"One of the most tragic things I know about human nature is that all of us tend to put off living. We are all dreaming of some magical rose garden over the horizon instead of enjoying the roses that are blooming outside our windows today."Dale Carnegie
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Sometimes, the formal and legal declaration of personal
bankruptcy is the best way to go when you're "snowed
under" with bills, and you just can't see your way clear to survive.
Actually, bankruptcy allows you to make a fresh start.
Generally, it takes only a small amount of money, a
careful evaluation of your assets and your liabilities.
In many cases, a lawyer is not necessary.
If you have very few assets, mountains of debt, and not
enough income to meet your obligations, then your best
bet is almost always the filing of straight bankruptcy.
What you'll need is the proper forms "S3010 Bankruptcy
forms, for an Individual Not Engaged In Business."
These can be purchased from any full-line office supply
store, especially in an area serving attorneys' offices.
You'll need to know which district you live in for Federal
Court purposes - so look in the white pages of your
telephone book under U.S. Government - Courts - and
take down the address of the nearest U.S. District Court.
Check it out to be sure that your residence is in this
court's jurisdiction.
You then fill out the forms you purchased, listing all of
your creditors - those with priority being listed first -
meaning those who have extended credit to you against
some sort of security or collateral, followed by those
who have extended credit to you on just your signature
or reputation. You must be sure to list all of your
creditors because any that you fail to list, will be
able to sue you and collect even after the bankruptcy
has been adjudicated. At the same time, be sure to
include the names of anyone and everyone you may
have co-signed a note or a loan for, as well as anyone
who may have co-signed for you.
The laws governing personal bankruptcy vary in all
states, but generally, a bankruptcy judgement will
not take away the house you live in, basic home
furnishings, a car that's necessary towards your
gainful employment, nor the tools of your trade.
Check these things out to be sure against the list
of items regarded as the necessities of life by
your state.
When you've got all the forms filled out, and notarized,
you take them to the Clerk of the U.S. District Court in
your jurisdiction. You pay the clerk $50, and from there,
you're home free. The clerk notifies your creditors, and
reminds them that being as you've filed bankruptcy papers,
they cannot bother you about your debts anymore.
However, they are invited to your hearing. Usually they
don't show up, because by that time, you have very few,
if any, nonexempt assets left that they are really interested in.
But, whatever assets you do have that are nonexempt,
will be sold by the Court to appease your creditors.
Any money realized from these sales is then added to
the total amount of money you may have turned over
to the court at the time of your filing, and divided equally
amongst your creditors according to priorities.
After all of this has taken place, and usually about 3
months after you've been adjudged bankrupt, you can
start all over again to incur debt, pay bills and establish
a new credit rating. However , you should be especially
careful about talking with your old creditors because
they may attempt to maneuver you into signing a
"reaffirmation" of your old debt. The thing to do is to
be sure that you carefully read anything you affix your
signature to, and don't agree to pay on any debt that
has already been discharged through your bankruptcy!
In some bankruptcy filings, it is definitely advantageous
to hire an attorney to represent you. This is especially
true for people who have assets such as real estate they
want to protect, and/or people who has been operating
home-based businesses or been accused of fraud.
Remember this, if you decide to process your bankruptcy
without a lawyer, then it is your responsibility to fill out
all the necessary forms accurately and completely, and
every bit as precisely as if you had paid an attorney to
do it for you. Leaving out a creditor's name or address
or forgetting a loan that you co-signed for, will surely
bring on litigation against you even after your bankruptcy
has been adjudicated. Be sure you understand all the
papers, ask the Court Clerk for advice, and if you run
into problems, then take it in to an attorney.
Besides the regular bankruptcy laws, there's also a little-known
and little-used method of getting reorganized with your debt,
particularly when you've got a steady job and just need more
time to straighten your indebtedness out. This is the
wage-earner's provisions of Chapter XIII of the Federal Bankruptcy laws.
Basically, these provisions allow you to make new arrangements
with your creditors and pay off all your debts over a new 3-year
period of time. When you filed for indebtedness relief under
the provisions of this law, nothing is recorded permanently
on your credit record. You get to keep all your assets, but
you must pay off all your debts. But, so long as the Court
grants you relief under these provisions, and you pay your
creditors according to the repayment schedule agreed upon
by the Court, your creditors cannot bother you. Even if they
have begun a suit against you, once the Court has given
you relief, they cannot touch you! Once you've filed under
these provisions, your creditors are immediately restricted
from even contacting you, and get only what the referee
or trustee doles out to them.
Often times, if a creditor threatens to sue you, the most
effective thing you can do is to tell him frankly that if he
sues you, you'll have no other alternative except to file
bankruptcy papers. In many instances, this will cause
him to take a second look and to do whatever he can to
assist you in paying him the money you owe, but over a
longer period of time, and at smaller monthly payments.
The absolute bottom line is that your creditors know only
too well that if you do file for bankruptcy, their chances of
receiving even half of what you owe is practically nil. Thus,
it's in their best interest to do everything they can to help
you to continue making payments on the amount you owe,
regardless of how small those payments may be.
When a creditor does sue you, and gets a judgement against
you, he can then get a court order directing the sheriff to
seize your personal property and sell it, with all monies
realized going to the creditor to satisfy your debt. When
they see this about to happen, many people connive to make
themselves "judgement proof." In other words, they hide their
assets or move them out-of-state before the sheriff or marshall
arrives. This is illegal, but is done as often as not.
Many creditors will attempt to "garnish" your wages. This is
done by getting a court order directing your employer to set
aside part of your wages or salary every pay period and turn
it over to him. First, of course, he has to find out where you
work; and even then, in most states, there are limits set
relative to how much a creditor can garnish your wages.
If you have no job, and no visible assets, or you live in a state
where your wages cannot be garnished, your creditors actually
have very few ways of ever collecting from you.
Many techniques used by creditors and collection agencies
are illegal. A creditor or agency can write letters to you; call
you once a day in quest of a payment; and even knock on
your door to ask about a payment. but he is forbidden by
law to harass you or invade your privacy, or use deceptive
means to get you to pay your bills. He cannot use foul
and abusive language over the telephone, tell anyone other
than you the reason for his phone call, inconvenience you
or in any way threaten your job or your reputation in the
neighborhood where you live.
Still, the best idea for reorganization and settlement of your
debts when you find yourself in an untenable position, is
in-person visits and explanations of your situation with your
creditors, and a desire to explore other possible ways of
mutual satisfaction without involving collection agencies
or bankruptcy. Give it a try - it's a lot easier than most
people realize.
About the Author For a wide range of personal finance articles, loans, credit cards, and
debt reduction resources, visit http://www.ReliefLoans.com.
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