Contest Update: Last week’s winner was Jen B who has asked us to donate to New Tampa Family YMCA. According to Jen B, “one hundred percent of donations to the Y go to providing scholarships for children and families with special physical and financial needs who can’t otherwise afford the benefits of the YMCA.” Contest brief rules are at the end of the article.
Three Questions: The Introduction
The “Three Questions” series is back. Here are three questions to ask yourself before you go into a bankruptcy consultation. In my experience, an initial bankruptcy consultation can take a lot longer than a normal legal consultation. Therefore, you need to be prepared if you want to get quality feedback during the consultation. Perhaps these three questions will assist.
Do you think that bankruptcy means you let yourself or your family down? I will remind you that at least two former presidents of the United States filed for bankruptcy before they took the oval office. Who were they? Walt Disney also filed for bankruptcy before Mickey Mouse took over the Orlando area.
1. HOW QUICKLY DO I NEED TO FILE FOR BANKRUPTCY TO AVOID NEGATIVE CONSEQUENCES?
I believe that someone said, “Patience is a virtue.” The same is true in bankruptcy proceedings. The more you plan ahead for your bankruptcy, the stronger your financial position will be when you emerge from bankruptcy. However, sometimes you may need to file immediately to avoid immediate consequences.
If you believe that your financial situation is slipping slowly and you are worried about potential lawsuits, negative credit reporting, or an inability to continue to pay your car payments or mortgage, the time to meet with a bankruptcy should be immediate. However, your focus should be how to plan for your bankruptcy in 30, 60, or even 120 days.
Conversely, if your car is going to be repossessed in days or the judicial sale of your house is next week, you may need to file on an expedited basis. It is possible to file a bankruptcy petition in a matter of hours if absolutely necessary.
However, I believe quality bankruptcy attorneys will try to advise you on ways to emerge from the proceeding in a stronger financial position than when you entered, but sometimes an emergency is an emergency. Do not delay when you get into financial trouble and get your bankruptcy game-plan in order sooner rather than later.
When you meet with a bankruptcy attorney, you will probably learn a few quick lessons right away:
(1) Do not continue to use your retirement accounts to fund your deficiency in income. Your retirement accounts are protected in a bankruptcy proceeding. Do not use your retirement account to gain another month of mortgage payments if you cannot sustain it long-term.
(2) Stop using your credit cards. You do not want to use your credit cards too close to filing your bankruptcy. If you use your credit card when you know, or sometimes suspect, that you will be filing bankruptcy, the credit card charges may not be dischargeable in bankruptcy.
2. WHAT ASSETS DO I WANT TO KEEP WHEN I EMERGE FROM BANKRUPTCY?
There are some assets that you have that will be protected in a bankruptcy proceeding no matter what. If you have a fee-simple homestead domicile (fancy lawyer language for a paid-off house you live in), it will be protected under almost all circumstances. Retirement accounts are protected. You also get a personal property exemption up to a certain dollar amount.
For mortgaged property, vehicles, and some other liabilities, you may have to affirm the debt for the property you want to keep.
Remember that the purpose of bankruptcy in a Chapter 7 proceeding is to hit a “reset” button. You get to start over without any debt but without any real assets either.
For a Chapter 13, you get to enter into a payment plan to pay off your liabilities so you can keep your assets. The point is that before you go to your bankruptcy consultation, consider all of the “things” you want to keep, how much you want to keep them, and what you are willing to give up to keep them. This will assist your bankruptcy attorney immensely in properly advising you on what approach you should take.
3. HOW AM I GOING TO PAY FOR THE BANKRUPTCY?
One of the most interesting aspects of a bankruptcy consult is the very honest and sincere statement, “I am filing for bankruptcy because I don’t have any money. How do you think I can pay you?”
Some bankruptcy attorneys will charge you a consultation fee and others will not. Whether the consultation costs money or not is not necessarily a reflection on the attorney’s ability or experience. Some attorneys charge for consultations to make sure you are serious about your situation. Other attorneys have a policy of not charging for consultations. However, a bankruptcy proceeding will cost you money one way or another. Even if you try to navigate the federal bankruptcy courts on your own, you still have to pay a filing fee.
I have seen Chapter 7 bankruptcy attorneys charge as little as $500. However, most charge $1,500 or more. A Chapter 13 costs considerably more. Unlike a normal hourly attorney, a bankruptcy attorney in most circumstances must be paid upfront because otherwise they become a creditor and then cannot represent you. This is another reason to plan ahead for your bankruptcy proceeding.
In closing, if you said to your spouse, parent, or trusted friend, “I am just going to file for bankruptcy,” make an appointment the next day.
CONTEST ON/JTS (). JT Simons, P.A., is holding a contest for you to figure out the hidden trivia question in this article. If you win, JT Simons, P.A., will donate $25 to charity. In short, figure out the hidden trivia question, send an email with the answer to JT Simons, and make sure your nonprofit is legitimate. Remember, send the answer to firstname.lastname@example.org, subject line CONTEST ENTRY, and give me as much information as you can about the nonprofit you want the donation to go to. I need to verify it. I need your first name and the first letter of your last name.