Bankruptcy

What is Bankruptcy & How Can it Help Me?

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What is Bankruptcy?

The goal of modern bankruptcy is to allow the debtor to have a “fresh start,” and the creditor to be repaid the value of their secured debts.  If the creditor does not have a secured debt then they may receive a portion of their unsecured debt. Through bankruptcy, debtors liquidate their assets or restructure their finances to fund their debts.  Bankruptcy law provides that individual debtors may keep certain exempt assets, such as a home, a car, and common household goods, thus maintaining a basic standard of living while working to repay creditors.  Debtors are then better able to emerge as productive members of society, albeit with significantly flawed credit records.

Once considered a shameful last resort, bankruptcy in the United States is emerging as an acceptable method of resolving serious financial troubles. A record one million individuals filed for bankruptcy protection in the United States in the peak year of 1992, and between 1984 and 1994 the number of personal bankruptcy filings doubled. In just one year (June 2005 to June 2006) there were 1,484,570 total bankruptcy filings.  Corporate bankruptcies are commonplace, particularly when corporations are the target of lawsuits, and even local governments seek debt relief through bankruptcy laws.

Why is it sometimes called “Bankruptcy Protection”?

Bankruptcy is a protective measure which enables debtors to a “start fresh” by eliminating debts in order to become productive again. By clearing the table of overwhelming debt and high interest rates most debtors are able to take control of their finances and start anew. One of bankruptcy’s most powerful tools is the automatic stay. The automatic stay instantly puts creditors at bay. The automatic stay is the financial equivalent to a restraining order which prevents creditors from taking collection actions. Creditors will no longer be able to call and harass you, file a judgment against you, attempt to repossess any of your property, attach any garnishments to your wages or bank accounts, or anything else that would amount to an attempt to collect debt.  This powerful tool against creditors becomes effective the instant you file bankruptcy with the court. However, the automatic stay has some limitations.  Criminal actions cannot be stayed, nor can alimony or child support payments. In cases involving evictions a tenant should file prior to the landlord’s action for eviction in order to prevent the eviction.

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What will bankruptcy achieve for me?

    • Bankruptcy allows most people to discharge their debt in about 90 days and get a legal fresh start and second chance.
    • Bankruptcy allows people to move forward in a safer financial way other than still living paycheck to paycheck for years as they try to pay their way out but unable to save money.
    • Bankruptcy allows people to learn from their mistakes and do better moving forward to protect themselves and their family financially.
    • Filing bankruptcy now allows people to get back to saving for retirement as quickly as possible.
    • Bankruptcy stops people from draining their retirement accounts to pay bills they can’t afford to pay.
    • Filing bankruptcy stops all collection calls.
    • Bankruptcy stops lawsuits over debt owed.
    • Bankruptcy stops wage garnishments.
    • Bankruptcy allows you to regain your life in an otherwise unsafe financial situation.
    • You should not avoid filing bankruptcy for fear of what your creditors might think. You are a number on the computer screen and they’ve already assumed some people will have to file bankruptcy at some point. That’s not an excuse. It’s a reality.

The biggest concerns for filing bankruptcy

How do I know if bankruptcy is right for me?

If you are in financial trouble and struggling to make payments, tapped out, you’ve spent down savings, or living month-to-month, then bankruptcy is worth a good hard look.

Many people carry a lot of baggage around about what it really means to go bankrupt. They think it some how means they’ve failed.  How wrong they are. An alternative way to look at the situation is that if you decide to file bankruptcy you’ve succeeded in taking responsibility for your situation and taking action so you can move forward in a safer financial condition. You’ll be able to begin to save and build your emergency fund and saving for retirement again. Those are important considerations. The first and most important step to take to find out if bankruptcy is right for you is to clear your mind of any preconceived notations about bankruptcy. Most people don’t understand if you file bankruptcy you can easily rebuild your credit, get credit again, will be able to buy a house, can keep your car, etc. Bankruptcy will stop collection calls, most people have their debt eliminated in three months or less, and you are entitled to a legal fresh start and second chance. It is the only debt relief solution that is backed by the power of law and that puts you in the drivers seat instead of just reacting to creditors. Some people spend a long time accumulating financial hardships. Others experience one tragic life event. You can be experiencing any one or more of these:  

  • Garnishments
  • Change in income 
  • Auto Repossessions 
  • Medical Bills
  • Divorce
  • Financial Hardships 
  • High Interest Loans 
  • Foreclosure 
  • Overspending
  • Tax Levies

How much will bankruptcy cost me?

The total costs for filing bankruptcy consists of three categories which include:

Filing Fees

The filing for bankruptcy is set by the court/Congress. In 2012 were approximately $300 for a Chapter 7 (personal and company) and $281  for a Chapter 13. A complete list of court fees can be found at United States Bankruptcy Court
Northern District of Georgia website (http://www.ganb.uscourts.gov/geninfo/feetable.htm).

Attorney Fees

This is my fee for processing all usual paperwork and acting as your full representation from beginning to end.  My fee varies depending on the type of bankruptcy filed and the complexity of the case.  During our consultation, I will have a chance to go over the information you provide and give you fee breakdown.

Third Party Fees

These include costs for your credit report and the consumer credit counseling classes required prior to filing and after filing by the court. These can range from $15 to $25 depending on the provider you choose. My office can handle this for you or you can independently obtain your credit report and classes. I will provide details on this once you decide which bankruptcy to file, if any.

When is the right time to file?

The right time to file really depends on each individual debtor’s personal circumstances. When debts become overwhelming large creditors, will begin to take action to collect on the debt such as filing liens, attaching garnishments, and destroying your credit score.  When these types of situations appear to be eminent the time to file is now.  If the debt seems to be manageable and you can see yourself paying them off within six months filing bankruptcy may not be in your best interest. Conversely if debts are at the point where looking ahead six months you would be unable to pay off the debt, even without accruing more debt to that account, then filing bankruptcy should strongly be considered. If you are unsure, the best course of action is to contact me to discuss your situation.

Are there alternatives to bankruptcy?

Yes. Sometimes payment plans can be negotiated with creditors. Obtaining loan extensions, compromises and workout agreements require negotiation skills and experience. These alternatives may alert your creditors to the existence of non-exempt property that the creditor could reach and can involve considerable expense. You also have the option of doing nothing. In any event you should seek professional advise in dealing with most of these alternatives.

Under what conditions should both husband and wife file bankruptcy?

First, the expectation is that both husband and wife file a joint bankruptcy. If they do not, then they must explain the deviation from the norm. Both husband and wife should file when some of the debts are owed jointly by both the husband and the wife. If both husband and wife owe the debts and only the husband files bankruptcy, the creditors may try to force or harass the wife into paying the debts, even if she is unemployed. Under Arizona law this may not be appropriate for the creditors – but it depends on the specific circumstances surrounding the debt.

What are the different types of bankruptcy?

Bankruptcy generally falls under two broad categories: liquidation & reorganization. Liquidation involves selling assets to pay creditors. Reorganization involves repaying some of your debts once creditors are “ranked” by priority.  Bankruptcies are further divided into consumer bankruptcy and business bankruptcy.  Bankruptcy Laws are set forth in the United States Bankruptcy Code, with references to other laws, plus federal and state rules.  The Code is divided into chapters: 1, 3, 5, 7, 9, 11, 12 and 15.  Below I outline general descriptions of what each bankruptcy chapter covers. As my practice is geared more toward consumer bankruptcy and debt resolution, I go into more detail on those chapters.

Is the most common and is used by consumers and businesses. Chapter 7 eliminates many debts such as credit card and medical bills not secured by collateral, also known as unsecured debts, in exchange for the liquidation of assets not protected by federal or state exemption laws. Debtors may retain certain exempt property. Debtors may also pick and choose which debts he/she would like to eliminate and which debts he/she would like to reaffirm. There is no repayment plan in a Chapter 7. To qualify for Chapter 7 an individual must be under the state median income levels. I go into much further detail on Chapter 7 here.

Chapter 13 is a debt reorganization plan. It enables individuals with regular income to develop a plan to repay all or part of their debts. The repayment plan typically lasts between 3 and 5 years. During the duration of the plan creditors are forbidden from continuing recollection efforts. Chapter 13 is akin to a court protected repayment plan. The filing of the Chapter 13 stops accruing interest and penalties. One advantage of a Chapter 13 over a Chapter 7 is the ability to cure delinquent mortgage payments over the duration of the plan and save a home from foreclosure. For those who have been laid off from work, suffered an illness, own a home or experienced an unexpected expense, filing Chapter 13 bankruptcy may be a good option. I go into much further detail on Chapter 13 here.

Chapter 11 is similar to a Chapter 13 plan but is a debt reorganization and pay-back plan for businesses and also by some consumers with too much debt to qualify for Chapter 13.

Chapter 12 is similar to chapter 13, but designed for family farmers and fishermen.

This applies to bankruptcy cases involving parties in more than one country.

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  • "Mark did an excellent job handling my case. He was professional, efficient, honest, communicated well, made things easy to understand and took care of every detail. I was referred by a friend of a friend who also had a positive experience."
    J. Lynn
  • "Mark Kirchen took the time to listen, treated us like human beings and always there to answer our questions, either by phone or email. I would highly recommend Mark to anyone in need of a GREAT attorney. "
    T. Thatcher
  • "My faith in Mark Kirchen was well placed. From the outset, Mark Kirchen reassured me about my case with his easy-manner and the knowledge he showed toward the subject matter. It was a pleasure to receive the call from him telling me that we had finalized our case. Thank you Mark, your service was greatly appreciated."
    M. Cano
  • "Made it easy! I was deeply concerned about the bankruptcy process. After interviewing several lawyers, come considerably higher priced, The Law Offices of Mark Kirchen won me over. I never regretted that decision! Incredibly knowledgeable, totally on his game! I recommend him highly. His staff is helpful and knowledgeable. Their patience is especially noticeable."
    U. Fisher
  • "Thank God for Mr. Kirchen, who was completely honest with me, told me what I could expect and what the variables were. He also pointed out how, had I found him earlier, I would have been out of the entire mess with a minimal of expenditure! "
    M. Minev
  • "I was in dire need of help. My divorce, job injury and daughters education led me to financial distress. I cannot thank you enough for the professionalism and breath of fresh air you provided, during such a stressful time with my bankruptcy proceedings. From the first phone call to the final step you were there for me. My life is gradually improving and I have you to thank."
    C. Johnson