Bankruptcy

What Is Bankruptcy?

Bankruptcy is a legal proceeding in which a person who can not pay his or her bills can get a fresh financial start.  The right to file for bankruptcy is provided by federal law.  Filing bankruptcy immediately stops almost* all creditors from seeking to collect debts from you, at least until your debts are sorted out according to the law.  (*It does not stop criminal proceedings or collection of past-due child support, but those debts can usually be managed through a chapter 13 plan.)

When it comes right down to it, there are two basic reasons for filing for bankruptcy: the “automatic stay” and the “discharge.” The automatic stay is what stops creditors from bothering you. It is imposed automatically at the beginning of the case, and lasts until the case is closed, or until you get your discharge (whichever comes first). It is possible for a creditor to have the stay lifted as to them, but they must first either get your approval to do that or file a motion to have the judge order that the stay be lifted. That costs them a lot of money, so only very motivated creditors will file those motions. The discharge is what happens at the end of a successful bankruptcy case.  Technically it is an injunction that stops all discharged creditors from bothering you. It is important to understand that while most debts are discharged, some are not. The exceptions are listed later in this brochure.

What Can Bankruptcy Do for Me?

Bankruptcy may make it possible for you to:

  • Eliminate the legal obligation to pay most or all of your debts (depending upon what types of debts that you have).  This is called a “discharge” of debts.  It is designed to give you a fresh financial start.
  • Stop foreclosure on your house or mobile home and allow you an opportunity to catch up on missed payments.  (Bankruptcy does not, however, automatically eliminate mortgages and other liens on your property without payment.)
  • Prevent repossession of a car or other property, or force the creditor to return property even after it has been repossessed.
  • Stop lawsuits, wage garnishment, debt collection harassment, and similar creditor actions.
  • Restore utility service or prevent termination of service.
  • Allow you to challenge the claims of creditors who have committed fraud or who are otherwise trying to collect more than you really owe, and in some cases to file suit against creditors who have been abusive and/or dishonest.

What Bankruptcy Cannot Do

Bankruptcy cannot, however, cure every financial problem.  Nor is it the right step for every individual.  In bankruptcy, it is usually not possible to:

  • Eliminate certain rights of “secured” creditors.  A “secured” creditor has taken a mortgage or other lien on property as collateral for the loan.  Common examples are car loans and home mortgages.  You can force secured creditors to take payments over time in the Chapter 13 process, and bankruptcy can eliminate your obligation to pay any additional money if your property is taken, or if you choose to surrender the collateral to the secured creditor (which changes the nature of that debt from secured to unsecured).  In most cases you cannot keep the collateral unless you continue to make payments.
  • Discharge types of debts singled out by the bankruptcy law for special treatment, such as child support, alimony, certain other debts related to divorce, most student loans, court restitution orders, criminal fines, and some taxes.
  • Protect cosigners on your debts.  When a relative or friend has co-signed a loan, and the consumer discharges the loan in bankruptcy, the cosigner may still have to repay all or part of the loan. However, in Chapter 13 you can protect cosigners by paying the full amount of the debt through the plan, if you are able to do that.
  • Discharge debts that arise after bankruptcy has been filed. It is very important to understand that bankruptcy only affects debts or claims that existed before the bankruptcy petition was filed.

What Are the Different Types of Bankruptcy Cases?

There are four types of bankruptcy cases provided under the law for individuals:

  • Chapter 7 is known as “straight” bankruptcy or “liquidation.”  It requires a debtor to give up property which exceeds certain limits called “exemptions,” so the property can be sold to pay creditors. In more than 95% of all chapter 7 cases the debtor either loses nothing or only loses something that he or she wants to surrender, such as a car that is no longer working or that she can not afford to keep.  (There is a longer discussion of exemptions later in this paper.)
  • Chapter 11, known as “reorganization,” is used by businesses and a few individual debtors whose debts are very large (over $1,000,000.00).  Chapter 11 is usually a very complicated and expensive process.
  • Chapter 12 is reserved for family farmers and fishermen. This is much like Chapter 13, but with higher debt limits and special provisions for the types of debts that farmers often have.
  • Chapter 13 is often called “wage earner,” even though it has been more than 30 years since that was actually the proper legal term.  It requires a debtor to submit a plan to pay debts (or parts of debts) over a period of 3 to 5 years. In Memphis that time period is always set at 5 years unless you can pay 100% of your debts in full in less time. (Long term debts such as mortgages and student loans only need to be brought current during the plan; not paid in full.)

What Type of Bankruptcy Case Should I File?

Again, you should only file bankruptcy after considering all of your options, and after consulting with an experienced attorney who is licensed in your state.  Most attorneys in this area offer free consultations. If you believe that bankruptcy may be in your future, go ahead and take advantage of that free offer. At the very least you will have a better understanding of what sort of result you might get, and on top of that you just might avoid making a serious mistake.

Most people filing bankruptcy will want to file under either chapter 7 or chapter 13.  Either type of case may be filed individually or by a married couple filing jointly.

Chapter 7 (Straight Bankruptcy)

In a bankruptcy case under chapter 7, you file a petition asking the court to discharge your debts.  The basic idea in a chapter 7 bankruptcy is to wipe out (“discharge”) your debts in exchange for your giving up property, except for “exempt” property which the law allows you to keep.  In more than 95% of all chapter 7 cases, all of the debtor’s property is exempt, and for those people there is no danger of losing anything to the trustee.  But property which is not exempt can be sold, with the net proceeds distributed to creditors. (There is a longer discussion about exemptions later in this paper.)

In chapter 7 it is possible to keep your home, your car(s), and other things that you are still paying for. If you are current on the payments, and if the property is not worth a great deal more than the balance of the loan, then in most cases you can keep the property if you want to. However, if you are far behind on the payments on a mortgage or car loan, and if you want to keep that house or car, a chapter 7 case probably will not be the right choice for you.  That is because chapter 7 bankruptcy does not eliminate the right of mortgage holders or car loan creditors to take your property to cover your debt, and the farther behind you are on the payments, the less likely it is that they will agree to work with you.

Chapter 13 (Reorganization, or “wage earner”)

In a chapter 13 case you file a “plan” showing how you will pay off some of your past-due and current debts over three to five years.  The most important thing about a chapter 13 case is that it will allow you to keep valuable property--especially your home and/or car--which might otherwise be lost, even if you are in default on the payments. However, you must be able to make certain payments which the bankruptcy law requires to be made to your other creditors, too.  The payments are based on: (A) the types of debt that you have; and (B) the results that you are attempting to achieve.  The payment schedule is different in every case, so do not assume that your payments will be the same as anyone else’s.

You should consider filing a chapter 13 plan if you:

1. own your home and are in danger of losing it because of temporary money problems;

2. are behind on car loans or other debt payments;

3. have valuable property which is important to you but which is not exempt; AND

4. you have regular income (regardless of the source) that will be sufficient to make the payments that will be required in your particular case.

Also, there are certain kinds of debts that are not affected by chapter 7, but which can be managed in a chapter 13 plan. The most common examples are taxes, child support, criminal fines and court costs, outstanding utility bills, and a few other specific types of debt.

You must have enough income in chapter 13 to pay for your necessities and to keep up with the required payments as they come due.  The most common mistake that debtors make is attempting a chapter 13 when they do not have enough income to make the required payments and to maintain their household expenses at the same time.

How Much Does It Cost to File for Bankruptcy?

For most people there are three separate fees (court costs; attorney fees and credit counseling fees) that must be paid before a case can be filed, and a fourth fee (financial counseling) that usually must be paid before a case can be closed.  People who are truly indigent* may be able to waive some or all of these fees entirely, or get reduced rates.

The filing fees (“court costs”) are presently $299.00 for Chapter 7 and $274.00 for Chapter 13. The same fee applies whether one person is filing alone or if a married couple is filing jointly.  In some cases you may be allowed to pay this filing fee in installments if you can not pay all at once, but that process can be risky so you should pay the fees in advance if at all possible.  For Chapter 11 if you have to ask how much the filing fee is, then you can’t afford it.

The standard attorney fee in Jackson for Chapter 13 is $3,000.00.  All or part of that can be paid in advance, but in most cases that fee is paid later, as part of the plan.  Some attorneys offer a discount if all or part of the fees are paid in advance.  If your case becomes complicated you may have to pay extra, but that is rare in Memphis.

There is no “standard” fee for Chapter 7, but most Jackson-area attorneys charge between $1,000.00 and $1,500.00, depending on the type of case and on the complexity of the situation.  Fees for businesses may be much higher.  While the attorney fees for Chapter 7 are usually much lower than they are for Chapter 13, most private attorneys insist that all Chapter 7 fees be paid in advance, or within a very short period after filing, because there is no “plan” through which those fees can be paid.

Before filing any type of bankruptcy, all individuals (anybody other than a corporation, LLC or partnership) must now submit a certificate showing that they have completed a credit counseling course from a pre-approved agency.  The cost for that is usually between $35.00 and $60.00, depending on the agency, and depending on whether one person is filing alone vs. a married couple filing jointly.

After filing a bankruptcy case, but before the case completes, all individuals must also submit a second certificate showing that they have completed a debtor education (a.k.a. “financial management”) course from one of the approved agencies. Most agencies charge between $25.00 and $50.00 for that course. The state Department of Agriculture offers a class once per month for only $10.00 per person, but most people choose to pay more for the convenience that is offered by the private vendors for taking the course online or by mailing in a workbook. (Note: The Dept. Of Agriculture’s only offers the debtor education course, not the preliminary credit counseling.)

*People who are truly indigent may qualify for free services or reduced rates for chapter 7 (not for chapter 13). This applies only to the poorest of the poor; typically people who are elderly and/or disabled, who have no significant assets, and who have no realistic chance of improving their income. If you think that you may qualify for free services, call West Tennessee Legal Services at 731-423-0616.

What Must I Do Before Filing Bankruptcy?

You must get a credit counseling certificate from an approved credit counseling agency, and it must be dated within 180 days before your bankruptcy case is filed.  The agency will review possible options available to you in credit counseling and assist you in reviewing your budget.  Different agencies provide the counseling in-person, by telephone, or over the Internet.  Frankly, for the vast majority of people this is a waste of time and money, but until the law is changed it must be done.

If you decide to go ahead with bankruptcy, you should be careful in choosing an agency for the required counseling. While there are many agencies that have been approved in certain parts of the country, not all of them are approved in this district. Even if they advertise that they are approved in all districts, you should still check with a local attorney or with the office of the United States Trustee to be certain.

Some of the approved agencies offer debt management plans (also called DMP’s).  This is a plan to repay some or all of your debts in which you send the counseling agency a monthly payment that it then distributes to your creditors.  Debt management plans can be helpful for some consumers, but for other people DMP’s are a terrible idea.  Some counseling agencies have been known to pressure people into entering a debt management plan even if that is not in your best interest, because they can charge a fee for managing that plan.  Also, there are a number of creditors who simply refuse to participate in a private payment plan. One of the benefits of bankruptcy is that creditors have no choice about whether to participate or not (with the exceptions of child support obligations and criminal court costs and fines).

You must also gather up any documents that have anything to do with your finances during the past 6 months or more. This includes:

  • Paycheck stubs (or other payroll data);
  • Anything showing income from any other source, such as Social Security, child support, alimony, self-employment, private retirement, etc.;
  • Billing statements, contracts and collection letters (as many as possible);
  • Copies of your last 3 tax returns or official “return transcripts” from the IRS;
  • Bank statements;
  • Papers related to lawsuits or garnishments;
  • Credit reports;
  • Etc., etc., etc. . . . . (If it has to do with income, assets or debt, save it.)

It is important to keep in mind these important points:

  • Bankruptcy should be the last choice, but is not necessarily to be avoided at all costs.  In many cases, bankruptcy may actually be the best choice for you.
  • Timing can be critical, especially in chapter 7. This is another very good reason for consulting with an attorney early in the process.  There are far too many variables to list here, but with the complicated rules that are now in place filing one day too soon or one day too late can literally make all the difference.
  • If you sign up for a debt management plan that you can’t afford, you may end up in bankruptcy anyway.  If that happens you may have only lost more money and suffered more financial agony than you would have otherwise.
  • There are approved agencies for bankruptcy counseling that do not offer debt management plans.
  • Bankruptcy does not prevent you from repaying your debts. From a legal perspective, all bankruptcy really does is to prevent your creditors from bothering you. After the case is closed you are free to repay anyone that you want to, and I highly encourage that as long as you are truly able to afford it. (If you choose to repay debts that have been discharged in bankruptcy, don’t tell the creditor(s) of your intentions in advance, because you could accidentally be making promises that you can’t keep. Just send them a check, with a note saying that you want to pay the debt despite the bankruptcy discharge.
  • It is usually best to meet with an attorney before you receive the required credit counseling.  Unlike a credit counselor, who cannot give legal advice, an attorney can provide counseling on whether bankruptcy is the best option.  If bankruptcy is not the right answer for you, a good attorney will offer a range of other suggestions.  The attorney can also provide you with a list of approved credit counseling agencies, or you can check the website for the United States Trustee Program office at http://www.usdoj.gov/ust.
  • Do not buy, sell, give away or otherwise transfer ownership of anything significant shortly before filing bankruptcy. There are far too many points to list here, but trust me when I say that doing this not only raises big red flags for the other people involved, but it can also create a situation where something that would not have been a problem if it had been left alone is suddenly now a big problem simply because its status changed before the bankruptcy was filed. Again, consult with an attorney before making any major moves.

What Property Can I Keep?

This may seem to be a simple question, but the answer depends on several factors, the most important of which are usually based on your needs and desires.  First of all, there is often a big difference between chapter 7 and chapter 13. In chapter 13 you can always keep everything that you want to keep as long as you can pay for it (often at a lower rate than before), so the rest of this section will only discuss chapter 7, where the danger of losing something that you would rather keep is considerably greater than in chapter 13.

In chapter 7 there are two separate entities that must be considered: secured creditors and the trustee. You already know that in the real world secured creditors, such as mortgage companies and automobile finance companies, can repossess their collateral if you default on the loan. That is also true in Bankruptcy World, but at the very least bankruptcy delays the repossession process, and it often gives you more options than you would otherwise have.  Just as in the real world, they won’t repossess your car or foreclose on your home if you are current on the payments (or if you can catch up very quickly), so don’t worry about the creditor taking away your home or your car if you are current on the payments. They want your money; not your property. They will always agree to let you keep the property if it won’t cost them any money. But the farther you are behind in the payments, the less likely it is that the creditor will let you keep something if you file chapter 7.

Like everything else in Bankruptcy World, there are exceptions to this rule. On the one hand, there are many situations where you can keep something that serves as collateral for a debt, sometimes by paying only part of what you owe, and in some cases you don’t have to pay anything. On the other hand, there are a few illogical creditors who will take something just because they can, even though it actually costs them money.

The other person that might want to take your property is the chapter 7 trustee. The trustee is the middle man (or woman) in every bankruptcy case. In Memphis the trustees are all private attorneys who have been appointed to this position. Every chapter 7 case is randomly assigned to one of these trustees. His or her job is to review all of the paperwork and to do some basic limited investigation on their own cases. In more than 95% of all chapter 7 cases all they do is review the paperwork, ask you a few questions, and close their file. It shouldn’t be surprising that most people who file chapter 7 don’t have anything worth taking.

However, there are times when a chapter 7 debtor does have something worth taking, and there are the rare instances when a chapter 7 debtor has hidden a valuable asset, or maybe even was not aware that they had something of value, such as an inheritance or a personal injury claim. The trustee’s primary job is to look for anything that can be turned into money, and then to use that money to pay off some part of this person’s debts. The trustees gets a small percentage of the money that goes to creditors, so they have a financial incentive to look for valuable property. The things that they always look for are real estate, vehicles, lawsuits that the debtor might have a right to pursue against someone else, and of course, money in any form, such as bank deposits, large tax refunds, inheritances, and actual cash. (No, they almost never actually come to your house looking for money or valuable things, but they do ask precise questions under oath, and someone caught hiding anything or telling a lie could actually go to prison!)

So can the trustee just take anything she wants to take? Absolutely not. More than anything, most trustees are practical people. They are private attorneys and this is how they make a living. They aren’t going to waste their time taking stuff that they can’t sell for more than it would cost to take it and sell it. In my experience, most of my clients don’t have many things that are worth enough to cover the cost of their own sale, and if they do, they are still paying for them so there is little or no equity for the trustee to take.

There is a longer discussion about equity later in this paper. In a nutshell, if the trustee takes something that serves as collateral on a loan, that creditor must be paid in full before the trustee gets anything. If a car is worth $10,000 (wholesale), but you still owe $11,000 on it, then the trustee has no reason to take it, because she’s not going to end up with any money in her hands after paying off the finance company. She could even end up owing them some money, and she’s not going to take that chance unless she’s pretty darn certain that won’t happen.

Most of your things are also protected by “exemptions.”  The next section will explain exemptions in more detail.

What Are Exemptions, and What Do They Do?

It is important to understand that exemptions are different in every state.  The information provided in this flyer only applies to cases that are filed in Tennessee by residents of Tennessee. People who live in other states, or who recently moved from one state to another, should consult with an attorney in your area for specific answers to this question.  Whatever happens, please do not assume that you will get the same result as someone else, regardless of where they filed.

In a chapter 7 case the trustee cannot touch any property which the law says is “exempt” from the claims of creditors.  This is not usually a concern in chapter 13 cases, but having unexempt property can cause your plan payments to be higher than they otherwise would be.  For Tennessee residents who file bankruptcy in Tennessee, the basic exemptions are:

  • 4,000.00 for anything other than real estate that is in your possession. This includes cash, money in the bank, household goods, furniture, appliances, electronics, vehicles and other personal items. For a married couple filing jointly this exemption is doubled to $8,000.00.
  • 100% of all reasonable clothing, suitcases, trunks, school books, family pictures and family Bible. (Note: this does not include jewelry or expensive items such as furs.)
  • 100% of all “qualified retirement accounts,” even if there is $1 million or more set aside.  This includes all retirement accounts that are set up by city, county or state employers, all true IRA’s and 401(k) accounts; and most other retirement accounts under IRS Code sections 401 and 403. (This is one reason why it can be a big mistake to cash out or borrow from your retirement account before consulting a bankruptcy lawyer.)
  • 100% of all benefits from Social Security and/or a workers compensation award;
  • $1,900.00 for “tools of the trade” (basically anything that you use to earn money: tools; books, computers; office equipment; etc.). For a married couple filing jointly this exemption can be doubled, assuming both spouses own the tools;
  • $7,500.00 for personal injury claims. This can be doubled to $15,000 if you happen to have two separate claims, or if a husband and wife both have such claims. This exemption only applies to your share of the claim, which is typically whatever is left after your medical bills are paid and your attorney’s fees are taken out;

    * Homestead (real estate that you own and that serves as your present home): -  $5,000 for a single debtor
    -  $7,500 for a married couple who file jointly and who both own the house
    -  $12,500 for a single debtor who is over the age of 62 on the day that the petition is filed
    -  $25,000 for a married couple who file jointly and both of whom are over age 62
    -  $20,000 for a married couple who file jointly when one of them is over age 62 and one is under age 62
    -  $25,000 for an individual debtor with at least one minor child at home, or in their custody. (It has not yet been determined whether a married couple filing jointly would get to double this exemption to $50,000, but they probably would.)
    -  Please note that there is no exemption for real estate that is not your home on the day your case is filed.

Some important details about exemptions:

-  For most purposes, we go by the fair market value for this item in this area in its present condition. In other words, how much you could sell it for if you had to sell it quickly?  For real estate and automobiles it is fairly easy to look up the values online, but for most other things you should think in terms of “yard sale” value. Think of it like this: If you were shopping for this particular item, and if you saw it at a stranger’s yard sale, how much would you pay for it? For most things, you probably would not pay very much, because you don’t know where it has been or how it has been used.

-  To put it another way, for bankruptcy purposes, the value of property is usually not the amount that you originally paid for it, or how much it would cost to replace it, or how much an insurance company might pay if it was lost in a fire. We have to think in terms of how much money something would turn into if we had to sell it quickly.

-  This does not mean that your things are going to be taken away from you. This is simply the thought process that we have to use. As long as you list your assets, in most cases you get to keep everything, or almost everything.

-  You only need to look at the equity in your property, and then subtract the exemption from that.  “Equity” is the money that would be left after selling your property and paying off the debt on that property. For instance, if you own a $50,000 house with a $40,000 mortgage, your equity is $10,000. As noted above, a single person under the age of 62 gets a $5,000 homestead exemption, so in this example that leaves $5,000 of equity exposed. A married couple (both under the age of 62) filing jointly gets a $7,500 exemption, so there would be $2,500 of exposed equity in that example. For anyone with minor children or anyone over the age of 62 there would be more than enough exemptions to cover all of the $10,000 equity in this example.

While your exemptions allow you to keep property even in a chapter 7 case, your exemptions do not make any difference to the right of a mortgage holder or car loan creditor to repossess their collateral.  In a chapter 13 case, you can keep all of your property if your plan meets the requirements of the bankruptcy law.  In most cases you will have to pay the mortgage as you would if you didn’t file bankruptcy (with extra time to catch up on delinquent payments). There are a few different ways to treat a car loan in chapter 13, but as a rule if you keep the car you will have to make significant payments to that creditor.

You do not have to keep property if you don’t want to. There are times when the car is no longer worth paying for, or you simply don’t need it, or maybe you can’t afford it. We are now seeing a lot of cases where mortgage rates are adjusting upward to a point where people can no longer afford to make the payments. In those cases you can simply give the property back to the creditor after the bankruptcy is filed. They will sell the property for as much as they can get for it. In chapter 7 that will be the end of it as far as you are concerned, because even if they don’t sell it for enough to pay off the entire debt the remaining deficiency is discharged along with all of your other debt. In chapter 13 you may still have to pay all or part of the deficiency, depending on the circumstances of your case.

Can I Own Anything After Bankruptcy?

Of course!  Many people believe they can not own anything for a period of time after filing for bankruptcy.  This is not true.  You can keep your exempt property and anything you obtain after the bankruptcy is filed.  However, if you receive an inheritance, a property settlement, or life insurance benefits within 180 days after filing for bankruptcy, that money or property may have to be paid to your creditors if the property or money is not exempt.

Will Bankruptcy Wipe Out All My Debts?

It depends on what kinds of debts you have, and whether you want to keep certain things. The bankruptcy discharge applies to just about any kind of debt that you can imagine, but there are some exceptions.  Bankruptcy will not normally eliminate the following debts:

1. money owed for child support or alimony, court fines, and some taxes;

2. debts not listed in a chapter 13 petition (but in most chapter 7 cases unsecured debts are discharged even if they are not listed in your petition);

3. loans you got by knowingly giving false information to a creditor, who reasonably relied on it in making you the loan;

4. debts resulting from “willful and malicious” harm, such as injuries that arose from intentional acts, or from accidents caused by someone who was under the influence of alcohol or drugs;

5. most student loans, unless the court decides that payment would be an “undue hardship”;

6. mortgages and other liens which are not paid in the bankruptcy case (but bankruptcy will wipe out your obligation to pay any additional money if the property is repossessed or foreclosed by the creditor, or if you voluntarily surrender it to the creditor).

Will I Have to Go to Court?

In most bankruptcy cases, you only have to go to a proceeding called the “meeting of creditors” to meet with the bankruptcy trustee and any creditor who chooses to come.  Most of the time no creditors appear, in which case this meeting will be a short and simple procedure where you are asked a few questions under oath about your bankruptcy forms and your financial situation.

Occasionally, if complications arise, or if you choose to dispute a creditor’s claim, you may have to appear before a judge at a hearing.  If you need to go to court, you will receive notice of the court date and time from the court and/or from your attorney.

What Else Must I Do to Complete My Case?

After your case is filed, you must complete an approved course in personal finances.  This course may take as much as two hours to complete.  Your attorney can give you a list of organizations that provide approved courses, or you can check the website for the United States Trustee Program office at www.usdoj.gov/ust .  In a chapter 7 case, you should sign up for the course soon after your case is filed.  If you file a chapter 13 case, you should ask your attorney when you should take the course.

How Will Bankruptcy Affect My Credit?

There is no clear answer to this question.  If you are already behind on your bills, your credit will be bad anyway.  Bankruptcy will probably not make things any worse, and if you can rebuild your credit within a few years on your own bankruptcy could actually give you a solid starting point for cleaning up your record.

The fact that you’ve filed a bankruptcy can appear on your credit record for ten years.  Because bankruptcy wipes out your old debts, you are likely to be in a better position to pay your current bills, and you may be able to get new credit. But please don’t think of credit as your friend. It is not your friend, and neither are your creditors. Credit is a business relationship, and nothing more. Treat it like a business.

What Else Should I Know?

Utility services--Public utilities, such as the electric company, can not refuse or cut off service because you have filed for bankruptcy.  However, if your bankruptcy case directly affects the utility company they can require a new deposit for future service. In any event, you absolutely must pay all utility bills which arise after bankruptcy is filed, just as you would otherwise.

Discrimination--An employer or government agency can not discriminate against you because you have filed for bankruptcy. In other words, your employer cannot fire you for filing bankruptcy, and you cannot be denied government benefits.

Driver license--If you lost your license solely because you couldn’t pay court-ordered damages caused in an accident, or because you have outstanding tickets, fines and/or court costs, bankruptcy may open the door to reinstating your license.

Co-signers--If someone has co-signed a loan with you and you file for bankruptcy, the co-signer may still have to pay your debt.  If you file a chapter 13, you may be able to protect co-signers, depending upon the terms of your chapter 13 plan.

How Do I Find a Bankruptcy Attorney In My Area?

As with any area of the law, it is important to carefully select an attorney who will respond to your personal situation.  The attorney should not be too busy to meet you individually and to answer questions as necessary.

The best way to find a trustworthy bankruptcy attorney is to seek recommendations from family, friends or other members of the community, especially any attorney you know and respect.  You should carefully read retainers and other documents the attorney asks you to sign.  You should not hire an attorney unless he or she agrees to represent you throughout the case.

If you need further assistance try (Bankruptcy CreditorBankruptcy Business Debtor, Bankruptcy Consumer Debtor )go to  or  www.nacba.org and use the “Attorney Finder” link on the main page of that web site.  It will allow you to search by city, state, zip code or the name of a certain attorney.  Membership in NACBA is limited to attorneys who primarily represent consumers in personal bankruptcy cases.  There are members of NACBA in every state and territory, so you should be able to find an experienced attorney nearby.

In bankruptcy, as in all areas of life, remember that the person advertising the cheapest rate is not necessarily the best.  Many of the best bankruptcy lawyers do not advertise at all.

Document preparation services also known as “typing services” or “paralegal services” involve non-lawyers who offer to prepare bankruptcy forms for a fee.  Problems with these services often arise because non-lawyers can not offer advice on difficult bankruptcy cases and they offer no services once a bankruptcy case has begun.  There are also many shady operators in this field who give bad advice and defraud consumers.

When first meeting a bankruptcy attorney, you should be prepared to answer the following questions:

  • What types of debt are causing you the most trouble?
  • What are your significant assets?
  • How did your debts arise and are they secured?
  • Is any action about to occur to foreclose or repossess property or to shut off utility service?
  • What are your goals in filing the case?

Can I File Bankruptcy Without an Attorney?

Although it may be possible for some people to file a bankruptcy case without an attorney, it is not a step to be taken lightly.  The process is difficult and you may lose property or other rights if you do not know the law.  It takes patience and careful preparation.  Chapter 7 (straight bankruptcy) cases are easier in one sense, but they also involve more risk if you own (or have rights to) anything of significant value.  Very few people have been able to successfully file chapter 13 (debt adjustment) cases on their own because the plan process is complicated.

Remember:  The law often changes.  Each case is different. This pamphlet is meant to give you general information and not to give you specific legal advice. Do not assume that this pamphlet covers your situation.

Additional resources for information regarding bankruptcy and other areas of consumer protection:

National Consumer Law Center

617.542.8010
http://www.nclc.org
www.nclc.org/advice/consumer_info.shtml

National Association of Consumer Bankruptcy Attorneys

www.nacba.org/tips.php

National Association of Consumer Advocates

www.naca.net/know-your-consumer-rights/

Nolo Press

www.nolo.com

Bankruptcy Law Network

http://www.bankruptcylawnetwork.com/

DISCLAIMER: The above information available through www.jacksonmadisonbar.org is basic legal information and is neither intended as legal advice, nor a substitute for legal advice.  No attorney-client relationship is created herein.  The content on www.jacksonmadisonbar.org is provided by the Jackson-Madison County Bar Association as a public service and for general information only. You should consult your attorney if you have questions concerning any specific situation. If you do not have an attorney, may we suggest that you visit our (Need a Lawyer – link) section or find a lawyer in the phone book.  The topics covered through www.jacksonmadisonbar.org will provide basic information and should make it easier for someone with a problem to decide whether they need professional help from a lawyer or if another agency could provide them with assistance.

A special thanks to the Memphis Bar Association for its contributions and assistance to the Jackson-Madison County Bar Association in making available this legal information.  Portions of the foregoing content have been reprinted with the permission of the Memphis Bar Association.  www.memphisbar.org.