Debt is handled different in each type of Bankruptcy, so if maintaining your assets is your largest priority, then a chapter 7 may not be the best option for you. In a chapter seven bankruptcy, debtor assets are sold, or claimed by creditors in the forms of liens or mortgages to pay off debt. A Chapter 13 bankruptcy differs in the fact that you may maintain all your assets, but must create a payment schedule to repay debts in full.

If you are underwater on a mortgage, or own assets that act as a drain on your gross wealth, a chapter 7 may be a good option for you. Debt from boats, cars, or other large purchases can be forgiven in a chapter 7.

There is a cost associated with filing a bankruptcy. This is not relegated to the costs of the process. You will also be legally required to inform potential employers or debtors about this, if asked. The bankruptcy will remain on your credit report for seven years in some cases, and may affect your chances of getting a home, buying a new car, or even landing a job. Consider this carefully before you plan to file bankruptcy, and ensure that you can handle this high price.

In a chapter seven bankruptcy, you must also be prepared to relinquish some of your property in return for being clear of debt. There is a list of items on the federal and state level that you will be allowed to keep. It’s important that you discuss your possessions with a qualified bankruptcy attorney, so that you can get a clear understanding of what items you will be able to keep, and which will be taken. You will also need help deciding whether the federal or state laws are the best for your situation.

If you file a chapter 7, here are some items that you will not be able to keep

• Collectibles, or large collections
• Cars, above one vehicle for personal transport
• Monetary assets, like CD’s or investments
• Family items with intrinsic worth

You may be able to keep the following, depending upon your profession and personal situation:

• Professional tools required by your job
• Everyday living items, such as clothing, basic furniture, or housewares
• Benefits supplied by the government, such as social security, Medicaid, or Medicare
• IRA’s, 401(k)’s or pensions

It’s advised that you work with a bankruptcy lawyer to make the difficult decisions you are going to be facing, such as whether or not to file, which guidelines to use, and how to fill out the paperwork.

A very common pitfall that many either commit or at least consider, is liquidating retirement assets. While cashing in an IRA, 401K or other types of retirement seems like an easy fix for a current economic problem, it is a big mistake. This only serves to take away the debtor’s hard earned security for tomorrow.

Your Retirement Funds Can Be Protected in Bankruptcy.

Working bankruptcy attorneys, you will understand how it is possible to get out from under the heavy pressure of debt without risking your financial future. Often, clients do not even realize that this is a possibility. Secure swift relief from debt and creditors. Protect the future that you have built for yourself and your family by working with a bankruptcy lawyer in New York.

Stay Away From Debt Management (Without an Attorney’s Help).

It is a common mistake to turn to debt management companies for relief. Consumer debt can be hard to manage, and debt management companies may seem like an easy way out. Unfortunately, many of these companies are just in it for a quick dollar, and not your best interests. Many of these companies present you with a debt structure, collect your money and never follow through with paying your creditors. You end off worse than you started.

An experienced bankruptcy attorney can help you if you decide to go with a debt management company. Allow a knowledgeable attorney to work with both the debt management firm and your creditors to make sure that they actually follow through with the structured plan. Protect yourself from unscrupulous people and hire someone that has your best interests at heart.

A Fraudulent Transfer of Assets Is Asking for Trouble.

While transferring your assets to another individual may seem like a great way to “hide” your property from a bankruptcy trustee, this is a mistake. Laws have been established to curb this practice by making certain transfers illegal. Fraudulent asset transfer occurs when a debtor does so to defraud his or her creditor. Selling your asset for less than it is worth to a friend is also fraud. An experienced attorney will let you know what constitutes fraud and keep you on the right side of the law.

If a transfer is called into question, a qualified attorney will help you with your defense against the accusation. There are times when transfers are legitimate and a good lawyer will properly defend your right to do so. Applicable defenses include those transfers made in good faith or those made during the course of normal business procedures.

Credit Repair Scams Are Rampant.

Many legal counselors and attorneys will protect consumers against credit repair scams. We are constantly on the watch for predatory or deceptive practices made by credit card companies, credit repair businesses, banks and mortgages.

A judgment is the final act of a court (a court order) in defining the rights of all parties involved. If you do not pay your debts, a creditor can pursue a judgment against you. You and your creditor are summoned to appear in court. If the creditor wins the court case, a judgment will be issued. The judgment will say that you owe a specified amount of money to the creditor. Once the creditor obtains a judgment against you, he can pursue a variety of legal methods to force payment of the debt. You can stop the creditor from taking any of these steps by filing for bankruptcy.

In most states, you will receive a summons to appear in court if a creditor is pursuing a judgment against you. It’s a good idea to appear for the court case. If you do not appear, your creditor wins the judgment by default. Sometimes, you can have a default judgment vacated (or set aside) by filing a motion after the judgment is issued. You will need to have a valid excuse to explain why you did not appear for the court case. A judgment can remain on your credit report for up to 10 years, so this is something you want to take very seriously.

A judgment can also be issued on real property (i.e. home, car). This type of judgment is called a judgment lien. A creditor can obtain a judgment lien by recording a certified copy of the judgment in the real estate records of the county in which the real property is located. Real property liens last for 10 years (or until the debt is paid off), and they can be renewed for another 10 years.

Even though you are not required to try a debt repayment plan before bankruptcy, it’s a good idea to consider debt negotiation, and debt repayment plans before pursuing bankruptcy. Bankruptcy is a “last resort” solution for people who have run out of available options. Establishing a repayment plan can help you manage your debt, budget your spending, and start making a dent in your total debt owed.

Most credit counseling agencies can develop a repayment plan for you. Likewise, financial advisors, accountants, and attorneys can also help you develop a repayment plan before deciding to file for bankruptcy. If you feel that a repayment plan could work for your financial situation, try one for awhile. See if you are able to meet your financial obligations and stick to the plan. If you are planning to file for Chapter 13 bankruptcy, you should understand that you will be forced to follow a court ordered repayment plan. Therefore, if you can develop and follow your own repayment plan, you may not need to file for Chapter 13 bankruptcy.

Developing your own repayment plan may involve negotiating with creditors for a longer repayment period, better terms, reduced monthly payments, or lower interest rates. If you’re not comfortable building your own repayment plan, consider having a credit counseling agency or debt settlement firm assist you in structuring a repayment plan. Repayment plans are a voluntary solution that can be very effective for a number of debtors. Consider developing and following a repayment plan before filing for bankruptcy.

The next step is determining if qualify for debt settlement. To qualify for debt settlement, you will typically need to have at least $7,500 in unsecured debt. Be sure to ask each debt settlement company that you talk to about the minimum debt balance requirements. Some companies have higher minimums than others. Look for debt settlement companies that have good ratings with the Better Business Bureau, and avoid companies that charge large upfront fees. Also, look for debt settlement companies that have a strong history of negotiating with creditors. Ask for references and compare the services that each company offers.

If you decide to pursue debt settlement, make sure you are prepared for the potential negatives. Some of these include possible collection lawsuits from creditors, damaged credit, and increased creditor phone calls. If you can’t handle these possibilities, then another option is probably the best solution for you. Likewise, if you cannot pay off your debt with your current income (or increase your earned income), then bankruptcy may be a better solution for you.

If you’re considering bankruptcy, it’s important to determine whether it will resolve your credit problems. Depending on the amount and type of debt you have, a bankruptcy may not erase your responsibility to pay your bills. Bankruptcy is typically less expensive than debt settlement. However, the consequences of a bankruptcy are terrible for your credit score. Debt settlement doesn’t affect your credit score to the same extent as bankruptcy, though a credit score drop is probable. A bankruptcy can remain on your credit report for up to 10 years, but bad debt is only allowed to remain for 7 years.

Both debt settlement and bankruptcy can be good solutions to debt problems. Talk with your attorney to determine the best solution for your needs.

One of the biggest reasons for bankruptcy is unpaid medical bills. If you or someone in your family experiences an unexpected illness or injury, you may acquire large medical or hospital bills. Paying off these bills can be challenging and you may be forced to consider bankruptcy. Health problems can be frustrating, and the additional debt required to solve medical problems can make the situation even worse.

Another common reason for bankruptcy is job loss or unemployment. Many people who have well paying jobs buy homes and cars and get accustomed to a certain quality of life. If you are fired or laid-off, your bills will begin piling up, and you may start receiving threatening calls from creditors and bill collectors. Extended unemployment due to health problems, lack of work in your field, or other circumstances, can also lead to bankruptcy. To make matters worse, many people who lost their job may be forced to take a job that pays less than their previous job. This can make repaying debt obligations even harder.

Another common reason for bankruptcy is divorce or separation. Divorce can strip you of your assets, reduce your disposable income, and create an increasing debt burden. Divorce is very costly and what’s even worse is that you could end up owing portions of your spouse’s debt – even ones you didn’t know about. If your spouse files for bankruptcy or has uncollectable debt, your spouse’s creditors can try to collect the unpaid debt from you (especially if the divorce is not yet finalized). Combine divorce with health problems, job loss, and unpaid medical bills and the situation rapidly spirals out of control. If you are unemployed after a divorce, you may have to acquire even more debt in order to get a car and a place to live after an unexpected separation.

With the economy in its current state, it will not surprise you to discover that another common bankruptcy motivator is a failed small business venture. Many people have great business ideas every day and in the right economic conditions some of those businesses enjoy a long, fruitful existence. The sad fact is, however, that business conditions these days are not very good for most types of business, and more small businesses fall apart than succeed. If your small business has had to close, there is a good chance that you still have loans or leases that you personally guaranteed and are responsible for. Although each situation is unique, there is a good chance that those personal guarantees can be wiped out through bankruptcy.

If you want to discharge your student loans by claiming the “undue hardship” exception, you must file a separate motion with the bankruptcy court, and then appear before the judge to explain your hardship.  Convincing the judge that you have an undue hardship is a very difficult task, unless you are physically unable to work.  If your student loans are a large part of your debt, you are probably better off not pursuing bankruptcy since courts are very unlikely to discharge student loans.

Even though you can’t usually discharge student loans, you can consolidate them under a Chapter 13 repayment plan.  If you include your student loans in the Chapter 13 repayment plan, you will still owe whatever the balance is on your student loans once you complete your bankruptcy repayment plan.

Something else you can do is challenge the loan balance under Chapter 13.  If your student loans have been transferred between lenders multiple times, and it’s not clear how much is owed, you can get a court determination of the actual loan balance.  Once a judge determines how much is actually owed, the bankruptcy court decision is binding for the lender – even if the repayment period stretches beyond the end of the bankruptcy plan.

See if you can work out a repayment plan with your student loan lender that stretches payment out over a longer period of time.  Depending on how far in default you are, you may be able to get your student loan lender to defer repayment until your financial circumstances have improved.  Consider consolidating all your student loans into one single monthly payment that stretches over a longer period of time.

Seek an experienced, knowledgeable attorney who will give your bankruptcy case the time, attention, and effort it deserves.  It’s important that you choose an attorney who specializes in bankruptcy.  You do not want to use a generic attorney who handles a wide variety of legal cases.  Begin by asking for references from business owners who might know a good bankruptcy attorney.  If you have a personal attorney, usually he can recommend an attorney who specializes in bankruptcy law.

Another helpful method is to spend a day at bankruptcy court.  Not only will you learn more about the bankruptcy process, but you’ll also be able to observe bankruptcy attorneys in action.  At the courthouse, you can ask which attorneys specialize in bankruptcy.  You can also find out who sits on your local bankruptcy court panels.  Usually, only well-respected attorneys who regularly appear in bankruptcy court will be included in these panels.  Also be sure to get the names of attorneys on the local bankruptcy court debtor or creditor committees.  These can often be good sources of experienced bankruptcy attorneys.

When you meet with a potential bankruptcy attorney, be sure to ask for references from past clients.  Make sure you feel comfortable with the bankruptcy attorney – since you will be working closely with him for an extended period of time.  Be sure to ask lots of questions, and don’t accept evasive answers.  Some attorneys are very good at dodging questions by providing insufficient, vague answers.  Here are some questions you can ask when choosing an attorney.

What certifications do you have?
How many bankruptcy cases have you handled?
Roughly how many cases do you handle in a month? In a year?
How many bankruptcy filings are business bankruptcy filings?
Will I be working directly with you – and if not, who will I be working with?
How soon can you begin working on my bankruptcy case? What is the estimated timeline for completion?

Get specifics on what fees will be charged, and how often.  Don’t hire the cheapest lawyer.  As the saying goes, “You get what you pay for.”  You want an attorney who knows bankruptcy law very well, and will do a good job representing you.  Find an attorney whose fees are reasonable and fair based on local standards.  Consult with your local bar association if you need help determining what price range is considered “reasonable.”  Avoid price extremes – anyone who charges too much or too little probably shouldn’t be your attorney.