Need Help: My Parents are planning on Filing Bankruptcy; What is It?

[Corey_Baker08]

My parents are planning on filing bankruptcy and I am on the net looking for a good Lawyer in Indiana. The major problem is that I dont know much at all about bankruptcy. What is the best Chapter of bankruptcy to file 7 or 13.

The debt my parents have is hospital expenses, bank account overdrafts, and other stuff. They rent their house and own their car. Basically they are the working class family with a 15 year old (me)and 17 year old kids that live pay check to paycheck. no money in the bank, every dollar they recieve they get from working.

So What is bankruptcy in short and is it a good solution to end their debt? Which is the best Chapter and didnt Bush just make it harder to file bankruptcy.

I appreciate your help and really need it.

[Bunny]

1. The new laws will go into effect in October, I think.

So if your parents are planning on filing, they should do it soon. From what you've described, they seem like good candidates for a Chapter 7, which wipes most debt away and they start with a clean slate. A Chapter 13 is for people with more resources, who work out a payment plan to repay their debt over time.

But I am not a lawyer, I do not play one on TV, and I did not sleep at a Holiday Inn Express last night.

[Book Lover]

2. The new laws don't go into effect until October

Chapter 7 clears the debtors of all listed debts; chapter 13 puts the debtors on a repayment schedule. Chapter 13 looks better on the credit report, but may not be the best way to go. There are both federal and state laws regulating bankruptcy, so it is best to speak with a lawyer to get full details. Also, google up the bankruptcy court for their location; each court has varying (though not very different) filing procedures and incorrect filing will delay processing of the paperwork. Best of luck to your folks and to you.

on edit: legal disclaimer: I'm no lawyer, even if I do argue a lot.

[lastliberalintexas]

3. Call your county bar association

for a referral. If they are unhappy with the attorney to whom they are referred, they of course do not have to hire her/him. But that's usually the best place to start looking.

Good luck to them and your family. It's very sad that debt consisting of mostly **medical bills** can do this to a family in the US!

[Joy Anne]

9. county bar association references

When I was doing EAP work 20 years ago in Philadelphia, I learned that the names callers get are just those lawyers who ask to have their names put on the list. They may or may not have experience in a particular specialty.

I just checked that information with my favorite lawyer, who says that process might vary by state.

[lastliberalintexas]

15. It depends

Most BAs of which I am aware refer only to those within the specialty- ie, you call asking for information about a divorce lawyer and you are only given the names of local family law attorneys. It is true however that most BAs are self-opting, meaning the attorney has to want their name to be placed on the referral list. But usually the majority who practice in bankruptcy, family, criminal, wills/estates and the like DO want their names on the lists. It's often where they obtain quite a few of their clients.

[mcscajun]

4. Difference between Chapter 7 and Chapter 13

Chapter 7 bankruptcy is often referred to as a "liquidation" bankruptcy and a chapter 13 is usually referred to as a "repayment" bankruptcy.

In chapter 13 bankruptcy, a debtor makes a complete or partial repayment to creditors based upon many different factors. The payment plan is appoved by the Bankruptcy Court and all creditors are forced to cooperate. The payments to creditors are handled through a Chapter 13 Bankruptcy Trustee who collects money from the debtor and returns it to the creditors as their payment. Chapter 13 allows debtors to set up their repayment plan so that they will be able to keep all of their property.

Chapter 7 bankruptcy has no repayment plan. Debtor's do not have to repay creditors unless the debtor voluntarily decides to repay the creditor. Debtor's usually decide to volutarily repay secured debt such as car loans and home mortgages so they can keep the property. Debtor's do not get to keep secured property without paying for the full value when a chapter 7 bankruptcy is filed. Chapter 7 debtors are only able to keep property that is properly exempted.

http://www.directlex.com/chapter13-bankruptcy/difference-chapter7.htm

Which one is best for your family? That's what you need the lawyer for...Good luck to you and your parents.

[GreenPartyVoter]

5. We did Ch 7. It's time consuming and there is a lot of paperwork. One

regret I had was that we didn't pay off a couple of local creditors before we filed. Now we have to pay for our heating oil up-front before they will deliver.

So if your folks owe anything to anyone locally, maybe they want to think about the impact the bankruptcy will have on their relationship with that company later on.

And they definitely need to file soon. (But after they pay off any local bills if they decide to do that.)

[mongo]

6. Well, every state has their own bankruptcy laws,

and I can't really tell you what would be best, but here is a general overview:

In chapter 7 bankruptcy, you give up any assets you may own (house, cars, jewelry, etc.), with certain minimal deductions you can keep. For example, if the car is worth 1,000, you would probably get to keep it, but if it was worth 5,000, probably not. Again every state has their own limits and deductions. But in the end you come out debt free with a clean slate.

In chapter 13, the court determines how much you can pay, and organizes a payment plan to repay your creditors, over 3 to 5 years. Sometimes portions of debts are forgiven by the state. You get to keep more of your assets, but have to repay your debts according to a schedule set by the court.

The law that was recently signed was designed to force more people to go into chap 13 bankruptcy and no file chap 7. It will go into effect 6 months after Bush signed it, which is sometime this fall.

Overall, bankruptcy is a better option than the credit counseling firms. It is expensive, though. You will have to pay somewhere in the neighborhood of 1,000 - 1,5000 upfront to file.

It doesn't cost anything to talk to a bankruptcy lawyer about it though. You should be able to find some in the phone book - and let them give your folks advice on the best way to go.

[rogerashton]

7. Look for a young lawyer, if you can.

Bankruptcy lawyers get burnt out -- (a friend of mine is a former bankruptcy lawyer turned computational economist. Can't hardly get no further from bankruptcy law.)

You can probably google as well as I but if you haven't yet these may help. The first two are sponsored -- caveat emptor.

http://www.totalbankruptcy.com/pc/index1.asp?GCID=S14618x001&KEYWORD=Indiana+bankruptcy

http://www.legalhelpers.com/?GCID=S14432x002&KEYWORD=indiana+bankruptcy

http://www.bankruptcyinformation.com/IN.htm

http://www.abcworld.org/cin.html

[whalerider55]

8. help is on the way

Contact the national consumer law center in Boston- foremost experts on Bankruptcy law in the country- they might not refer you to a good lawyer, but they can hook you up with lists in Indiana.
[e-mail]

also try the National Association of Consumer Advocates in DC- see if you can search their database or call them

http://www.naca.net/db.php3


whalerider

[Lydia Leftcoast]

10. I did Chapter 7 after a major customer went under

Suddenly I had a level of debt and living expenses that was supportable at one level of income, not supportable at 50% of that. Ouch! Then came a tax bill for the previous year's high income. I couldn't pay both the taxes (which are not forgivable in bankruptcy) and my other creditors, so consumer credit counseling suggested that bankruptcy was my only option.

It was a great relief, BUT you do have to pay your lawyer upfront, because otherwise your debt to your lawyer would be uncollectable.

You forfeit all lines of credit that have balances on them at the time of bankruptcy. Bye-bye Visa, bye-bye Mastercard, bye-bye local department stores. However, I had zero balance on my J.C. Penney card and on my checking account line of credit, so I kept those. However, I was very careful to use them only in emergencies after that.

[shanti]

16. a lawyer is a more expensive option

you can also use a paralegal.

[BiggJawn]

18. You sure about the lines of credit?

I didn't include my Mastercard in the list of creditors, and the same month the ch. 7 was discharged, they raised my credit limit.

It does vary state-to-state, I guess. Here, if you don't list a creditor, you can't claim discharge.

[Lydia Leftcoast]

20. I didn't list Penney's or my bank as creditors, because they

had zero balances at the time.

I still have the Penney's card, and I kept the checking acct. line of credit until I closed the account after moving.

[helderheid]

11. before they file, have them go here first

www.budhibbs.com

[nonconformist]

12. With the limited information on their debt

Chapter 7.

7 is a liquidation. Most or all debts are wiped. Property may have to be surrendered, depending on any liens (but it's not typical to lose property unless you voluntarily surrender it).

13 is reorganization. Your debts are all combined, the amount you will pay back on those debts is determined (could be a percentage, could be 100%) and the payments are spread over a 3-5 yr period.

Generally, 7 is always preferable unless there is a specific reason you have to file Chapter 13. Some debts (taxes generally) can't be discharged under a 7, and if you are in default on a mortgage and can't bring it current when you file (and want to keep your home) you would file a 13. Since they rent, I can't imagine that a 13 would be ideal.

Sadly, I know quite a bit about bankruptcy. We filed Chapter 7 in 2002. Attorney will run somewhere between $800-$1200, depends on your area. Ours was $1000 in Michigan. Don't even attempt to file yourself (I say this because you might find websites that say you can) - the lawyer is worth every penny. I'm guessing they'll have a pretty straightforward Chapter 7 case.

Curious - if you're 15 and your parents are filing, why are you looking for the attorney? Not to be all Mom sounding, but you shouldn't be worrying about this. Let them handle it. Don't worry, everything will be fine. In fact, when it's all said and done it will be way better than it is now, trust me. Just enjoy being a teen... you have the rest of your life to stress over finances.

[Corey_Baker08]

14. Thanks For The Help

Im helping them look because they have no clue about the internet or Bankruptcy. I usually help them with most things like this. I like it because I wanna go to college to be a lawyer so this is kind of exciting anyway.

[linazelle]

13. You don't need a lawyer....

If you don't have complex debts--like real estate, then it's not difficult to file bankruptcy.

You can buy a kit at the stationery store with all the paperwork you will need. It contains a "register" where you list all of your creditors, the amount you owe them, addresses, etc. It's very time consuming to fill this stuff out, but if you pay somebody you still have to dig through the same papers and tell them what to do so you might as well consider doing it yourself.

The main thing you have to be careful of is forgetting to put a creditor on the list--because if you forget, you will still owe that creditor when the judge dismisses all the ones you list.

Before the judge dismisses the debts, you have to "file" them with the court. They will review the listings, your debts, etc. and notify your creditors of the pending bankruptcy. If there are no protests, which are very unlikely in a Chapter 7 case where you dismiss all debt, then you go before a judge in about 30 days after filing and the debt is dismissed. Time is of the essence so you want to file early, with the October deadline looming.

I'm sure there are also sources on the web where you can buy the paperwork you need.

Good luck. You should not have any problems.

[nonconformist]

19. Can't say I agree.

The lawyer does more than file your paperwork.

The lawyer is the one that handles your creditors for you starting the day you file. This is a huge thing for most people. If anything comes up even after the discharge, they'll still handle that for you. The lawyer has a relationship with the bankruptcy judge and the trustees that will be overseeing your case. They're also there to advise (so you don't do something stupid that will mess it up), answer all your questions and help you get through this.

There is a lot you have to do yourself even with an attorney, as far as getting all your paperwork in order. It takes a bit to get all of that together and organized. But it pales in comparison to all the work that needs to be done - the actual paperwork that is filed is a beast. Our case was straightforward and our paperwork was 6 inches high.

This is a very stressful time for most people. By this point, you've been through the ringer. I can't even express the relief we felt when we gave our packet of paperwork to the attorney and our part was basically done. I can't even express how good it feels to be able to refer all the creditors that have been harassing you to your attorney. I can't even express how nice it was that the lawyer understood the law intimately and was able to work it to save one of our cars that the law straightforwardly said we would lose. I can't even express the crap we would have had to deal with one of our creditors that our attorney handled completely himself. I can't even express how relieved I was that he was there with us during our creditor's meeting when one of the creditors started hammering on us and he intervened. I can't even express how relieved I was when our mortgage company on the home we surrendered tried a typical tax scam on us a couple months post-discharge and the attorney took care of it for us, saving us hundreds of dollars in taxes.

If you go without an attorney, you still have to pay the filing fee which is $250 if memory serves. The attorney fees include this price. Once you get the paperwork in order, an attorney can file you immediately, get you into bankruptcy protection and freeze all collection attempts/lawsuits. If you file yourself, how fast you can file depends on how fast you can accurately fill out hundreds of pages in paperwork. You have to field all the creditor calls yourself. You have to sit alone at your creditor's meeting. If you have any issues with anyone (and it does happen, even on the simplest cases) you have to deal with it yourself. Creditors are more aggressive when they know you don't have an attorney... they'll try hard to scam you into reaffirming debts you really shouldn't be. And most importantly, if you make a mistake, your case is DISMISSED. You don't get a discharge, you don't get your filing fee back, you come out of protection, but your credit report will show that you filed for bankruptcy for the next 7-10 years.

An attorney is invaluable to have when you're going through such a stressful situation. I talked to several people online and saw a couple of people at our creditor's meeting that filed themselves. Many of the people I talked to online had issues at some point. A few made mistakes and got the dreaded 'dismissal' (unheard of with a good attorney). The people at the meeting were aggressively pursued and bullied by creditors that didn't dare mess with any of their debtors there with attorneys.

The price of a lawyer is more than worth your sanity, peace of mind and security during what is one of the most unpleasent experiences of your life. I'm a reasonably intelligent person who had researched bankruptcy at length for some time before filing and I'm thrilled we didn't go it alone. The OP says that his parents are not familiar with the internet or with bankruptcy. They should DEFINITELY hire an attorney.

[Spinzonner]

17. Nolo Press is a publisher of legal information

and legal self-help books.

www.nolo.com

They also have books on dealing with financial problems in general.

Even if its not best to go the self-help route, the books provide valuable information and background that could be helpful in understanding and dealing with a lawyer or service.

If affording them is a problem, try a library or go to a major bookstore where you can sit and read them.