Tips And Guide For Debt And Loan Management

Sometimes people discover a mistake or want to make a change in their paperwork after their case has been filed. Maybe you failed to list a creditor, or gave an incorrect address for one, or forgot to list an asset. Whatever the reason, bankruptcy procedure allows you to amend your schedules at any time before you receive your discharge. Amending your papers is fairly simple. You will need to draft the amended schedule on an official bankruptcy form (like the one that was originally filed) and fill out an amendment cover sheet. Most local bankruptcy courts have one at the clerk’s office. If you are adding a creditor, you will need to pay a little bit of money. Make five copies of the amendment and cover sheet and file it with the court. If you are adding a creditor, and the creditors’ meeting has already been held, then you may need to schedule a second meeting of creditors, although it depends upon the rules of the district where you live. If you do, either you or the court (again, depending upon your locale) will send a notice to all creditors of the new meeting time and date. Check with your court to find out the exact procedure. You will also need to file a change of address form with the court if you move while you are in bankruptcy. Throughout your case, the court mails important information to you: a notice of filing (including the automatic stay order), a notice of no distribution (if your assets are completely exempt), and most importantly, your discharge order. The discharge order is something that you will want to keep safe for some time; it prevents any of your creditors whose debt was discharged from coming after you after the case is over. To send your discharge order to you, the court must be able to find you if you move.

Bankruptcy paperwork may look intimidating, but it is quite easy to understand. A bankruptcy is made up of a petition, schedules that list your financial situation, a statement of financial affairs, an alphabetical listing of all creditors, and a summary. Look at the top of any page in your bankruptcy, and you will see a headline in bold. That headline is then detailed in the rest of the page. For example, near the front of your paperwork will be a headline of “Schedule A—Real Property.” Below the headline will be a detailed description of all real estate you own: where it is located, what it is worth, how much you owe, and so on. Each page of your bankruptcy is similarly laid out. Your bankruptcy paperwork will consist of the following:

• Petition. The petition is the first two pages of your bankruptcy. It lists your name and that of your spouse, if filing jointly, your address, social security number, and other relevant information.
• Schedule A—Real Property. This schedule is where you list all real estate you own.
• Schedule B—Personal Property. Here you list household goods, bank accounts, clothes, jewelry, guns, IRAs, stocks, patents, cars, tools of the trade, animals, and everything else.
• Schedule C—Property Claimed as Exempt. As you know, this page is critical. Here you list all your exempt assets. If you do this well, you will exempt all of your assets listed on schedule A and B.
• Schedule D—Creditors Holding Secured Claims. Here you list all secured debts, such as car and home loans.
• Schedule E—Creditors Holding Unsecured Priority Claims. This seemingly confusing category includes taxes, government fines, alimony, child support, and that sort of thing. Although not normally dischargeable, these debts must be listed nonetheless.
• Schedule F—Creditors Holding Unsecured Nonpriority Claims. These are the debts you will be getting rid of, your unsecured debts, such as credit cards and old medical bills.
• Schedule G—Executory Contracts and Unexpired Leases. Few consumer creditors have anything to report on this page. It consists of any leases that may be in effect at the time of filing or any contracts that have yet to be fulfilled (that is what executory means).
• Schedule H—Codebtors. A codebtor is someone who is also responsible for any of the debts you list, but who is not filing with you; for example, your husband (if you are filing separately) or your grandfather who co-signed a car loan for you. Although your bankruptcy will wipe out your responsibility for your debts, your codebtors (if any) remain liable for them.
• Schedule I—Current Income of Individual Debtors. Here you list your job, how much money you make every month, how much is taken out of your monthly paycheck, and sources of any other income.
• Schedule J—Current Expenditures Of Individual Debtors. Your last schedule requires that you give the court an idea of how much you spend every month on rent, utilities, food, recreation, insurance, car payments, and so on. You do not list what you have been spending on credit cards and other sorts of debts, because those will be discharged.
• Declaration Concerning Debtor’s Schedules. You sign, under penalty of perjury, that the schedules are true, complete, and accurate.

These four documents come after your schedules:

• Statement of Financial Affairs. In this statement, you essentially give the court an idea of your recent financial dealings. You list your gross income for the past few years; any repossessions, foreclosures or lawsuits in the past year; losses due to fire, theft, or gambling (which are dischargeable); transfers of property in the past year; property held in safe deposit boxes; and any recent prior addresses. Businesses must also list inventories, accountants, partners, and so on. This statement is also signed under penalty of perjury.
• Statement of Intention. With this statement, you indicate what you want to do with your secured property: Keep it or surrender it.
• Matrix. The court uses this alphabetical listing of all creditors to notify them of your bankruptcy.
• Summary of Schedules. This one-page sheet summarizes all preceding pages, especially your income, expenditures, assets, and debts, and is again signed under penalty of perjury.

All of your creditors are notified of your filing and the time and date of your meeting. A few may show up at the meeting to try to get you to sign reaffirmation agreements, but as we have said, it is not a good idea to sign such agreements if they can be avoided (sometimes they can and sometimes they can’t). Recall that debtors normally have three options with regard to secured merchandise: reaffirmation, redemption, and surrender. The problem with reaffirmation agreements is that they renew your personal liability for the debt, liability that is otherwise discharged in the bankruptcy.
Sears does have a security interest in your washer and dryer and does have the right, after the bankruptcy, to reclaim its property if you don’t sign a reaffirmation (after all, that is the purpose of a security agreement). Certainly, Sears will tell you that the reaffirmation should be signed if you want to keep your washer and dryer. But you do not have to sign.
What happens if you do not reaffirm your debt? Once your case is over, Sears may come and try to get its washer and dryer back, and then again, it may not. Does it really want your old washer and dryer?
Even if Sears does decide it wants your washer and dryer and does come to get them, you do not have to let the guys from Sears in your house. It is your house, and if they enter without your permission, they are trespassing. Sears (or any similar creditor) will have to have its attorney go to state court and get a judicial order allowing Sears to take back the property. How many thousands of dollars will that cost that creditor? What is a used washer and dryer worth? It is not cost-effective in most cases for Sears, or any secured creditor of fairly small amounts, to take its property back. The issue of whether you should sign the reaffirmation depends upon what kind of risk taker you are. If you are willing to gamble that your secured creditor will not go to the effort to get its merchandise back, then do not sign the reaffirmation. You may be able to keep the washer and dryer without paying a penny more. Then again, you may not. If, on the other hand, you really want to keep the merchandise, and you do not want to take the chance of losing it later (or worry about doing so), then you should probably sign the new contract. If you do so, insist that the reaffirmed amount be only the fair market value of the property today (what a willing buyer would pay a willing seller for the merchandise today). Reaffirming for the entire amount is unnecessary. Say that two years ago you bought a big-screen television at Circuit City and still owe $3,000 on the contract, but the set today is worth only $1,500. Then you need only reaffirm the $1,500. Here is why: secured claims in bankruptcy are only secured up to the fair market value of the property. Even though you may owe Circuit City $3,000, if the fair market value of that television is $1,500, then the security interest is only that amount. The other $1,500 that you owe is considered unsecured, and as you know, unsecured debts are discharged in bankruptcy. If you sign a reaffirmation for the entire $3,000, you would be taking on $1,500 worth of debt that would otherwise be discharged. This is why you need a good attorney.
Many secured creditors of large items, such as cars and homes, do not ask for reaffirmation agreements, although some might. Those that do not require one assume that you will continue to make your scheduled monthly payments after the case is over. If you do not, they will take their property back.
What if you are going to surrender some property back to a secured lender? One surprising advantage of surrendering property is that it normally takes a few months to organize a time and date for the surrender. While you are waiting to give the property back, you can usually keep using it without paying for it. You can stay in your home without paying the mortgage for a few months. You can keep driving the car without making payments. The rule is that a debtor is supposed to act upon his statement of intention (reaffirm, redeem, or surrender) within 45 days of the filing, although it is a rarely enforced rule and one without penalty.

After your petition and schedules are prepared and filed, the court sets a time for a hearing that you will need to attend, called the first meeting of creditors. That meeting usually occurs about a month or two after your case is filed. Notice that it is called a meeting. It is neither a trial nor a hearing before a judge. It is an informal meeting and usually quite painless.
At the meeting, you will meet your trustee. He or she is assigned by the Department of Justice to oversee your case. Your trustee will ask you a few questions about your assets (for example, whether you failed to list an asset or are hiding anything). The trustee will also probably have a few questions about your schedules. Although your lawyer (if you have one) will be present with you, he or she cannot answer for you. You will not be unmercifully grilled or asked to explain why you are in bankruptcy. The trustee is far more interested in whether there may be some nonexempt assets to seize. Your entire meeting should last about five minutes.

Whether you decide to go it alone or hire an attorney, the next step is also the most time-consuming. Because the court requires a lot of information from you before it will discharge your debts, you have to sit down and organize this information. Among the things you will need to organize, and eventually list in your paperwork, are the following:

• A list of all major assets. This list includes everything of substance you own. All furniture? Yes. Every piece of silverware? No.
• A list of all unsecured debts. This list must include to whom the debts are owed, their addresses, and your account numbers.
• A list of all secured debts. This list would also include an indication of what property secures the debt and your intent with regard to the property: do you want to keep it or give it back?
• A list of income and expenses. This list would comprise all sources of income and a list of average monthly expenses.

When you have all this information ready, either you, your attorney, or your paralegal will have to draft your petition and schedules. You will sign these under penalty of perjury.
A bankruptcy case is officially commenced when you file your petition and schedules with the court and pay the appropriate fee. Bankruptcy courts are divided into geographical districts and are normally located in the federal building of each particular district. The filing fee is the same whether you are filing alone or as husband and wife. After your case is filed, the automatic stay is issued and remains in effect for the duration of your case. Peace in our time!

The first thing to decide is whether you are going to hire an attorney to file your case for you, use a paralegal, or do it yourself. If at all possible, it is best to hire an attorney (and we’re not just saying that because one of the authors of this book happens to be a bankruptcy attorney, honest!). You really need someone who can talk to the trustee and deal with the creditors if they contest the filing. Bankruptcy is serious business, and if something goes wrong, the consequences can be dire. You want to be sure that everything is handled correctly.
On the other hand, avoid hiring a paralegal, if you can afford it. Sometimes you will see an ad in the paper like this: “Bankruptcy $75.” That is an ad run by a paralegal. A paralegal is not an attorney. He cannot give legal advice and cannot go to the hearing with you. That is why his fees are so much less than a lawyer’s. If you do decide to hire one, make sure that he has plenty of experience handling bankruptcies and be sure to get some referrals.
Finally, if you cannot afford a lawyer or a paralegal, then you can file your case on your own. There are several books, computer programs, and Web sites that can help you.

The phone stops ringing because of the automatic stay that goes into effect when you file bankruptcy. You will recall that the stay stops all credit collection activities, so once your case is filed, you don’t have to worry about dealing with nasty creditors ever again.
Even better, money shows up. How? Because the money you previously spent paying your dischargeable debts every month is now yours to keep. If you have been paying $500 a month servicing your credit card debt, there is no need to pay that ever again once your bankruptcy case is filed. Voilà! The $500 a month is now yours to keep. You will also find that, unlike your life today, life in bankruptcy is surprisingly nonadversarial. Throughout the process, you will be treated with respect and courtesy. Besides the fact that your creditors can no longer harass you, you will soon discover that civility is the rule in court.