As always, the government paints a rosy picture of the
economy. They tell us for example that jobs are being added and that the
unemployment rate has dropped. What they don’t mention is that the rate they
use does not take into account everyone really out of work. There are huge
numbers of unemployed that have just given up. There are huge numbers for whom
unemployment benefits have run out – these are conveniently not counted either.
The “real” unemployment rate in the U.S. in June
was 14.3% - the so-called U-6 rate which factors in those job seekers that the
traditional unemployment rate conveniently skips over. Moreover it shot up in
June from May by a full half percentage point.
This paints a pretty bleak picture of our economy. Combine
that with Detroit
filing for bankruptcy, and major companies defaulting on pension obligations,
and the picture is little less rosy.
In this environment it is no wonder that many Americans finding themselves in a corner, are
considering bankruptcy as an alternative.
This is fueled by the marketing and hype from the attorneys
offering bankruptcy services. Who hasn’t seen a billboard that at least implies
that by talking to such and such guru attorney all of your money problems will
magically disappear?
It’s tempting.
But Think it Through.
First, bankruptcy is a different creature than it was before
the passage of the Bankruptcy Abuse Prevention and Consumer Protection Act.
As a side note – I love the Orwellian contradictions. Trust
me – there is nothing in this legislation that protects consumers! It is all
about protecting the banks, credit card companies and consumer finance
companies from any effort on the part of crushed borrowers to see daylight.
This legislation has made major changes in bankruptcy. Without exception, to the detriment of the poor person finding themselves opting to file bankruptcy.
There is plenty of information about bankruptcy on the
internet. We have an article describing and outlining it on our website – http://www.beyourownlawyer.org/articles/bankruptcy.html
There are a lot of things to consider before you file a
bankruptcy. First, do you need to file at all?
What is your real situation vis a vis creditors?
How much do
you owe how many creditors?
Does your state have wage garnishment?
What kind of homestead exemptions apply to the collection of
any judgments?
What assets do you own? If you’re trying to keep a house,
how much equity do you have?
Have you done some prudent asset protection to get things
beyond the reach of creditors?
How long are judgments valid in your state? Can they be
renewed?
Depending on the answers to these questions, you may be
better off than you think without bothering to file a bankruptcy.
In a state with no wage garnishment, and generous homestead
exemptions, you can often, with impunity, tell your creditors where to go.
There just is not that much they can do to you.
Also, if you don’t have an overwhelming number of creditors,
with a little help, you can probably work out the same kinds of deals as far as
reducing principal amounts of debt, forgiving accrued interest and stretching
payment over time that you could in a bankruptcy proceeding.
Such workouts often make sense to creditors looking at the prospect of receiving nothing as an alternative.
Another major area to take stock of are the bankruptcy
exemptions available to you should you choose to go that route.
Bankruptcy law gives each state the right to determine
whether state exemptions, federal exemptions, or both will be available to its
residents upon a bankruptcy filing.
Some of these exemptions are absurd. For example many states
allow an exemption of $1,000 in a car. These statutes were written years ago,
when $1,000 might actually get you a decent vehicle. Not so now. This means if
you have a car worth $5,000 (with no lien) and you file a bankruptcy under
Chapter 7, that car will be taken and sold – you will receive the first $1,000.
Likewise, household goods and furnishings. $1,000 exemption
is common. Let’s be real, you can’t
furnish a single room in a hous for $1,000. Do you really want to see all of
your possessions boxed up and sold if you file bankruptcy?
Finally understand that once filed, a Chapter 7 bankruptcy
cannot simply be dismissed if you change your mind. Another brutal provision of
Bankruptcy Reform. Once this process starts and gets under way, there is no
good way for you to get out of it.
Don’t misunderstand.
Sometimes there just are no alternatives.
Just be careful
and make sure that you have thoroughly studied all of your options before you
rush out and file a bankruptcy.
Some thoughts here.
Try to stay away
from the “form fillers and filers” These guys are a lot like the TV lawyers in
personal injury cases. http://www.beyourownlawyer.org/articles/personalinj.html
They advertise heavily. They deal in volume. They
essentially fill out “canned” forms and file them in bulk, hoping to make a
profit from volume after having lowered their fees to absurdly low levels.
The truth of the matter is that you can do for yourself a
much better job than you will get out of the “fillers and filers”. Look at the
services section on our website http://www.beyourownlawyer.org/services.html
and click the “bankruptcy” tab. You’ll find that the way the
bankruptcy system is set up, unless your case is highly complicated or unusual,
you can do just fine – better in fact – by representing yourself.
