the ultimate guide to bankruptcy

THE ULTIMATE GUIDE TO BANKRUPTCY

THOMPSON & FAASATTORNEYS AT LAW

1311 W. Chandler Blvd., Suite 220Chandler, AZ 85224

(480) 634-7480

THOMPSON & FAAS – ATTORNEYS AT LAW – (480) 634-7480

Copyright © 2011

Table of ContentsChapter 1: Why Bankruptcy is a Great

Financial Tool3

Chapter 2: Is Your Monthly Income Less Than Your Expenses?

5Chapter 3: Saving Your House, Keeping

Your Car & Saving Your Retirement

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Chapter 4: What Bankruptcy Cannot Do

8Chapter 5: Chapter 7 or 13, What’s the

Difference?11

Chapter 6: The Assignment 15

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Chapter 1 Why Bankruptcy Is a Great

Financial ToolA FRESH START TO A BRAND NEW FINANCIAL

FUTURE

For most of us "collection," "bills," "debts," "interest," "mortgage," and "past-due" are words or phrases that instantly raise our blood pressure. Nearly everyone has debt and most of us fall behind from time to time; we all accidentally miss a payment here and there or occasionally have to do some serious juggling to keep the

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lights on and the house up-to-date.

Not everyone needs an attorney, however, recognizing when it is time to ask for help is one of the best decisions you can make. The harassing phone calls, late notices, increasing penalties, and threats of garnishment can be overwhelming and you do not have to go it alone. Thompson & Faas is in your corner when it comes time to make decisions about your financial matters and help you make the best decision for yourself, your family and your future.

Bankruptcy is not failure; rather it is the beginning of a better, brighter financial future. Secure your home, your car, secure your financial future – bankruptcy can provide you a fresh start. It is also your legal right to debt relief.

Gain relief from the harassing phone calls, demanding letters, eviction notices, garnishments and threats of lawsuits by contacting our office to find out what debt relief options are available to you. No other financial plan can offer the immediate relief from the harassment and collection efforts of bill collectors, whether they are big or small. Bankruptcy stops foreclosures, stops repossessions, stops lawsuits, judgments, garnishments and collection calls. It will stop what you have been working so hard to put an end to your debt.

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Chapter 2Is Your Monthly Income Less Than

Your Expenses?WHERE DID ALL MY MONEY GO?

One tell-tale sign of impending financial disaster is not being able to meet your monthly expenses. If you are constantly asking yourself where the money went,

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using your credit cards for meals, gas, or other essentials (and not paying off the balance), or—in extreme cases—visiting the payday loan store to get by, it is time to take a long, hard look at your budget.

Figure out what you take home on a monthly basis, and subtract what you spend for necessities such as rent or mortgage, utilities, food, child care, and all debt payments.

Then ask yourself these questions:

1. Do you spend more than you make? 2. Have you removed all luxuries from the budget

and still can't make ends meet? 3. Are you sacrificing on essentials like utilities, food,

or medical and dental care to make a minimum payment on a credit card or pay for car, furniture, or other secured debt you don't need and can't afford?

4. Are you scraping to pay the just minimums on your credit cards?

5. Would it be impossible for you to pay off your credit cards in just a few months?

6. Are your monthly debt payments stopping you from living more comfortably and with less stress?

If you answered "YES" to any one of these questions, then Thompson & Faas may be able to help you to work to reduce these debts or eliminate them completely.

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Chapter 3Saving Your House- Keeping Your Car

& Saving Your Retirement BANKRUPTCY MAY MAKE IT POSSIBLE FOR YOU

TO:

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Eliminate the legal obligation to pay most or all of your debts. This is called a “discharge” of debts. It is designed to give you a fresh financial start.

Stop foreclosure on your house or mobile home and allow you an opportunity to catch up on missed payments. (Bankruptcy does not, however, automatically eliminate mortgages and other liens on your property without payment.)

Prevent repossession of a car or other property, or force the creditor to return property even after it has been repossessed.

Stop wage garnishment, debt collection harassment, and similar creditor actions to collect a debt.

Restore or prevent termination of utility service.

Allow you to challenge the claims of creditors who have committed fraud or who are otherwise trying to collect more than you really owe.

Chapter 4What Bankruptcy Cannot Do

BANKRUPTCY CANNOT CURE EVERY FINANCIAL PROBLEM

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Nor is it the right step for every individual. In bankruptcy, it is usually not possible to:

Eliminate certain rights of “secured” creditors. A creditor is “secured” if it has taken a mortgage or other lien on property as collateral for a loan. Common examples are car loans and home mortgages. You can force secured creditors to take payments over time in the bankruptcy process and bankruptcy can eliminate your obligation to pay any additional money on the debt if you decide to give back the property. But you generally can not keep secured property unless you continue to pay the debt.

Discharge types of debts singled out by the bankruptcy law for special treatment, such as child support, alimony, most student loans, court restitution orders, criminal fines, and most taxes.

Protect cosigners on your debts. When a relative or friend has co-signed a loan, and the consumer discharges the loan in bankruptcy, the cosigner may still have to repay all or part of the loan.

Discharge debts that arise after bankruptcy.

OTHER SOLUTIONS TO BANKRUPTCY:

Most people would like to avoid bankruptcy if they can. Sometimes alternatives are worth trying, but it pays to know the risks. At Thompson & Faas, we never

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push someone into bankruptcy, but instead we lay out the options and let the individual decide. Here’s a bit of information about commonly-tried bankruptcy alterna-tives.

1. Debt consolidation: If you are able to get a loan to consolidate unsecured debt into another loan, it can make a difference if the new loan has a lower inter-est rate or longer re-payment term. This solution is one that makes sense for people who can almost pay all their debts, but are struggling a bit and want better repayment terms. One must understand the risks if unsecured debt is transformed to secured debt on your home as part of the consolidation. If something goes wrong with the new loan, the future consequences will be more severe, i.e., your home will be in jeopardy.

2. Debt settlement: Once a debt goes into extended de-fault, it can often be settled for less than the face amount–often much less. If a debt is deeply in de-fault and has been purchased by a debt buyer, it is realistic to attempt to settle such a debt for between 30 to 60 percent of face value (sometimes less, sometimes more). However, there are a few traps for the unwary. Once debts have traveled into lengthy default, they have usually ballooned to a much larger face amount (due to interest and fees) than they were when you stopped making charges. So, 50 per-cent of a future amount may sometimes look a lot

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like 100 percent of a current debt balance, but it de-pends on the circumstances and time periods in-volved. There are also important tax consequences to debt forgiveness. Moreover, in trying this ap-proach, one needs to be ready to deal with the nu-merous annoying contacts from debt collectors for an extended time period. However, debt settlement can sometimes make sense for people who have (or can save) enough cash to make realistic offers to debt buyers. A typical offer is 30%-50% of the debt with a one-time lump sum payment. This is some-thing that you can usually do yourself. Beware of companies who specialize in this work: most are scammers.

3. Simply not paying debts: Some people simply ignore their unsecured debts. Oddly, this can be a workable strategy sometimes–for people who are not working, have no assets, and are living off an exempt stream of income like retirement or social security. State court lawsuits will result, and travel to court will be necessary, but if your only income is, say, social se-curity the creditor will have a difficult time collecting unless they discover your checking account. This is not a workable solution for people who have jobs be-cause of wage garnishment procedures.

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Chapter 5Chapter 7 or 13, What’s the

Difference?DECIDING WHAT CHAPTER IS RIGHT FOR YOU

Chapter 7Chapter 7 Bankruptcy is also known as “liquidation” or “straight” bankruptcy. Chapter 7 is typically preferred for debtors who are want to surrender their house/or car are current with their mortgage and car but over-whelmed by unsecured debts (e.g. credit cards and medical bills).Chapter 13This is also known as a wage-earner plan. Chapter 13 is typically filed by individuals behind in house and/or car payments and wants to keep the house and/or car. A debtor can file a Chapter 13 Plan, which is a written pro-posal for bringing his/her secured debts current over a period of 36 – 60 months. The debtor keeps and uses his/her property while the bankruptcy case is pending. If a debtor “fails” the means test under Chapter 7, he/she must file bankruptcy under Chapter 13 and repay a portion of the unsecured debt. Questions you need to ask yourself about the two

Chapters are: Are you keeping your house?

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Are you behind on your car? Can you afford to reorganize your debt? Do you need to get rid of all of your debt?

Discuss your answers and questions with us to decide which bankruptcy is best for you.

DEBT SETTLEMENT OR BANKRUPTCY, WHICH ONE IS BETTER?

Have you heard on the radio or late night television the siren song of the debt settlement companies? It goes like this:

“Don’t ruin your credit by filing bankruptcy!”

“The secret the credit card companies don’t want you to know!”

“If you owe at least $10,000 in credit card debt, you are eligible for our program!”

Or in my opinion, the absolute worst because it is a flat out lie –

“Recent changes in federal law require credit card companies bailed out by the federal government to settle their debts with you!”

When something sounds too good to be true, it is. What is more likely is these companies are scammers

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who will take money out of your checking account, leave you with thousands of dollars of unpaid debt and law-suits. Most recently, the Minnesota Attorney General sued six of these debt settlement outfits.

My position has always been, bankruptcy is a last re-sort but one that offers you legal protection from your creditors, debt settlement does not. Let me share some of the pitfalls my clients have hit with these miracle pro-grams.

First, this is how they operate:

They are usually not located in the state you are in, so they are hard to chase for refunds or misconduct. Their ads and websites and phone calls trumpet their success, but the contract you sign guarantees nothing. You send them money, usually taken right out of your bank account, and they do not even talk to your credi-tors until they have a certain amount from you. It may take months, years, before they have enough from you, after deducting their fees, of course, to even answer their phone when your creditor calls. And, the creditors do not call often, they just sue you, garnish your wages and your checking account.

Of course, you are behind on paying the credit cards, because you are sending what you have left every month to the friendly debt settlement company. And, they told you, stop paying the credit cards. So, your credit report is taking the hit for being in default, the hustler/con man debt settlement company has your

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money, and you have no relief. In fact, you are getting harassed more than before you hired them.

I represented one couple, in their 60’s, who were so ashamed of their debt problems, they did not tell any-one. Their kids were helping them out, and they hired two of these debt settlement scam outfits, to handle one credit card each. After over six months of paying, all they had to show for it was a lawsuit against them by each credit card company. Sure, sometimes you send enough money that they can make a deal to reduce your debt.

Then, you get a 1099 income tax form for forgiveness of debt income. So, get your financial information in or-der and check with Thompson & Faas before falling for one of these scams.

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Chapter 6The Assignment

10 STEPS TO MAKING BANKRUPTCY PLANNING SIMPLE

1. Fill out our questionnaire. Why? Because we can talk intelligently about your options but do not stop

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there. Following these steps will make your bank-ruptcy a simple financial solution to your present fi-nancial problems.

2. Make a list of your debts, all of your debts. Make a list of debts that are owed on cars, houses, motor-boats, RVs, separately from the debts from credit cards and personal lines of credit. Why is this im-portant, well it can be the difference between a Chapter 13 and a Chapter 7. Bring this list to your appointment.

3. Gather up 6 months of paycheck stubs and find your last 2 years of your tax returns. Yes, you have to file your taxes to file bankruptcy.

4. Are there any lawsuits or any other legal proceed-ings? Read through them and figure out on date, you are required to act.

5. Go to legalconsumer.com-http://www.legalcon-sumer.com/bankruptcy/means-test/index.php and take the free Chapter 7 bankruptcy test. Knowing whether and when you qualify for bank-ruptcy is pretty important. Fiddle with the num-bers, look at all your options.

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6. Find out the value of your car – in its present condi-tion with all of its mileage at Kelley Blue book – and print out the Private Party Value results. Here’s the site – www.kbb.com.

7. Have a house you want to keep? Go to www.zil-low.com and find out its’ market value.

8. Own a home and behind on the payments? Go to our Chapter 13 calculator and find out what your payments will be. The calculator can be found here -

9. Get smart about what you are allowed to keep and what may have to go. The U.S. Bankruptcy Court for Arizona, Arizona Bankruptcy Court website has a list of items, household furnishings, jewelry, and cars that you are allowed. You can see it all here at FAQS.

10.Now that you know what you can keep, do you have any luxury items? A lovely engagement ring or a luxury watch? Maybe a motorcycle or two? Check www.ebay.com for prices.

So, now you know more about your debt, your assets and quite possibly where you are headed in the

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http://www.azb.uscourts.gov/default.aspx?PID=14

http://www.azb.uscourts.gov/


future. You have a plan. So, what are your questions for us? Write them down so our meeting can be productive. Want to know more? Of course you do, it is your bankruptcy we are talking about. So, watch a series of videos on the U.S. Bankruptcy Court’s website. You can also learn about the mandatory pre- and post- credit counseling required in bankruptcy. Get smart about bankruptcy and use it is a financial tool, which is exactly what it is.

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http://www.uscourts.gov/video/bankruptcybasics/bankruptcyBasics.cfm

the ultimate guide to bankruptcy

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