WHAT IS BANKRUPTCY? What is its purpose?
Bankruptcy law entitles
you to eliminate debts and get a fresh financial start. You have
a right to stop collection
harassment, wage garnishments, home foreclosures, and car repossessions.
Who
files for bankruptcy?
Most often,
middle-income parents with children, especially single and divorced
mothers. Ninety percent have endured a job loss, a divorce,
or an illness or injury that results in heavy medical bills. Careless
spending
is almost never in the picture.
Nearly 30,000 people file each
year in Arizona, a historic high. Why the record numbers?
Credit
card debt rose 6,000% between
1968 and
2000. Mortgage debt levels have set records every year since
1993. Mortgages, cars, health insurance, and school tuition
exhaust income,
leaving little to cushion economic setbacks. Job layoffs have
increased 28% since the 1970s. Marriages now end in divorce
43% of the time,
causing financial hardship, esp. for women with kids. Medical
care costs for a serious illness or injury can be enormous
for the insured,
with exclusions, co-pays, and caps, and beyond reach for the
uninsured. Home foreclosures rose 255% in 25 years. Car repossessions
have doubled
in 5 years.
SHOULD I FILE FOR BANKRUPTCY?
1. Do you have more
debt than you can pay?
With careful budgeting, can you pay
your debts in a reasonable time?
2. Are you judgment-proof?
Some
property and income is protected by law from collection. If you live
on exempt income such
as Social Security
and have little property, creditors may not collect
from you.
3. Will bankruptcy discharge your debts?
Student
loan debts, child and spousal support debts, and recent tax
debts are
not dischargeable.
Others are.
4. Do you have better options?
Resist the
temptation to borrow more. Do not take out a second mortgage or
cash out
the equity
in your house.
High mortgage costs and an increased risk of foreclosure
result. Be cautious about refinancing and debt consolidation
plans.
They do not
eliminate or reduce debt. They do not reduce interest
rates. Payments may be only slightly lower. Few lenders
will offer
you credit while
you are in such a program. Debt consolidators, who
disburse your money to creditors, may make payments late, ruining
your credit record.
5. EXERCISE YOUR RIGHTS.
Bankruptcy
is just another form of financial planning. It is not a drastic
event.
In the
business
world, it
is known as “restructuring.” It is a
necessary and just remedy to a credit-driven economy.
Will
I get credit after bankruptcy?
Yes. You
may get new credit on good terms within 2 years
if you
carefully
manage
your
credit record.
Home mortgages, car financing, and credit cards
are all available.
Do I need an attorney?
Yes.
The law is not simple. Small mistakes can have big consequences. You
risk losing
money and property
if you go it alone. Non-attorney document preparers
cannot advise you on
the law. They give you no help at all once your
case has begun. Complaints about shoddy work
and the illegal
practice
of law
have led the Arizona
Supreme Court to crack down on them. Arizona
Republic, 1/17/03.
What does it cost?
My fees are lower than those of most other attorneys. I do not
have an expensive office or a big advertising budget.
Will I lose my house?
No, if you
stay current on payments and your equity in the house is
less than
$150,000.
Will I lose my car?
No, if you
stay current on payments and your equity in the vehicle
is less
than $5,000.
How should I handle bill collectors?
Refer them to me. Federal law prohibits
collection agencies from contacting you
if you have hired an attorney.
Should I continue to pay creditors?
Stay current on accounts you wish to
keep, such as mortgage and vehicle accounts.
Stop paying credit card and unsecured
loan debts you
will discharge.
Must I go to court?
You usually must attend only
one hearing before a bankruptcy trustee.
I will
be with
you.
More: National Consumer Law Center, Surviving
Debt; consumerlaw.org
Elizabeth
Warren, The Two-Income Trap.
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