The financial distress we are finding is absolutely mind numbing. We can easily see that debt ridden small businesses and many consumers will soon be trying to find a way out of a terrible situation that they did not get themselves into. That’s where we come in. We have written extensively about what you should look for in a bankruptcy attorney and frankly, we tick all those boxes.
Unfortunately we live in a world where the only attorneys who technically have to specialize are patent attorneys. That means that anyone else can sit there and say they file bankruptcies, even if they don’t have a clue what they’re doing. Below I list 7 things that every bankruptcy lawyer should know before they ever file a case.
1. In 97% of Chapter 7s, the debtor gets to keep everything they want to keep.
Everyone freaks out when they think about Chapter 7s. They worry they’re literally going to be cast out on the street with nothing but their underpants. That couldn’t be further from the truth. In the overwhelming majority of Chapter 7s, most debtors walk away with everything they WANT to keep. A Chapter 7 is called a liquidation but in order to liquidate an asset, a trustee must find that there’s significant equity in an asset AND you don’t have enough exemptions to protect it. While exemptions vary from state to state, the exemptions here in Georgia are pretty generous.
2. Even high income people can file
The bankruptcy means test doesn’t mean you can’t file bankruptcy. It’s simply there to to determine whether or not you have any disposable income to pay your debts back. If you don’t pass the means test, you can still file a Chapter 13 bankruptcy in which you pay back a fraction of your debt.
3. The automatic stay is a powerful tool
For the low cost of just a filing fee, you get to enjoy the benefits of an extremely powerful court injunction that protects you and your assets from collection. It is broad and works even if your creditors don’t know about it. You get to use the stay so long as you have an active bankruptcy case. It can only be lifted in certain legal proceedings or once your case has been dismissed.
4. Certain Taxes can be eliminated
Certain taxes can be made to disappear in bankruptcy. If you’ve followed the law and filed a timely return on your taxes, many of them can be discharged in bankruptcy. The formulation is very technical and involved, but done correctly, you can eliminate a number of taxes.
5. Support obligations aren’t dischargeable
Whether it’s child support, separate maintenance or alimony, you can’t get rid of it. It follows you until you die or pay it. Anyone who tells you otherwise, is a liar. Additionally, support gets first priority in a bankruptcy case. If there is money moving through the case, it goes first to your support obligations before anyone else gets a dime.
6. Informal notice stops collections
A creditor has rights under the bankruptcy code but most of those rights revolve around a deadline of some sorts. Creditors have to file something called proof of claim to get paid in your case or they have to contest the dischargeability of your debts.
However, even if a creditor doesn’t get formal notice of the bankruptcy from the court, they are still bound by the deadlines. If they miss the deadline, their claim is toast.
7. Bankruptcy can actually help your credit score
Yes, it sounds counterintuitive, but it’s not. Bankruptcy doesn’t doom you to no access to credit. You’ll probably be able to access credit within months of your case being discharged. You know the old saying,”time heals all wounds” that’s especially true in bankruptcy. It becomes less and less of an issue the longer it’s been since you filed.
Filing bankruptcy does not doom the debtor to being without credit for 10 years. Instead, the proximity of the discharge affects the price of credit, and bankruptcy becomes less and less significant in the lending decision with the passage of time.
A recent government study by the CFPB shows that your credit score will actually improve the very month you file bankruptcy. Even more important than your credit score, is your balance sheet. That improves automatically.
Bankruptcy is a specialty
Like I said before, you don’t want to go to a urologist if you’ve got a brain tumor. Yes, doctors are smart, but they specialize. Bankruptcy lawyers should too. If you’re running around seeing lawyers that do bankruptcy, personal injury, government law, complex litigation, adoptions, immigration and 21 other things, you should probably avoid them, no matter what your need is. The law is specialized, but bankruptcy law is very specialized. It is no place for people who want to DIY or hire the occasional dabbler. The 2005 revisions to the bankruptcy code threw up numerous hurdles and created various traps that can cause your case to get dismissed or cause you to lose valuable assets. Don’t make a huge financial mistake just because you saw a flashy ad. Do your research.