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?
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.
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.