Bankruptcy Pros and Cons
“Ask A Ventura Bankruptcy Attorney”
This question was posted on Reddit today, and, since I was writing the answer, I thought it made a good post here (I added the pictures after posting at Reddit, though):
Q: I’m thinking about filing bankruptcy for several reasons, one of which being a few repossessions for vehicles. What are the pros and cons of filing bankruptcy? What should I know before going into it? And lastly what exactly is involved in filing bankruptcy?
My answer: Those are simple questions, with extensive answers. 🙂
(Assuming you pass the means test)
- Your repo deficiencies will be discharged
- Your unsecured credit card debt will be discharged
- Any medical debt, payday loans, personal loans, or other unsecured debt will be discharged
- Creditors stop calling you
- Lawsuits against you are stayed (suspended) while the BK case is in progress
- Most judgments against you are discharged
- Wage garnishments stop and/or are prevented
- Bank levies are prevented
- You shouldn’t see a judge
- You get your life back
- You get to keep (in most cases) all of your property, your vehicle, and in many cases, your home.
- Your credit score WILL recover. Promise. Ignore all the Naggy Nellies who tell you otherwise. They don’t have law licenses.
- Cost (typically around $1k-$3k plus filing fees, currently $335). Historically, bankruptcy must be paid in advance. A growing number of lawyers now permit you to file now, pay later. In my practice in CA, we even advance the filing fees and permit clients to pay after we file, for $0 down. That’s a growing trend.
- Credit damage (but your credit is already screwed; Bankruptcy often makes it better, and it almost always makes it easier to rebuild your score)
- Modest inconvenience
- Scared of the unknown
The Bankruptcy Process:
- Get a free consultation from a Bankruptcy lawyer near you
- Give the lawyer all the info they require
- Take the credit counseling course required by the Court
- Approve and sign the petition
- Lawyer files the petition and additional documents
- Take the required financial management course
- Appear at your Trustee meeting (30-ish days after you file)
- Relax – the hard part is now over
- 70 days or so after your creditor’s meeting, most Chapter 7’s will be issued a discharge (unless you have assets to administer), and 2-3 days later, the Court will close the case.
- You’re done.
What Should You Know?
- Be Honest. Be honest with the Court, with your lawyer, with the Trustee. Don’t bullshit. Don’t shade the truth. Let your lawyer know EVERYTHING.
E V E R Y T H I N G
I can solve a lot of your problems, but only if I know about them.
- Lying to a Trustee or on your bankruptcy paperwork is a federal crime. DO NOT DO IT.
- Don’t give your car to anyone before you file.
- Don’t shift money around. DON’T DO IT.
- Don’t hide things.
- Don’t move things.
- Don’t sell things.
- TALK TO YOUR LAWYER, HONESTLY.
- Don’t panic. It will be OK.