In this time of ever-increasing job losses, record foreclosures, and financial ruin for families and businesses in this country and around the world, it is imperative that we, as individuals, know our rights and options. It is unfortunate, but I think we have all realized that we can't count on our government to protect us from a sour economy, and we can't count on our banks to do what's in our best interest.
We frequently hear radio ads and see media that claim to inform us about bankruptcy. These sources of information are not always accurate, and sometimes purposely misleading. While credit counseling or consolidation can be an option for some, more often than not, people who seek assistance from credit counseling agencies find that the payments required are out of reach, or the program leaves the individual exposed to potential lawsuits until the debts are paid, which could be a matter of years.
Credit card companies would like us to believe that those who file for bankruptcy relief are irresponsible people with bad intentions, who just want the easy way out of mountains of debt. My experience as a bankruptcy attorney tells me something very different about those who file for relief. The people who sit across my desk during their initial consultation are not happy to be there. Bankruptcy is a last resort for most, and more and more I am seeing people who have had successful careers and great credit for the last twenty-plus years. These people never thought they would be sitting in my office explaining that they tried to hold it all together as long as they could but there just isn't enough money to go around. They may be business owners, plumbers, cabinet makers, landscapers, construction workers, real estate agents, mortgage brokers, even those who are in no way involved in the housing industry, but who have lost their jobs nonetheless.
The truth about bankruptcy is that it can be a valuable resource. It is certainly not the most pleasant experience, but when a person is faced with the question of whether to pay a past-due credit card bill to stop harassing phone calls, or buy groceries for the family, something's got to give. Let's face the facts about bankruptcy:
Myth- You are required to pay your debts in bankruptcy.
Truth- In a Chapter 7 bankruptcy, you are not required to repay any debts, with the exception of taxes, student loans, and child support, generally. A Chapter 13 bankruptcy will require a three to five year payment plan. The goal isn't necessarily to pay 100% of the debt- the goal may be to pay only as much as you can afford to pay, which in many cases is very little.
Myth- You will lose your home, cars, etc. if you file bankruptcy.
Truth- Arizona law allows you to protect the following assets, within the prescribed values: equity in your home and vehicles, household furniture, a watch, wedding set, clothing, tools used in your job, and 100% of your qualified retirement plan or pension. (This is not a complete list of assets that are protected.)
Myth- You can't buy a house after filing for bankruptcy.
Truth- You will have a difficult time qualifying for a prime-rate mortgage for a short time after your bankruptcy discharge. However, before the current mortgage crisis, I could tell my clients that two years after their bankruptcy discharge, assuming they kept their credit on track in the meantime, they should be able to qualify without a problem. Because of new lending regulations, this timeframe may be extended.
Myth- You don't need to hire an attorney to file bankruptcy.
Truth- The truth is that you are not prohibited from filing on your own or paying a licensed document preparer a nominal fee to prepare the documents for you. However, it is not recommended. You may look at the petition, schedules and statements required by the court and think they are easy enough to fill out. But, bankruptcy is not always the most logical area of law, and there is a lot of legal analysis that goes into preparing the documents (legal analysis that a document preparer is not qualified to do). I can't tell you how many people I have had in my office that did not hire an attorney, and as a result are facing harsh implications. It's not just as simple as asking the court to dismiss your case when things start to go south, so do what's best for you- hire a bankruptcy attorney to handle your case.