Elaine M. Benkoski, Attorney -

WHAT DO I DO NOW?

(Answers to some situations which arise while preparing to file for Bankruptcy protection)

You have consulted with your bankruptcy attorney and are in the process of gathering all the data needed for the completion of your Chapter 7 or Chapter 13 petition. Now that you have begun thinking again (stress can do terrible things to your ability to organize and think), you have these questions:

Are there any “DO's and DON'Ts” I need to know right now?

Answer: Yes. The debtor in a Bankruptcy case has the duty to disclose his or her assets, cooperate with his or her trustee and sign his or her case under the penalty of perjury; so, you need to heed the following advice:

Do not incur new credit charges;
Do not transfer any assets;
Do not make payments on unsecured loans to family or friends;
Do not destroy any financial records.
Do start collecting all you past due bills.
If you will be discharging an over-draft or personal loan from your bank, then it is suggested that you do open a new bank account before we file your case.
Make timely payments on secured debts, such as car loans and mortgages.
Do start keeping track of all your out of pocket expenses.

Do I pay any or all my bills now?

Answer: While you are preparing your petition, you need time to marshal your assets and gather your data. The bills keep coming in and you are unsure what your attorney said to do. You need to prioritize those bills; in other words, put those bills in order of importance to you.

In a Chapter 7 case, if you have secured loans such as a car loan or mortgage, those need to be paid in a timely fashion. The answer in Chapter 13 cases may vary, so call your attorney.
If you have overdraft protection attached to your bank account and you owe a balance or you have a personal loan from your Bank, that Bank could automatically withdraw funds from your account. So, until you have a new account at a different bank, or until you can have your automatic pay deposit stopped, it may be important to keep making your current payments to this creditor.
Bills for your regular monthly living expenses (those listed on your Schedule J) will usually be paid in the normal course of your affairs. This type of bill includes: rent or mortgage, heat, light, phone, cable, insurance
If you have a payment plan for your recent income taxes, you may consider keeping to your schedule until your Bankruptcy case is actually filed.
In most instances, your unsecured creditors (credit cards) will not be paid during this time. These are the debts which will be discharged (forgiven.)

One of my credit cards has sued me, do I have to go to Court?

Answer: Make sure that your Bankruptcy attorney has all the information that you have about this law suit and a copy of the summons or notice which you have received. There are many different actions which a creditor can take in its pursuit of being paid. Sometimes you can safely ignore the summons for a short while . In Massachusetts, if a creditor has a judgment against you, has commenced a supplementary process action and you have been summoned to appear to show cause as to why you should not be held in contempt , if you do not go to Court an arrest warrant could be issued by the Court! So, make sure you and your bankruptcy attorney have discussed that case. Have no fear, your Chapter 7 Bankruptcy will discharge that Judgment the same as all your other unsecured debt.

Do I have to list all my creditors because I want to keep one credit card.

Answer. All your debt must be included in your Bankruptcy case, no “if, ands or buts” about it.

I am not sure that I know all my creditor's names and addresses. What do I do?

Answer: You may need to order a copy of your credit report from each of the three credit reporting agencies. In Massachusetts, you are entitled to have one free copy per year. You can do this online: or or . You can also write to each agency:

Equifax Credit Information Services, Inc.
P.O. Box 740241
Atlanta, GA 30374

Transunion Consumer Solutions
P.O. Box 2000
Chester, PA 19022-2000

Experian
NCAC
P.O. Box 9595
Allen, TX 75013

I owe much more on my car loan than what the car is worth. What are my options?

Answer: In this jurisdiction you have three options with reference to a secured creditor. The three options are: (a) redeem; (b) return; or (c) reaffirm. If you want to keep the car, then you have to choose to (a) redeem; or (b) reaffirm.

To “redeem” the vehicle, you pay the actual value to the creditor in cash. Since you don't have the cash, this may seem like an empty option. However, there are two lenders engaged in the business of lending the redemption value to debtors in Chapter 7 cases. The telephone number for “722 Redemption Funding” is (888)721-2800. And, the telephone number of “Title 11 Funding” is (401)453-6875. ( In essence, you will have a new secured creditor and you make your secured payments to them.) Whether or not redemption is a wise idea, depends upon the savings to you. You need to make an application and they compare the cost of “reaffirmation” to the cost of the “redemption.” (The age of the vehicle involved is a major consideration.)

To proceed with a redemption, involves filing a “Motion To Redeem” in the Bankruptcy Court. Sometimes the creditor doesn't agree with the Kelly Blue Book assessment of value and an evidentiary hearing may be necessary. Your attorney will charge an additional fee for this service.

To “reaffirm” the loan, you sign an agreement which is filed in Court. Both you and your attorney have to make the assessment that the reaffirmation is in you best interest. In essence, a reaffirmation reinstates your current loan as if the bankruptcy had never occurred..

I am getting all kinds of conflicting advice from friends and relatives. Should I file a Chapter 7 Bankruptcy or not?

Answer: Bankruptcy has both its advantages and disadvantages as does most actions that we take. Only you can make the final decision. To help you analyze your case, please consider the following Advantages :

Automatic Stay : Your creditors will stop calling and harassing you. Even before you file your case, once you have told your creditors that you will be filing for Bankruptcy protection, and your attorney has confirmed that fact, the creditors will stop calling you.

Discharge : Most of your unsecured debts will be forgiven and those creditors can never again ask for payment.

Stop Foreclosure : If you own a home and are behind on your mortgage payments, Chapter 13 Bankruptcy can help you cure your arrearage over a period of time.

Elimination of Judicial Liens : If a creditor has put a lien on your house, in some instances, that lien can be removed.

Redemption of secured property : In some instances, you can greatly reduce the amount you will pay on secured loans.

Rejection of Executory Contracts : In some instances, you can avoid leases.

Orderly administration . Sometimes, you have just enough to pay some but not all of your creditors. Bankruptcy can provide the vehicle for an orderly administration of your assets.

On the other side of the coin, please consider the following Disadvantages :

Risk of Loss of Property : You and your attorney will analyze this risk before you file. When you file for Bankruptcy protection, you are permitted to keep assets of a certain value. You will apply “exemptions” to those assets. Assets over and above your “exemptions” may be liquidated in a Chapter 7 case. Most Chapter 7 cases are “no asset” cases because all your assets are exempt. Chapter 13 cases are different. Certain other assets are “excluded” from you case.

Loss of Control : For a time, by filing your Bankruptcy petition you confer jurisdiction over you and your assets on the Bankruptcy Court. So, the Court and the Bankruptcy Code have to be followed. In my experience, debtors who have made the decision to file are put back into control of their lives by the fresh start that the discharge of debts can afford.

Non-dischargeable debts : As you can surmise, certain debts will not be discharged for a variety of good reasons. The usual, typical non-dischargeable debts are: student loans, child support, taxes (of recent vintage) and fines. So, it is very important for you to know the nature of your debts.

Time : In a Chapter 13 case, you will be under the jurisdiction of the Bankruptcy Court for the length of your re-payment plan. The typical length of time is three to five years. Chapter 7 cases typically are discharged within three months of filing.

Doesn't Bankruptcy ruin my credit and I'll never be able to buy a home?

Answer: Most often once you are over your head in debt, your credit worthiness is already questionable. The fact of the filing of a Bankruptcy case can be carried on your credit reports for 10 years from the date of filing. I've had former Chapter 7 clients come back two and three years after filing to tell me that they have qualified for a mortgage loan. After filing, there are many ways to rehabilitate your credit. Here are some simple ways to improve your credit score:

One of the most important factors affecting your credit score is this: PAY YOUR BILLS ON TIME. Don't delay, don't be late, be regular as clockwork with those payments! In other words, your payment history is an important factor.

Only have the credit you need. Another important factor affecting your credit score is the amount of unused credit you may have. So, have only one credit card and use it wisely. KEEP IT SIMPLE.

Finally, KEEP YOUR BALANCES LOW. Once you have obtained new credit, high outstanding balances can negatively affect your credit score.

Copyright © 2004-2012 Elaine M. Benkoski
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The information you obtain at this site is not, nor is it intended to be, legal advice. You should consult an attorney for individual advice regarding your own situation.