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Bankruptcy
To File or Not To File
July 2005
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~-- Why now - the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.-- Should you file?-- CA$HFLOW GameIf you have the suspicion that bankruptcy might be in your near future (within 3 years), it may behoove you to file now!
I want to be very clear, here. I do not advocate filing for bankruptcy. Actually, I'm against it. I believe that when we take on debts we are obligated to pay them. However, I am aware that some people are in so deep that paying their debts will take their lifetime. And often, those debts are due to unforeseen and unfortunate circumstances (such as illness or unemployment). Bankruptcy can provide an enormous relief and the opportunity for a fresh start.
Why now - the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~This new law, passed by Congress and signed into law by President Bush on April 20, 2005, goes into effect in October. Without going into all the details of these sweeping changes, let me highlight a few of the most significant effects. First, it gives the court the power to require conversion from a Chapter 7 (liquidation) to a Chapter 13 (repayment required) bankruptcy. Which means you may want to liquidate, but may be required to repay your debts instead.
Second, your essential living expenses will no longer be personalized, but taken from a state average. So, if your living expenses exceed the state average (due to high medical expenses, for example), you may be required to declare Chapter 13 even though you cannot actually afford the payments. And the court could also decide that your filing for bankruptcy was unnecessary and dismiss it. They can even sanction both you and your attorney for dismissal or conversion.
Third, filing will become a longer and more expensive process for several reasons. You will have to complete educational requirements (which you also pay for); lawyer's fees will be higher due to the increased complexity; and, of course, there are those sanctions.
Should you file?~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~While I cannot advise you to file, if you think that bankruptcy is in your future, file before the October deadline! So how do you decide? Here are a few questions to ask yourself:
- Are you delinquent or habitually late paying your bills and/or unable to pay at least the monthly minimum on your credit cards?
- Are you hounded by creditors and collection agencies?
- Would it be impossible to payoff your unsecured debt (credit cards, student loans, etc.) within 5 years?
If you answered YES to any or all of these questions, you might seriously consider bankruptcy. If you answered NO to most or all of these questions, you might still benefit from financial coaching, but you probably do not need to consider bankruptcy.
As I said, I cannot advise you on your decision to seek bankruptcy. For that, you should speak to an attorney who specializes in bankruptcy about your individual financial circumstances. What I can do is support you through the process, if bankruptcy is the right choice for you, and make sure you are on a sustainable and financially healthy road going forward. And if bankruptcy is not necessary now, we can work together to ensure that you maintain a sustainable and healthy financial future. For a complimentary session, e-mail me or call me at 510-748
CA$HFLOW Game~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~If you are in the San Francisco Bay Area, I am holding monthly CA$HFLOW Games in my home. Please contact me to play or host your own game.
Hosting the game gives you the option of choosing a different date or time and bringing the game to your neck of the woods. You must have a table large enough to seat 6 comfortably (a kitchen table or dining room table works best).
