Bankruptcy and Trustees

You need to consult a Bankruptcy Attorney if you are considering filing BK. Most of them offer free initial consultations and will gladly answer your questions.

The attorney will perform a 'means test' on your income & assets, which will tell him which chapter of BK you'll be eligible to file. If you have the means to pay back even a portion of your debts, you will need to file Chapter 13, which is a debt repayment program and lasts 3-5 years - and allows you to keep and continue paying on your vehicle, house, etc. if you so desire.

Chapter 7 is filed when you don't want to or don't care about keeping your assets, like your house, car, etc. The BK Trustee in a Chapter 7 case will sell your non-exempt assets to satisfy your debts before discharging the remainder of them.

There are more details, but that's it in a nutshell.

HOWEVER.....

Please consider using a consolidation or settlement program before filing Bankruptcy. Bankruptcy negatively affects your credit for a very long time. It's not the easy fix that it used to be - the laws changed some time ago, and it's not just a case of walking in, filing and walking out. There's a lot of paperwork, expense and time involved. Especially in the case of a Chapter 13.

If you file Chapter 13, your paycheck will most likely be garnished by the BK Trustee for the amount of your Chapter 13 plan payment. This can leave you with a greatly reduced income. At first, you'll think you can live with it - but then something will happen - a doctor bill, hospital stay, car repair, home repair, vet bill....and you'll find yourself not only with reduced income, but with increased bills. So now you're right back where you started.

Just think long and hard about it - please.

I found some useful information in United States Trustee Program & Bankruptcy

Basically the trustee is a "neutral" party that serves the best interests of both the debtor and the creditors, according to applicable bankruptcy laws.

A trustee is not going to come to your home and take inventory. They trust you to list all your assets on the petition, and the only time they would raise question is if you had large amounts of money un-accounted for.

The average person is able to keep all their possessions in a bankruptcy. It's only when you have "lots" of assets (fur coats, valuable paintings, jewelry, boats, etc) that they will want to sell some of it to satisfy the creditors. Basically, unless you were "rich", you probably don't have anything they will want.

Ok, then with that in mind. I am self employed, no regular income but I think when they see sales of $140,000 plus from my business last year and I don't know yet what my net income is going to be yet, I am still getting my stuff ready to do taxes. I am sure they are going to say Chapter 13.

But what they don't see is that I am maybe going to owe the IRS money this year and I am going to have a tough time coming up with all this money for everybody.

I don't see any cut and dry answer here for me. I have an appt. with a BK attroney to talk to them a week from this Friday but I am just not sure that this is the right way to go. Chapter 13 is a repayment plan, can't I work that out myself with my creditors and still have a repayment plan and not have to go BK?

Not necessarily. You might have gross revenue of $140K, but if your overhead was $139K then you only have $1k income ..... Your bottom line, not the top line, is what they will look at.

You are correct that 13 is a repayment plan -- you can certainly try to work things out with your creditors instead of filing BK. Some creditors might agree to a payment plan, some might not. The only difference with a 13, is that the court forces them to agree to the payment plan. (You're also paying your attorney and the trustee about $5-6K to do all that for you).