I know someone that I think should declare bankruptcy....?

[forde]

...What is a good resource to determine if they should or not?
Do the laws vary by state? If so, then it would be the state of NJ. I need to find good resources to know if this is the path that I should recommend. The situation is that this person has credit card debt of about $20,000 with an income of about $27,000 a year. No assets, except a car that was paid off a year ago, probably worth about $3,000-$4,000. No other $ or assets. I know nothing of bankruptcy since I have never been close to needing that or knew anyone else either. But I think it may be right for this person and I just want to research it a bit first before I advise someone to go that route. Also, is a lawyer recommended or required, and if so, how do you select one and how much might they charge someone who really doesn;t have any money to begin with?

[garret]

...What is a good resource to determine if they should or not?
Do the laws vary by state? If so, then it would be the state of NJ. I need to find good resources to know if this is the path that I should recommend. The situation is that this person has credit card debt of about $20,000 with an income of about $27,000 a year. No assets, except a car that was paid off a year ago, probably worth about $3,000-$4,000. No other $ or assets. I know nothing of bankruptcy since I have never been close to needing that or knew anyone else either. But I think it may be right for this person and I just want to research it a bit first before I advise someone to go that route. Also, is a lawyer recommended or required, and if so, how do you select one and how much might they charge someone who really doesn;t have any money to begin with?

As a financial counselor, the ONLY time I would even consider telling a client to look into bankruptcy is if they had done EVERYTHING I teach and they still can't get themselves out of debt. Banruptcy is not a 'sign the papers and your debt disappears' proposition. It is a long, drawn-out, gut-wrenching process. I once heard that, statistically, the top three most emotionally difficult things to deal with in life are: death of a loved one, divorce and bankruptcy in that order. Plus, it is important for folks to remember that IRS debt is not bankruptable. Neither is student loan debt. Plus, you have to come up with a thousand or two for lawyer fees and court costs. Additionally, once someone files bankruptcy, for the rest of their lives they have to answer 'yes' to the question 'have you ever filed for bankruptcy.' That question often pops up on loan applications, job applications, lease agreements, rental applications, etc. Once someone has filed for bankruptcy, they have to either acknowlege it, or outright lie. This person your talking about would be filing bankruptcy on only $20,000 while they have no assets to be attached. If they are way behind on those credit cards, they might even be able to negotiate the debt down to around half of that. So to answer the question: bankruptcy should not be considered until after one has done everything they can to reduce their lifestyle, cut expenses, increase income, sell things, and stop borrowing money. Free help is available on my financial web page at eclecticsite.com/financial.html That would be a good place to start. Then have them do all the research they can do about bankruptcy and becoming debt free. Consumer Credit Counseling might be able to help, and it's the only consumer debt agency I would be willing to recommend. Also look into http://www.crown.org/financialhope/

[bachir93]

what concern is it of yours?
why isn't that person doing their own research into such matters?

they would probably only get approved for chapter 13 BK at best, requiring a partial payment of theor debts over 3-5 yrs monitored by the courts, since they have a job

bankruptcy is FEDERAL - rules are the same everywhere

[ailwyn]

what concern is it of yours?
why isn't that person doing their own research into such matters?

they would probably only get approved for chapter 13 BK at best, requiring a partial payment of theor debts over 3-5 yrs monitored by the courts, since they have a job

bankruptcy is FEDERAL - rules are the same everywhere

To owe $20,000 today is nothing. Plus there are attorney fees that could be between $1500 to 2,000 before you he files the paper work. And of course, it stays on all 3 credit reports for 10 years.

[favian]

OK if you need to file bankruptcy get a lawyer to handle it, it will be between $1000 and $2000 dollars. Your friend would also have to take a hard look at spending habits. $20000 with nothing to show for it seems like they have a spending problem. They can look at a debt consolidation program = wreck your credit, or bankruptcy= wreck your credit.
I chose bankruptcy. It is not as bad and scary as everyone makes it sound, and doesn't make you a bad person. It will be harder to get loans, but i have found because I am not getting hit with unending high interest rates i have managed to save over $7,000 in six months and have invested $6,000 for my future. I have also gotten a credit card (which I use very wisely). My credit score went from 400's to over 630 after my bankruptcy in less than six months. I use a free budgeting program MINT to aggressively track all my spending and budget.
I am not bragging that I got out of my debt, I am much more fiscally responsible because of the bankruptcy, but I would like to give a prospective from someone who been there and living it.
Good luck to you!

[hillocke]

Credit card debt of $20,000 might be able to be handled if the creditor is willing to work with them by possibly stretching out the payments. Alternatively, they may be able to get a better loan and pay off the credit card.

A credit counseling service (many of them are not for profit) may be the best way to go first. They can negotiate with the credit card company directly. It would be to their benefit if they did because they would get nothing if chapter 7 bankruptcy was filed.

Bankruptcy is a Federal event, and is filed in Federal court. A lawyer would be recommended to help with all of the pitfalls that exist out there. They are not cheap (possibly $1-2,000).

So, I would recommend the following:

1. Figure out a reasonable budget and how much they can afford to pay down that debt. Then with that knowledge,
2. Contact the creditor and see if they can work something out. OR
3. Work with a credit counselor and see if they can negotiate terms.
As a last resort,
4. Declare bankruptcy and wipe out the debt.

Of course with the new rules, they may be forced into Chapter 13, in which basically the court negotiates with the creditor, and payments would have to be made through the court.

[mace]

Hey, I DON'T think that person should file for bankruptcy. We were in the same situation recently. We've got a 6 people family. And the debt we had was around $50,000... Thats three credit lines. My mom and dad only made about $24,000 a year, and it got even worse last year... So we were about to file bankruptcy because we were so tired of all the threatening letters and calls. Just tired. So we prayed with our family and already called a lawyer to help us file bankruptcy and only had to pay the fee to start the process. But suddenly we get a call from our family friend. And she tells us that unless we have hundreds of thousands of debt, we shouldn't file bankruptcy. It was a great talk, but, we cancelled our bankruptcy process and just called our creditors. Ended up in forgiven $16,000 and our payments were lowered twice than supposed to be. I'm pretty sure things will get better soon, and maybe the rest of the money will be paid off somehow. But hey, we ended up with an option to not dirt up our credit history with a bankruptcy! Its better to have some debt to pay off, then to go bankrupt and have no clean history for the next 7 years. Hope this helps.

In the meantime, check out this http://prepaidlegal.com/hub/yaroslav33 if you still need a lawyer advice. I think it would help you or your friend save some money. They deal with bankruptcy, too.

[jarl]

Filing for bankruptcy is RARELY a good idea for an individual. The laws have changed recently to favor the creditors even more highly, the person will have fees to pay on top of the bills (the credit card debt is no longer something that will drop out), and he or she will be put on a “pay-back” plan that has very little room for a missed payment. There is little to no protection for the individual. Your friend’s best bet is to find an organization (a non-profit, local group) to go through some credit counseling and debt consolidation (they’ll negotiate lower interest rates so that the payback goes WAY down), then work hard to PAY DOWN that debt. Sometimes the negotiators can get the amount of debt reduced, too. Bankruptcy should ONLY be as a desparate last resort, and there are a ton of on-line resources to read up on it. These new federal laws protecting creditors are a HUGE consideration, since the debt would now not be reduced at all.

[corcoran42]

or being a 1/2 owner in anything of any value, this person should qualify for a Chapter 7 bankruptcy. The new bankruptcy law requires that everyone do credit counseling before they can file and after they have filed they must also take a financial course in order to receive their discharge. I had to file a Chapter 7 myself after a divorce and I hated doing it, but I had no choice. It IS very important that we learn from our mistakes, however, because after the filing of a Chapter 7 now, you cannot file again for 8 years and a day. I am not sure what New Jersey laws are, but what I have told you applies to everyone.

I would never recommend that anyone file a bankruptcy by themselves without a lawyer, because there are just too many laws that a bankruptcy lawyer would know that lay people do not know. When a person files now, they must give six months of paystubs to the attorney, 4 years of tax returns, a title if the vehicle is paid for...the correct addresses for correspondence for the Creditor along with the balance owed and the last time the credit card was used.


I work for a bankruptcy Attorney as his paralegal and I h ave worked for him for 23 years. If I can be of any further help, let me know.