Millions of Americans are struggling to pay off their bills after the recent economic depression. They have been forced to file bankruptcy to discharge their overwhelming debts. They can discharge their debts easily and liberate themselves from financial burden. Therefore, if you are contemplating filing bankruptcy then it is advisable to hire a bankruptcy attorney. Many people even hire a debt settlement attorney when they plan to settle their debts.

Hire an attorney before filing bankruptcy petition:

The deft knowledge of an attorney will ensure that your bankruptcy procedure goes smoothly. A competent and experienced attorney can help you through the maze of forms and procedures involved while filing bankruptcy. He can try to work with the debtor by waiving interest and reducing payments. The lawyer will be aware of the bankruptcy law therefore he can suggest you suitable solution according to your financial situation.

Chapter 7 or 13 Bankruptcy: Personal bankruptcy options

The bankruptcy lawyer recommends you an appropriate personal bankruptcy method after analyzing your financial situation. Here are two common types of personal bankruptcy that people opt for:

Chapter 7 bankruptcy is commonly known as liquidation bankruptcy. The court appointed trustee liquidate the non exempt property and disburse the fund among the creditors. But the bankruptcy exemptions vary from state to state.

In Chapter 13 or Wage Earner’s Bankruptcy, the trustee reorganizes your debt and schedule a repayment plan for 3 to 5 years. Your remaining debts are discharged after completion of 3 to 5 years repayment plan. You might not be eligible to file chapter 13 Bankruptcy if you fail to have a stable income.

Therefore, a bankruptcy attorney can provide you authentic information on the method of filing bankruptcy. This will help you take right decision according to your financial state.

How Filing Bankruptcy Protects the Filers?

You can see a remarkable decrease in the number of collection call if you are represented by an attorney. The lawyer has proficient knowledge of the state’s exemptions thereby helping you protect your assets from repossession.

About The Author: This article has been written by Angela Sanders. She Sanders is associated with Oak View Law Group, A Trustworthy Bankruptcy Law Firm. She writes articles on various financial topics, such as Debt Consolidation, Bankruptcy, Debt Settlement Attorney, Investment Opportunities and Monetary Policies etc.

Many people begin to consider filing for bankruptcy when they have no ability to repay debts, and no other way to stop the incessant telephone calls and collection efforts of creditors.

Some people, however, consider simply ignoring the creditors, shutting off the telephone ringer, and pretending there is no problem.

Avoiding creditors not only doesn’t make them go away, it doesn’t solve the problem and could hurt your finances severely.

Bankruptcy Option

Bankruptcy is an alternative that allows a person a court-approved method of repayment or discharge of debt. A debtor either makes reasonable payments over a period of time, has debt erased, or a combination of both.

Bankruptcy requires that creditors comply with the court-ordered plan. With a plan in place, or court orders discharging debt, creditors are no longer legally permitted to even attempt to collect debt.

You should consider whether bankruptcy is right for you. Never simply ignore creditors.

Unexpected Garnishment Without Bankruptcy

Without a court-ordered repayment plan or some other alternative, there is nothing stopping creditors from garnishing your wages, if you have them, or even your money kept in a financial institution, such as a bank.

If someone who owes a debt to a creditor has funds at a financial institution, the creditor may serve a Garnishment Summons and Disclosure Form upon the financial institution along with other notices.

The financial institution must retain as much of the amount owed as the financial institution has on deposit owing to the debtor, but not more than 110% of the creditor’s claim.

The creditor will mail to the debtor a copy of the Garnishment Summons and anything else that the creditor served on the debtor’s bank, including notices.

The debtor has 14 days to notify the financial institution and the creditor of any claim for exempt property he or she wishes to assert. If the financial institution does not receive any such notification within 14 days, the debtor’s funds at the financial institution remain subject to garnishment.

Address the Problem Head-On

Clearly this is not the best way to address financial problems.

Even if you do not qualify for discharge of debt in a bankruptcy proceeding, a reasonable repayment plan, generally over three to five years, may be obtained.

This is a much better resolution than garnishment.

As you can see, it is not difficult for a creditor to obtain a garnishment of your bank account. Garnishment may arise quickly and complete destroy the plans you have for your money, which may include debt repayment or feeding your family.

Be sure to explore the option of bankruptcy, and any other options you have – but do not simply ignore creditors and hope they will go away. Ignoring creditors is a dangerous and unsuccessful tactic.

When someone considers bankruptcy, he or she probably feels fear of the consequences of bankruptcy, such as having the bankruptcy show up on future credit reports, for a period of time.

Benefits of Bankruptcy

The benefit of bankruptcy is a fresh start – the ability to rebuild credit and get back on top, and cessation of relentless calls from creditors.

Another benefit, less commonly considered, is prevention of the garnishment of wages.

If you don’t have enough money to pay your bills and feed your family, you don’t have enough money to pay your bills and feed your family. Period. You don’t have extra money to repay creditors, either voluntarily or through garnishment.

Consider Bankruptcy

If you currently bring home a consistent paycheck, but have no ability to repay debts, consider bankruptcy. Bankruptcy may not be right for you, but it is always worth consideration if you find yourself in this circumstance.

Through bankruptcy, your debts may be forgiven or you may be granted the ability to repay debts, generally over three to five years, or a combination of both.

Yes, there are drawbacks to filing bankruptcy, such as its effect on your credit report.

You can re-establish good credit scores over time. The fact of filing bankruptcy only appears for a certain number of years as well.

Consider Alternatives

Consider alternatives also.

One alternative may be negotiation of debt with creditors.

Another alternative may be harmful, such as allowing creditors to garnish your wages.

In order to understand this harmful alternative, you should understand how simple this process is for a creditor, once the creditor is aware of your income.

Negative Alternative – Wage Garnishment

Below are the basic steps a creditor takes to garnish wages of a debtor.

A debtor will first be served with a Garnishment Exemption Notice and Notice of Intent to Garnish Earnings at least 10 days before attempting to garnish wages.

• The creditor may serve this personally upon the debtor or by mail.
• A sample of the requirements in Minnesota for this Notice may be found in Minnesota Statute 571.925 or online at http://www.revisor.mn.gov/statutes/?id=571.925#stat.571.925.
• This notice is valid for one year.

There may be things you can claim as exempt from garnishment. The creditor may dispute your claims.

If there is no dispute, in order to proceed with garnishment, the creditor will need to serve the debtor’s employer with a Garnishment Summons and Disclosure Form.

• In Minnesota, an example of a Garnishment Summons may be found in Minnesota Statute 571.74 or online at http://www.revisor.mn.gov/statutes/?id=571.74.
• The creditor must mail to the debtor a copy of the Garnishment Summons and Earnings Garnishment Disclosure Form that he or she served on the debtor’s employer, within 5 days of service on the employer.

The creditor must also serve the debtor with a Notice to Debtor in no less than 14-point font.

• An example Notice to Debtor may be found in Minnesota Statute 571.74 or online at http://www.revisor.mn.gov/statutes/?id=571.74.

This process is relatively simple.  Don’t think creditors won’t do it.  Consider all you options, and choose one that actually helps you.

What do you do when you owe money to people you can’t pay? What options do you have?

Let’s take a look at your options. You cannot undo the past. You cannot singlehandedly improve the economy. So let’s move forward. Figure out your alternatives.

Two of the three alternatives below are acceptable, and will make your life better. One of them is clearly not.

Option 1: Negotiate

You can try to negotiate with the people you owe and request more time to pay, or request to make smaller payments over a greater period of time.

When creditors know you are in a position where you may have to file bankruptcy, creditors may be willing to negotiate.  They would rather receive something than nothing.

Talk to creditors about what they will accept, and make sure you can comply with the terms you offer.

Option 2: File Bankruptcy

Talk to someone about bankruptcy alternatives, preferably a lawyer. Find out your options.

There are bankruptcy proceedings where some of your assets may be liquidated to repay debts and the remaining debts are forgiven. Some people don’t have the type of assets that may be liquidated, and therefore debt is just forgiven.

For those who do not qualify to simply have all debt forgiven, there are bankruptcy proceedings where you put together a feasible repayment plan over a period of years, usually three to five, to repay some or all debts. There may be some remaining debt that will be forgiven.

Even if creditors don’t like this idea and wouldn’t negotiate this, ultimately it is the court that approves or denies such a plan after a bankruptcy petition has been filed, not the creditor. The creditor is given an opportunity to object, but the court makes the decision.

Option 3: Ignore the Creditors, and Lose More Than You Knew Was at Stake

If you ignore a creditor completely, the creditor will go to court and get a judgment against you.

Next the creditor will get a court order requiring you to tell the creditor all about your finances and your assets.

If you ignore this order, the creditor will ask the court for a show cause hearing. A show cause hearing is a hearing where the court asks you to show cause, or give a good reason, for your failure to answer the financial questions of the creditor.

If you appear at the hearing, the court can fine you, jail you, or both, as a sanction for not responding to the creditors financial questions after the court ordered you to do so. If you provide a good reason for your failure to respond, the court will simply give you another ten days to respond – you cannot get out of the requirement that you provide this information.

If you ignore the hearing and don’t appear, the creditor simply fills out a form, an affidavit, informing the court that there was a hearing scheduled, you were informed about the hearing, and you failed to appear for the hearing.

The court will then issue a warrant for your arrest.

Choose Option 1, Option 2, or Both – Don’t Choose Option 3

You have options when you can’t repay your debt. Be proactive, and figure out the best option for you.

Running from your debt seems easiest at first, but it will not be in the long run.

Negotiation and bankruptcy work for many, many people.

Creditors never want you to file bankruptcy. You may think you don’t have to file bankruptcy because creditors have no avenue to find your assets, but you may be wrong.

The Legal Process for Your Creditors

First, creditors ask a court to find that you owe them money. Sometimes this is not difficult because it is clear you didn’t pay the debt you owed.

After the creditor has a court order, or judgment, against you for a certain amount of money, the creditor will next ask the court to order you to provide financial information about your assets and liabilities to the requesting creditor.

If you fail to comply, the creditor will not give up. You may find yourself in serious trouble, even though you had perfectly acceptable alternatives.

Contempt for Failure to Provide Information

When you fail to provide financial information about yourself to the creditor, the creditor may seek a contempt of court citation, where you may be fined, jailed, or both.

First, the creditor requests a show cause hearing, asking the court to order you to show cause (or provide a legitimate basis) for failing to comply with the court’s order to provide information.

The creditor will simply file a short affidavit saying that you were ordered to provide information and failed to do so. The creditor will provide the court with a proposed order. All the court has to do is choose a date for the hearing and sign the order.

Next, the creditor must serve you with the court’s signed order directing you to show cause for your violation. This service of the Order to Show Cause upon you must be done personally, by either:

1. handing the Order to Show Cause directly to you at any location, or
2. leaving it with a person of suitable age and discretion residing at your usual place of abode.

The person who serves you must complete an Affidavit of Personal Service. This document must be completed and notarized.

All the forms the creditor needs in order to obtain this hearing can be found on the website for the courts of Minnesota under “Court Forms.” These forms are short and require little effort from the creditor.

The creditor will then need to file the a copy of the Order to Show Cause and the Affidavit of Personal Service with the court.

Maybe Bankruptcy is Right for You, Maybe there is an Alternative

As you can see, hiding isn’t often very effective. Whether you hide yourself, or you hide your assets, there may be serious consequences later. At first you may think all you have at stake is money, but it could quickly become your freedom.

So, first: NEVER IGNORE A COURT ORDER.

Second, TALK TO AN ATTORNEY AND SEE IF BANKRUPTCY IS THE BEST SOLUTION FOR YOU, OR, IF NOT, WHETHER SOMETHING CAN BE WORKED OUT WITH THE CREDITOR.

Debt collectors must follow a process before garnishment is permitted.  After obtaining a judgment and docketing the judgment, a creditor will need to find out your ability to pay the judgment, or the creditor’s ability to collect on the judgment. The creditor will want to know bank accounts, earnings, or other assets you have.

Is Bankruptcy Right for You?

Maybe you have no assets. Maybe you are considering filing for bankruptcy. You should talk to an attorney about your particular circumstances, assets, and liabilities, to determine whether bankruptcy is the most beneficial course of action for you.

Is Negotiation of Debt Right for You?

You may also want to talk to the attorney about negotiating the debt with the creditor. When a creditor learns that bankruptcy may be the only option for you unless another agreed is made, the creditor may be willing to work something out with you. Most creditors understand that money in hand is always better than the hope of more money in the future.

Many, though not all, types of debt are dischargeable in bankruptcy, and it may be in the creditor’s best interest to work out a way for you to repay some of the debt so that the creditor is not faced with an inability to attempt to collect any of the debt.

The Process of the Debt Collection When a Debtor Has Not Filed Bankruptcy

In order to learn the financial status of a debtor and a debtor’s particular assets, a creditor may file a Request for Order of Disclosure motion with the court. The creditor will need to first have obtained a judgment against the debtor, and also docketed that judgment.

The creditor files a Request for Order of Disclosure with the same court that docketed the judgment, with the same case number. The creditor will need to fill out the information about the debtor and the debtor’s address.

A creditor may only submit this form when the creditor can truthfully state the following::

• the creditor won a judgment in the lawsuit against the debtor,

• the case began in district court and the court administrator docketed the judgment more than 30 days prior to the creditor filing this form, or the case began in conciliation court and the court administrator docketed the judgment,

• the debtor has not paid the creditor all money owed to the creditor,

• the debtor and the creditor have not agreed to some other way to settle the debt.

If the court grants the creditor’s request, the debtor will be sent a standard, court-approved, Financial Disclosure Form, asking questions about the assets and liabilities of the debtor.

After an order from the court for the debtor to complete and provide to the creditor the Financial Disclosure Form, the debtor must comply with the court’s order or there will be consequences.

A Debtor’s Failure to Comply with Court Orders

A debtor who fails to complete the form and return it to the debtor may be held in civil contempt of court. The penalty for contempt may be jail, a fine, or both.

However, a debtor cannot be held in contempt for violating an order about which the debtor had no knowledge. Therefore, if the creditor cannot provide the court with the address at which to notify the debtor of the order, the debtor cannot be penalized for not complying with the order.

Debtors who are unable to pay debts are often forced to file for bankruptcy. Often, when a debtor is considering bankruptcy it is because creditors have not only been calling relentlessly, attempting to collect unpaid debts, but are also taking collection a step further and into the legal system.

Debt collectors will often file lawsuits, garnish income and financial accounts, and attach to other property of the debtor.

Restrictions on Debt Collectors

Debt collectors are strictly prohibited from engaging in unethical conduct through enforcement of the Fair Debt Collection Practices Act and Minnesota’s correlating statutes found in Chapter 332 of the 2010 Minnesota Statutes.

There are other restrictions placed on debt collectors found in the Fair Debt Collection Practices Act and Chapter 332 of the Minnesota Statutes as well.

Debt Collectors May be Willing to Work Toward Resolution

When debt collectors and creditors become aware that a person may be forced to file for bankruptcy, they may become more willing to work out an acceptable resolution.

Efforts at acceptable resolution will nearly always be beneficial to the debtor, but they are not always successful.

It may be helpful to understand the steps creditors will take to collect debts when nothing else has been worked out with the debtor. Before creditors can begin garnishment, creditors must initiate an action. Next, they must take steps below. There is more involved after this, but below is an explanation of the first legal actions that will be taken.

Creditors Will Attempt to Obtain a Judgment Against the Debtor

The first step toward collecting a debt owed to a creditor by a debtor is obtaining a judgment against that debtor for the amount the creditor is seeking.

A “judgment” is a final decision by a court.

Once a creditor has a judgment from a court for a certain amount owed, the creditor can begin the process of collecting that amount.

The Creditor Will Docket the Judgment

The creditor must docket the judgment. The court administrator or clerk’s office for the court in which the creditor received the judgment dockets the judgment for the creditor upon request.

A “judgment docket” is a list of judicial orders of a particular court, recorded by the court’s clerk, and available for inspection by the public.

The judgment docket provides the ability for interested parties to learn of the existence of the judgment. Recording a judgment in a judgment docket is considered official notice to all parties of the existence of the judgment.

Note – If you Satisfy the Debt or Make another Agreement the Creditor Must Stop

At any time the debtor satisfies, or pays the judgment, the creditor is obviously no longer permitted to seek collection of that amount – the creditor has already collected.

If the creditor agrees with the debtor to settle the case in some other way, the creditor is also not permitted to seek collection in violation of that agreement.

Bankruptcy provides individuals and entities with an opportunity to get back on top of debt. This opportunity may be provided through liquidation of assets, or through the creation of a reasonable repayment plan through which the individual or entity can comply.

Federal Bankruptcy Courts and Litigation

Each of the 94 federal judicial districts handles bankruptcy matters, and in almost all districts, bankruptcy cases are filed in the bankruptcy court. Bankruptcy cases cannot be filed in state court.

Litigation in the bankruptcy court is conducted in much the same way that civil cases are handled in the district court. There may be discovery, pretrial proceedings, settlement efforts, and a trial.

Objections in bankruptcy court by creditors or by the trustee may be made for several reasons. Objections are made by the creditor or the trustee when the creditor or trustee dispute a position taken by the debtor.

• Disputes may arise over who owns certain property or how it should be used.
• Disputes may arise over the value or worth of property.
• Disputes may arise over the amount of debt owed by the debtor.
• Sometimes disputes arise over whether the debtor should receive a discharge of some debt or type of debt.
• There are other issues as well that may lead to disagreement, such as the amount that lawyers, accountants, or other people hired to complete the bankruptcy process should be paid for their services.

The objections that a creditor or wishes to make must be done within 60 days of the date scheduled for the 341 creditors’ meeting. If that meeting is continued, the deadline for objection does not change with the date of the meeting. The deadline for objections remains 60 days after the first date for which the meeting was scheduled.

Bankruptcy Appeals

There is a process for filing appeals of the decisions made by the bankruptcy court.

Bankruptcy Appellate Panels are 3-judge panels authorized to hear appeals of bankruptcy court decisions. These panels are a unit of the federal courts of appeals.

Bankruptcy Appellate Panels (BAPs) were established under the Bankruptcy Reform Acts of 1978 and 1994. 28 U.S.C. §158 sets forth jurisdiction for appeals of bankruptcy decisions and authorizes the establishment of BAPs upon the order of the circuit judicial councils. BAP judges continue to serve as active bankruptcy judges in addition to their duties on the appellate panel.

Appeals from dispositive orders of bankruptcy judges may be taken to the district court or the BAP (if one has been established and the district has chosen to participate), with further appeal as of right to the court of appeals for the circuit.

In accordance with requirements of federal statutes and procedural rules, parties may elect to file an appeal of a bankruptcy court decision with the BAP or with the district court.

The procedural aspects of the bankruptcy process are governed by the Federal Rules of Bankruptcy Procedure (often called the “Bankruptcy Rules”) and local rules of each bankruptcy court. The Bankruptcy Rules contain a set of official forms for use in bankruptcy cases. The Bankruptcy Code and Bankruptcy Rules (and local rules) set forth the formal legal procedures for dealing with the debt problems of individuals and businesses.

The Role of the Bankruptcy Trustee

A trustee may be appointed to a bankruptcy estate. The trustee is a representative of the estate. The trustee has powers pursuant to statute.

The authority of the trustee mainly benefits unsecured creditors.

The trustee is supervised generally by the court, although the trustee performs his or her duties under the direct supervision of the U.S. trustee or bankruptcy administrator. A trustee will be appointed in each bankruptcy under chapters 7, 12, and 13 of the Bankruptcy Code. A trustee may be appointed in some bankruptcies under chapter 11 of the Bankruptcy Code also.

The bankruptcy trustee will analyze documents filed by the debtor, including the debtor’s petition and schedules. The bankruptcy trustee is entrusted with the duties of bringing action against debtors or creditors to recover property of the bankruptcy estate.

Chapter 7

Bankruptcy trustees in bankruptcies filed under chapter 7 of the Bankruptcy Code liquidate the nonexempt assets of the debtor to pay off debt to creditors.

Chapters 12 and 13

Bankruptcy trustees in bankruptcies filed under chapters 12 and 13 are similar to those in chapter 7 cases, but in chapters 12 and 13 the bankruptcy trustee also oversees the repayment plan of the debtor, including accepting payments from debtors and turning those payments over to the appropriate creditors.

Bankruptcy Courts

There is a bankruptcy court for each judicial district in the country. Each state has one or more districts. There are 90 bankruptcy districts across the country.

The bankruptcy courts generally have their own clerk’s offices. The court official with decision-making power over federal bankruptcy cases is the United States bankruptcy judge, a judicial officer of the United States district court.

The bankruptcy judge may decide any matter connected with a bankruptcy case, such as eligibility to file or whether a debtor should receive a discharge of debts.

Much of the bankruptcy process is administrative, however, and is conducted away from the courthouse. In cases under chapters 7, 12, or 13, and sometimes in chapter 11 cases, this administrative process is carried out by a trustee who is appointed to oversee the case.

Bankruptcies involve application of rules and code.  They are overseen by trustees and ultimate determinations are made by the court.

Bankruptcy Rules and Code

The procedural aspects of the bankruptcy process are governed by the Federal Rules of Bankruptcy Procedure (often called the “Bankruptcy Rules”) and local rules of each bankruptcy court. The Bankruptcy Rules contain a set of official forms for use in bankruptcy cases.

The Bankruptcy Code and Bankruptcy Rules (and local rules) set forth the formal legal procedures for dealing with the debt problems of individuals and businesses.

Courts

There is a bankruptcy court for each judicial district in the country. Each state has one or more districts. There are 90 bankruptcy districts across the country.

The bankruptcy courts generally have their own clerk’s offices.

The court official with decision-making power over federal bankruptcy cases is the United States bankruptcy judge, a judicial officer of the United States district court. The bankruptcy judge may decide any matter connected with a bankruptcy case, such as eligibility to file or whether a debtor should receive a discharge of debts.

Much of the bankruptcy process is administrative, however, and is conducted away from the courthouse. When debtors seek discharge of debts and no objection is made, the court may grant the debtor an automatic discharge. When the debtor or trustee lodges an objection to the discharge of a debt or debts, an adversary proceeding ensues.

Trustees

In cases under chapters 7, 12, or 13, and sometimes in chapter 11 cases, the administrative process is carried out by a trustee who is appointed to oversee the case.

The trustee in a chapter 7 case is in charge of liquidating the assets of the debtor that are classified as nonexempt. Exempt assets are generally a certain amount or value of necessities and other non-extravagant assets. The trustee takes the nonexempt assets of the debtor and liquidates, or sells them. The trustee next distributes the money from the liquidation to the creditors. Often, all of the debtor’s assets will be exempt and there will be no assets for the trustee to liquidate in order to repay creditors.

The trustee in a chapter 12 or 13 bankruptcy have duties similar to the duties of the chapter 7 bankruptcy trustee. However, in a chapter 12 or 13 bankruptcy the debtor will also have some type of plan for the repayment of some or all debt. The bankruptcy trustee in a chapter 12 or 13 case will oversee this repayment plan and the debtor’s compliance. The trustee will accept payment from the debtor pursuant to this plan and hand over appropriate payments to appropriate creditors.