are prohibited from giving legal advice that could save the debtor hundreds or thousands of dollars. A bankruptcy filed with only the help of non-attorneys many times fails to accomplish its most basic purposes, thereby leaving the debtor worse off than prior to bankruptcy filing. In many cases where petitions are prepared by typing services and filed under the new law, courts have been swift to reject the filings, at the expense of the person seeking bankruptcy relief. When debtors, who previously had their first filing rejected, try to file a second, amended case, the new law takes away many rights they would have had in the first case, had the case been filed correctly. Because of this potential danger, it is extremely important to get the advice of an experienced bankruptcy attorney for your first case to minimize the possibility of having mistakes made, and for the purpose of attempting to preserve all the rights and protections possible in the first case.

Other fly-by-night operations offer “credit repair” or credit counseling but are not associated with the established nonprofit credit counselors in the community. These operations promise to make credit problems go away and to obtain new credit for those who have bad credit records. However, in reality they know no magic tricks. At best, they may obtain an expensive “secured” credit card in a person’s name, which can be used as long as the card user keeps enough money in a special account to cover the amount charged on the card. In most cases, customers do not even receive this doubtful benefit, and the operators simply fail to deliver on their promises after taking the customer’s money.

Other scam artists sell services that consumers could obtain for free or at nominal expense. After taking the consumer’s money, some scam artists offer only a referral to a bankruptcy attorney, who may not be very knowledgeable. Others, who claim that they can help consumers with bad credit to find housing, give lists of apartments taken directly from newspaper advertisements. Finally, some offer a debt-consolidation loan, which often means a home-equity loan or a refinancing of the debtor’s first mortgage. These loans can be big mistakes, turning unsecured credit card debts that can be wiped out in bankruptcy into mortgages that cannot be discharged; or trading debts with little or no interest for debts with high interest rates. The brokers or lenders who push these loans on debtors with poor credit histories usually charge very high fees.

There is still hope if you are broke and can't afford to pay an attorney

Many attorneys do not charge for the initial consultation. During that free consultation, many attorneys will give you a preliminary idea of what bankruptcy options are available to you. Often they will explain about both Chapter 7 and Chapter 13 and how they would work in your situation. Although there will still be much more work to be done to complete your case analysis, the attorney will probably be able to give you a fairly good idea of the cost. During the initial consultation, the attorney may develop a filing strategy which will allow you to save money you are currently paying to creditors, or suggest a chapter 13 plan that may not require you to pay much or all of the attorneys' fees at that time or even before filing the case. Many people think they do not want to file chapter 13 because they think they will have to pay back all of their debts in full in a chapter 13. In most cases that is not true. Usually, most or all of your debts can still be wiped out and sometimes a chapter 13 helps you more than a chapter 7 would.

Finding experienced bankruptcy attorneys

Just as there are good doctors and bad doctors, good mechanics and bad mechanics, so too are there good lawyers and bad lawyers. Some attorneys are barely competent or even downright incompetent. Just as there is no simple, guaranteed way of finding a good doctor, there is no simple, guaranteed way to find a good lawyer.

Here are some things to look for:

Experience

It would seem obvious that an attorney who has been practicing for 25 years should know more than an attorney with only 10 years experience. However, that is not always the case. There are some attorneys who have practiced bankruptcy law for many years, but have never really mastered the subject. There are other attorneys who have pursued a general practice, filing a case now and then. If they have been practicing for 25 years without much in-depth experience in bankruptcy that does not translate to the expertise you need.

Training & Competence

After an attorney graduates from law school and passes the state bar examination, then the real learning begins. Even when there are not many new laws being passed on a particular subject, attorneys improve their skills by attending educational seminars. Now, with the enactment of a completely different bankruptcy law, education is an absolute necessity. So many basic concepts under the prior law just don't work anymore. And, the new law is so complex, an attorney is making a big mistake if they believe they can understand the bankruptcy laws by just sitting down and reading it.

Someone Who Will Listen to You

An attorney who tells you what you should do before they even listen to the facts of your situation is not the right attorney. Unfortunately, some attorneys have a "cookie cutter" approach to legal advice which completely ignores the true difficulties or opportunities that your case may present. You want an attorney who will listen to your facts and ask the right questions so they will truly understand your case.

Someone who will give you specific advice about your situation

Your attorney should listen to you and then consider your specific facts in the context of the law. Only by doing that will they be able to give you the advice you deserve.

A knowledgeable bankruptcy lawyer is worth their wait in gold!

There are a number of potential pitfalls and tricks in the new law, so it is very important to consult with a knowledgeable bankruptcy attorney. If your case is filed wrong, it may be dismissed for not filing a required document and if you have to file a new case you may not be able to get the same protection from your creditors. A good bankruptcy attorney would ideally be: well-versed in the possible complications that might arise in what seems to be a simple and straightforward bankruptcy case, would be aware of recent changes in the law and of court decisions in the local courts; and usually find ways of making a bankruptcy case more productive and effective than it would be if the debtor tried to handle it without an attorney, ultimately saving the debtor many hundreds or thousands of dollars more than the attorney’s fees; would have the ability to bring debtors the peace of mind that results from knowing their cases are being handled without the mistakes that they might make on their own.

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