Personal Bankruptcy: The Need for Protection from Creditors

Written by Adam Peck Category: Nursing Homes January 17th, 2013 3 min read

With unemployment expected to persist above 10 percent through 2010, more Americans whose debt has ballooned may wonder whether they should seek protection from their creditors.

Last year was the seventh-worst on record for personal bankruptcy: 1.4 million new cases were filed nationwide.Deciding whether to take the plunge is the result of art more than science or accounting norms. Many financial advisers recommend considering filing for bankruptcy if you can’t figure out a way to pay off your unsecured debt within five years says Los Angeles Bankruptcy Attorney Steven C. Peck.

But most agree that if you can avoid filing, you should. Bankruptcy is for people who can’t make their debt payments and can’t earn more income or refinance or renegotiate their debts. If that is your situation, here are a few tips:

• Avoid scams: Above all, be wary of anyone who demands money to help settle your debts. In a common ploy the scam artist starts by getting you to set aside a large sum – in his or her care says Peck. In what’s often called debt settlement, the scammer then advocates for you with creditors. But he can’t arrange better payments than you could on your own – and he charges a fee. His monthly fee can end up setting you back further.

• Counseling requirements: A 2005 change in bankruptcy laws means people must go through two counseling sessions that can run one or two hours or longer, the first before filing and the second after resolving their debt.

“The purpose of the pre-filing counseling is not to dissuade or point an individual in any one direction it is to get a sense of what does it cost to run your house.” The counselors must be government-approved.

• Chapter 7 or 13? What type of case you’ll file depends on your situation. The rules for the two most common types of cases are in two sections of federal bankruptcy law known as Chapter 7 and Chapter 13.

In Chapter 7 cases, generally reserved for people who make less than their area’s median income, a court-appointed trustee sells your assets and distributes whatever cash he can get to your creditors.

Chapter 13 covers people who have steady income, own property they want to keep and have too much unsecured debt. This process helps them create a plan to pay off their unsecured debts in three to five years. It can offer more leeway.

• IT’LL COST YOU: Even in financial distress, you must pay the court where you file your case. Federal law sets the fee for filing a Chapter 7 case at $299 and a Chapter 13 case at $274. Either amount can be paid in installments.

On top of that you’ll usually pay a lawyer, and attorneys’ fees vary greatly.

In Chapter 7, lawyers are paid at the beginning of the case under court rules. Peck says his law firm charges a $1,000 minimum for Chapter 7 cases.

For Chapter 13, he said, many courts regulate lawyers’ fees and set a flat rate, because those cases are more complicated and can take more time. In Los Angeles, that fee is $3,300.

Share it

Questions? Check with Peck Today

Blog Lead Form

Elder Abuse and Neglect in Assisted Living Facilities

Elopement in Nursing Homes

Assisted Living Abuse

Settlement Reached in Assisted Living Facility Death

Assisted Living Abuse and Neglect Attorneys

Written by Adam Peck

Expertise: Personal Injury

Adam J. Peck, ESQ is a principal with Peck Law Group, APC. In 2008, Mr. Adam Peck received his Juris Doctorate from Whittier Law School where he graduated Cum Laude. His practice is primarily dedicated to representing Elders, Dependent Adults, along with their loved ones and family members, who have suffered horrific personal injuries.