I am doing a chapter by chapter review of the book Personal Bankruptcy Laws For Dummies by James P. Caher and John M. Caher. Today I review Chapter 2.
Chapter 3: Meeting the Players
There are a lot of people involved in the bankruptcy process. Some, such as the trustees, are working against you. Some, like your lawyer, are on your side. This chapter gives you an idea of who’s involved in the bankruptcy process and how.
In the wake of bankruptcy laws enacted in 2005, it has become increasingly important to find a good lawyer to handle bankruptcy for you. Filing bankruptcy is not the time to barrel through on your own—new laws are so obtuse and poorly written that even attorneys are having problems keeping up to date.
Paying your lawyer will be tough—you’ll likely be paying an attorney around $100-$200 per hour—so make sure you insist on a consultation with the attorney who will actually handle the case, not some paralegal or assistant. You can sell assets to raise the money (you’d probably be forced to forfeit these assets when you file anyways), or you can try your friends or relatives.
Definitely don’t borrow money from anyone without being perfectly transparent about your plan to file bankruptcy. Otherwise, the creditor may claim you’re guilty of fraud.
The Case Trustee
The case trustee differs depending on the type of bankruptcy you file.
A Chapter 7 bankruptcy involves a panel trustee, who appointed at random from a panel of lawyers. You’ll meet them at a 341 meeting, which is where debtors answer questions about their assets and financial affairs. The trustee’s main mission is selling property and doling the proceeds out to creditors, and is given a commission based on how much money is collected.
A Chapter 13 bankruptcy involves a standing trustee, who questions you about your assets and scrutinizes your income and expenses and generally tries to make sure that your repayment plan meets technical requirements and could probably succeed.
The difference is that a Chapter 13 trustee doesn’t typically liquidate your property—instead, he or she collects monthly payments that you make and receives a commission based on these payments. So, he or she has an incentive to help you succeed with your repayment plan.
The U.S. Trustee
The U.S. Trustee is an employee of the U.S. department of justice He or she oversees private trustees and makes sure that they properly account for the funds they receive, watches for fraud, grades the Means Test, and can help whenever special accommodations must be made for the 341 meeting.
Who to Look Out For
Although it seems tempting, you should avoid the following in order to make sure you’re only getting objective, trustworthy advice:
Credit counselors might inappropriately discourage you from filing for bankruptcy. Be wary—they’re often on creditors’ payrolls, so they’re really just trying to sap more money from you.
Debt consolidators use sophisticated marketing ploys to dazzle you into believing that you can get out of debt by borrowing more money. Don’t fall into the trap.
Bill collectors will tell you anything to squeeze some money out of you.
Thankfully, creditors can’t bother you too much until after your case is filed. The most they’ll do is attend the 341 meeting and ask a few questions, but contact will be limited to the context of surrendering collateral or making arrangements to keep it after you file.