One of the most confusing things about filing bankruptcy comes when your attorney’s office calls to remind you to take your classes. What classes? That’s the most common response I got from clients when I had to make that phone call. Then came the dreaded “what if I don’t pass?” Allow me to put your mind at ease and tell you a little bit about the classes required of anyone filing personal bankruptcy.
In 2005 Congress passed new legislation known as the Bankruptcy Abuse Prevention & Consumer Protection Act, otherwise known as BAPCPA. It was the largest overhaul to the bankruptcy code in several decades and it created the requirement for certain classes. Section 109(h) states that a debtor will not be eligible to file Chapter 7 or Chapter 13 bankruptcy unless within 6 months prior to filing the debtor received an “individual or group briefing” from an approved credit counseling agency. The law also required that all debtors complete an “instructional course concerning personal financial management” soon after their case has been filed.
Both courses are available to be completed online, over the phone, or in person and take somewhere between 1-2 hours. Neither course is pass or fail, but rather just for completion. These courses typically cost between $30-$50 apiece and that amount may or may not be included in the fees you pay your attorney. Here’s a bit more information about both:
- Credit Counseling Course – The credit counseling course should be taken before your bankruptcy paperwork is filed with the court. In fact, if your case is filed without your certificate of completion it could be thrown out altogether. It is imperative that you take the course as soon as you can after you attorney tells you it is available so that your filing is not slowed down.
- Debtor Education Course – This course is taken after your case has been filed with the court, but before it has been finalized and completed. That means you will have a smaller window of time to complete this course. In most cases bankruptcy attorneys recommend that you take this course before your bankruptcy hearing which is typically scheduled for 30 days after your case is filed.
These courses were made mandatory by the BAPCPA in order to prevent bankruptcy abuse from taking place, or in other words to make it a bit more difficult to file. The law was not created to keep those who really need bankruptcy from filing – it was created to prevent those individuals who habitually file from taking advantage of the system. Be sure and discuss these 2 courses with your bankruptcy attorney so that you are prepared when it is time to take them.
No two bankruptcies are exactly the same. Your financial situation may require a totally different bankruptcy than someone else’s and that is why it’s important to find the best bankruptcy attorney for your situation. Not only is finding a good bankruptcy attorney good for your stress level, but it will make the process smoother for you. Think of it this way, if a mistake is made by your attorney on the official bankruptcy paperwork then your case could be completely thrown out or sent back to the beginning of the process. Here are just a few tips (in no particular order) on how to find the right bankruptcy attorney for you.
- Online Research – We are living in the internet age so take advantage of it! Just do a simple search for your zip code and the words “bankruptcy attorney” and see what comes up. Be sure to read reviews if they are available and check the Better Business Bureau if that is applicable.
- Friends & Family Recommendations – Ask those people in your life that you trust if they have ever had to file a bankruptcy and whether or not they would recommend their attorney. Make sure to ask questions about how long their case took to file and exactly what characteristics they liked or did not like about their previous lawyer.
- Local Bar Association – If you do not know anyone in your area who has filed bankruptcy then make a quick phone call to your local bar association (phone number can be found in the yellow pages or online) and ask them to provide you with a list of attorney’s in your area that specialize in bankruptcy.
- Consultations – Once you have done your research, asked friends and family, or contacted the local bar associations begin making phone calls to request a free consultation with a bankruptcy attorney. Take notes during these consultations and make sure to have specific questions for them such as “which chapter of bankruptcy do you file more often” or “what is your typical timeline?” You will also want to jot down exactly how much the bankruptcy attorney charges and what kind of payment arrangements can be made. Some bankruptcy lawyers prefer to be paid up front, while others offer monthly payment plans.
The bottom line is that only you can decide which bankruptcy is right for your situation. Just remember that whoever you choose will be with you throughout the process and be the person you should turn to when you have questions. Bankruptcy is a complex legal procedure and having a lawyer you are comfortable with can really make a difference.
It is true that bankruptcy has some kind of an effect on all parts of your finances, but what about your property? Many people assume that filing bankruptcy means that you have to give up your property, but that is not the case. In most cases your property can be safe from liquidation as long as you are current on the payments. Here are some cases where your property may not be safe:
- You have a high amount of equity in your home – Because of the housing crisis our nation has faced over the last several years this situation does not apply to a lot of Americans. However, some individuals have a balance that is much less than the fair market value of their home resulting in an amount of equity that the court may want to use to pay creditors. In most cases this will be something discussed between you and your bankruptcy lawyer so that it does not have to be a surprise.
- You have paid in full vehicles and/or homes – As far as the bankruptcy court is concerned, any paid in full vehicle or home that you own is considered an asset that could potentially be sold in order to pay back your creditors. Typically the court will not choose to liquidate the sole vehicle for the household because they understand that it is necessary in most areas in the company. However, when a family has several paid in full vehicles the court will want to evaluate which ones are not necessary. The same is true for homes.
- You have valuable “luxury items” – The definition of luxury items will differ with each case, but basically it can be any item of a large value. Common luxury items that are liquidated in bankruptcies are boats, jewelry, art, and high end electronics. Again, you most likely will have discussed these items with your attorney beforehand so you will know if there is any chance that you could lose them.
The good news is that even if you own some of the items mentioned above there are exemptions in each state that will protect a certain value. For instance, in Illinois a married couple filing bankruptcy can have up to $30,000 in equity and keep their house because the exemption keeps the home safe. If they had more than $30,000 then the bankruptcy court may suggest selling the home. Exemptions are created by the states specifically for their citizens and your local bankruptcy attorney will be privy to what they can and cannot protect. If there is a certain item, or set of items that you are worried about protecting just contact a bankruptcy attorney and ask them a few questions.