What the Credit Industry Doesn’t Want You to Know About Bankruptcy

1. The “new” bankruptcy law that went into affect in October, 2005 isn’t very much more restrictive than the “old” law.

The law revision got a lot of press that made it sound like it would be much more difficult—perhaps impossible—to file for bankruptcy protection after the new law went into effect. It’s true that there are some additional steps and additional paperwork. Filing bankruptcy is a little more work and requires a little more preparation than it did before (although most of that work falls more on your attorney than it does on you). However, the end result is the same for most debtors. Once the means testing and the credit counseling session are over, the vast majority of people end up filing exactly the same kind of bankruptcy petition that they would have before the law changed. And for that very small percentage of people who may not be eligible to file a Chapter 7 bankruptcy, Chapter 13 is still available.

2. Most people who file for bankruptcy protection don’t lose any property.

The U.S. bankruptcy code provides exemptions that allow you to keep a certain amount of value in large property like your home and your automobile. In addition, there are extensive exemptions for clothing, furniture, and personal property. Bankruptcy law wouldn’t provide much protection if it left you without a place to live or a means to get back and forth to work! In addition, some states have exemptions available that go beyond those provided by the federal statute. Most people who are considering filing for bankruptcy don’t own a lot of high-ticket items—their property consists primarily of what they need to live and work. That’s exactly the kind of property that the bankruptcy law intends to protect from creditors.

3. You can rebuild your credit in just a few years after bankruptcy.

You may have heard that bankruptcy “stays on your credit” for ten years. That’s true, but it’s not the whole story. The truth is that your credit score—the number that has the greatest impact on your ability to get new credit and secure favorable rates—is more influenced by recent activity. Very soon after you’ve filed bankruptcy, you’ll begin to get credit offers. You’ll want to exercise great caution in deciding which offers to accept, and when. Many of the creditors who will solicit your business right after bankruptcy will attach outrageous fees and charges to these accounts—the kind of unexpected, mounting costs that will put you right back in financial trouble. However, by judiciously accepting credit accounts you can handle and making payments that are timely and are more than the minimum required, you can begin to rebuild your credit. Most debtors who are able to keep their bills current after bankruptcy are able to re-establish their credit in 2-4 years. Sure, the bankruptcy will still appear on your credit report, but if your current credit is solid, that’s not likely to keep you from buying a home or a car or even obtaining some unsecured credit accounts.

4. Most of the people who file for bankruptcy protection are honest, hard-working people who have fallen on hard times.

The credit industry would love for you to believe that only deadbeats file bankruptcy. There’s a lot of mileage in that claim—it makes ordinary people reluctant to file bankruptcy when they need to, it creates an unsympathetic attitude toward those who do file bankruptcy, and it makes it easier to get support for legislation that will make it harder for people to file bankruptcy. And maybe it’s more comfortable for most of us, not to have to face up to the fact that circumstances in our economy are so desperate that 1 in 53 U.S. households had to file bankruptcy during 2005. The truth, however uncomfortable, is that most people who file bankruptcy don’t do so because they took vacations they couldn’t afford and bought luxury goods with their credit cards. Most people file bankruptcy for one of three reasons—or for a combination of these reasons: divorce, job loss, and extraordinary medical expenses.

5. Once you file for bankruptcy, your creditors can’t bother you anymore.

In most cases, when you file for bankruptcy protection, the court issues an “automatic stay”. The automatic stay is a court order that tells your creditors that since you’ve filed for bankruptcy protection, they can’t contact you anymore. They can’t call you, and they can’t send you threatening letters. If they’re garnishing your wages, they have to stop. If they were about to repossess your car, they’ll have to wait to see how the bankruptcy court resolves ownership of your car. Bankruptcy law even provides that creditors who violate the automatic stay can be required to pay damages—in some cases even punitive damages. There are exceptions in certain types of cases and for certain debts like criminal restitution, but in most cases and for most debts, the automatic stay will protect you from any creditor contact.

Tiffany Sanders is an attorney who has published two books. Her articles have appeared in numerous newspapers, magazines, newsletters, and web resources in the United States and Australia. She writes bankruptcy law news and articles for www.TotalBankruptcy.com, where sponsoring attorneys provide extensive consumer information and resources related to bankruptcy filing and rebuilding credit after bankruptcy.


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Chapter 13 Meeting with Creditors

Have you recently filed Chapter 13 Bankruptcy? Do you have an upcoming Meeting of Creditors hearing? Many Chapter 13 debtors get a little nervous about the meeting since they are not exactly sure what to expect. So, I decided to take some notes on exactly what happens during the meeting for the benefit of those who have an upcoming meeting. Of course, I knew what was going to happen since I’ve done these hearings before for my clients, but I wanted to note the exact words this hearing officer (trustee) was using and the exact questions she was asking. Sometimes, clients have visions that creditors are going to sit there and hammer them all day with questions or something. This is just not the case, in my experience. Let’s start with some basics.

What is the Meeting of Creditors?

The Meeting of Creditors is a hearing that is held 20 to 40 days after the bankruptcy petition is filed. The debtor must attend this meeting, at which creditors may appear and ask questions regarding the debtor’s financial affairs and property. If a husband and wife have filed a joint petition, they both must attend the creditors meeting. The trustee also will attend this meeting. It is important for the debtor to cooperate with the trustee and to provide any financial records or documents that the trustee requests.

The trustee is required to examine the debtor orally at the meeting of creditors to ensure that the debtor is aware of the potential consequences of seeking a discharge in bankruptcy, including the effect on credit history, the ability to file a petition under a different chapter, the effect of receiving a discharge, and the effect of reaffirming a debt.

In some courts, trustees may provide written information on these topics at or in advance of the meeting, to ensure that the debtor is aware of this information. In order to preserve their independent judgment, bankruptcy judges are prohibited from attending the meeting of creditors. This paragraph was adapted from Bankruptcy Basics, a FREE publication, to receive a copy go to http://www.bankruptcyzone.com/index.php/free-ebook/.

What Can You Expect at the Meeting?

Well, that’s what this article is all about. Let’s talk about that:

If you have an upcoming meeting of creditors hearing, the best way to overcome your fear of the unknown is simply to go to a meeting(before yours) and just sit there and observe. That will probably prepare you much more than if you learn about it second hand.

So what I’ve tried to do is give you blow by blow of what happened at this particular meeting of creditors about a week ago (December, 2005). I primarily practice Bankruptcy in the Northern District of California, although I can practice anywhere in California.

Disclaimer: The following is an example of what occurred on a particular date in my jurisdiction (Northern District of California, Oakland Division) at a Chapter 13 Meeting of Creditors hearing in December, 2005. This may vary dramatically from what occurs where you live. Therefore, do not think that the way the meeting is presented above reflects what will occur in your jurisdiction. You should speak to your attorney about what occurs in your particular jurisdiction. This article is for informational purposes only and does not constitute legal advice.

That having been said, in the Oakland Division of the Northern District of California Bankruptcy court, the meetings are held at a location other than the actual Bankruptcy court. The court itself is across the street. The meetings are held in a suite on the 6th floor of the Federal Building. Inside the suite, there are two main rooms. One is a waiting room where attorneys can confer with clients, talk to each other, etc… The other room is where the actually meeting of creditors hearing occurs. There is usually a person there to help direct you and answer basic non-legal questions about the process.

1. So, let’s say your hearing is at 9 A.M. You get there at 8:30 or so and go into the waiting room. The trustee in our jurisdiction hands out a booklet called “The Chapter 13 Debtor Handbook” which is for you to take home and read and tells all about the process. You are then directed to watch a 15 minute video that explains the basics of bankruptcy and particularly Chapter 13 bankruptcy.

2. Once the video is over, the trustee’s assistant comes into the waiting room and announces that the meeting is about to start and that anyone who is on the 9 A.M. calendar should come into the room where the meeting will be held. There are about 20 or 30 seats and all of the people on calendar head in to the adjoining meeting room.

3. The hearing begins. Trustee starts the calendar and introduces herself. She talks about what will occur at the meeting. The trustee states that she will call debtors individually and that she will question each for approximately 5 minutes. If creditors are present, they will be able to ask questions for 5 minutes per case per debtor. The debtor is to have their Social Security card and ID ready to show to the trustee when their name is called. She says that all payments into the Chapter 13 plan are to be made in cashier’s check or money order. Debtors are not allowed to incur new debt. If you absolutely need to purchase a car for transportation, the trustee must approve how much you can spend on the car and approves the purchase contract. You can only sell or refinance your real property with permission of the trustee. Permission is only given to Title companies when in escrow. In other words, the deal must be already in place.

4. The Trustee calls the name of the first debtor. The debtor and their attorney comes up to the table. The attorney sits on one side of the table and the debtor on the other side. (Picture a long cafeteria-style table. The trustee and her assistants are sitting at the middle of the table facing the front of the room. The attorney and debtor are sitting at the far ends of the table opposite each other).

5. The trustee asks for debtor’s ID and Social Security Card.

6. The attorney states his or her appearance for the record. (e.g. “Leon Rountree, appearing on behalf of John Doe debtor”)

7. The Trustee swears in the Debtor: “Do you solemnly affirm under penalty of perjury that the testimony that you are about to give is the truth, the whole truth, and nothing but the truth”?

8. Trustee states for the record: “I have seen the debtor’s Social Security card and identification and Social Security number on the card matches the number on the petition.”

The trustee then asks the debtor the following questions:

9. “Is your home address still: “[Home Address]”?

10. “And do you still work at [Place of employment] as an [occupation]”?

11. If the debtor owns a car and is keeping it: “Is your car insured”? “Have you made the necessary car payments”?

If the debtor is not keeping the car, “Are you surrendering the car”?

12. “Do you own any real estate”? If yes, “Have you made all the necessary house payments since the petition was filed”?

“When did you make those payments”?

“Is the house insured”?

“Do you pay the property taxes directly”?

“Are the property taxes current”?

13. “Have you filed all tax returns for the last five years”? If not, “When will they be filed”?

14. “Do you owe any money to the IRS or the California Franchise Tax Board”?

15. If debtor has credit card debt, “Have you destroyed all your credit cards”?

16. “Do you believe that you can make monthly payments of [Chapter 13 plan payment] per month”?

17. “Did you review the bankruptcy petition and schedules before signing them”?

18. “Is everything in the petition and schedules true and correct”?

19. Are there any creditors that wish to be heard in this matter?

If everything runs smoothly, the trustee states that she will recommend to the Judge that the Chapter 13 plan be confirmed.

That’s it! When they say that it will last about 5 minutes, they usually mean it. The only exception might be if there are objections of some kind to the plan or a married couple is filing in which case the meeting may last a few minutes longer.

Disclaimer: The above is an example of what occurred on a particular date in my jurisdiction (Northern District of California, Oakland Division) at a Chapter 13 Meeting of Creditors hearing in (December, 2005). This may vary dramatically from what occurs where you live. Therefore, do not think that the way the meeting is presented above reflects what will occur in your jurisdiction. You should speak to your attorney about what occurs in your particular jurisdiction. This article is for informational purposes only and does not constitute legal advice. This article does not create any attorney client relationship. Copyright 2005, Leon H. Rountree III

Leon Rountree III, Esq. is a consumer bankruptcy attorney based in Oakland, California. His firm assists consumer and small business debtors in Chapter 7 and Chapter 13 bankruptcy cases. More information about bankruptcy and the firm can be found at his web sites located at: http://www.bankruptcyzone.com and http://www.leonrountree.com.

Chinese Debt Collection

In late June of 2003, I received an e-mail from Daniel Harris, who introduced himself as maritime lawyer from Seattle. He had found me through the internet and was asking me whether I was interested in helping arrest transshipped cargo in Dalian. I was excited about the task and I surfed Dan’s website and learned Dan owns a small international law firm in Seattle, called Harris & Moure. I replied to him immediately and sent him some relevant provisions concerning cargo arrests under China legal system. He was very happy with my prompt and helpful reply and we soon were working together on the case. He later told me he was so impressed with my responses that he had picked me over numerous other lawyers throughout China.

Brief of the case
OOO Bolshoretskoe is a Russian fishing company that sold 400 Tons of pollock worth around US$700,000 to Alimex Seafood A/S, a Danish company. The pollock was scheduled to be transshipped from Dalian to Europe. Alimex had not yet paid Bolshoretskoe for the product. Bolshoretskoe owed Daxin Petroleum Pte, Ltd., a Singapore fuel supply company, around US$400,000 for fuel. M/V IVAN POLZUNOV, the vessel carrying the pollock, was scheduled to call on Dalian on 4 July, 2003. Our task was to seize the pollock for Daxin to get Bolshoretskoe to pay its debt.

Bolshoretskoe’s debt to Daxin arose in July and December, 2002, when Daxin supplied bunker products for two Russian fishing vessels, TOSNO and PHOENIX. To secure these fuelings, Bolshoretskoe signed a guarantee letter to Daxin in which “Bolshoretskoe assigns all receivables resulting from production, deliveries and selling of Salmon or Pollock on/from board of F/T PHOENIX in favor of Daxin for the amount of the bunker supply. In addition, Bolshoretskoe agrees that property title to salmon or pollock products covering the amount of the bunker shall pass to Daxin immediately upon processing and/or storage of the products on board of PHOENIX.

Daxin was not paid on its two fuel deliveries, and Bolshoretskoe was refusing to pay. It is estimated the TOSNO and PHOENIX owed a combined total of around $20 million in unpaid debt to various creditors.

Intensive and orderly preparation for cargo arrest
After studying the relevant documents and analyzing the entire history of the case, we determined that either Bolshoretskoe or Alimex would pay Daxin if we arrested the cargo in China. So we set about to do just that.

First, we prepared all necessary legal documents pursuant to Chinese law. Due to the various different legal systems and languages involved (China, Russia, Singapore and the United States), our preparations were extremely time consuming. As we were preparing our documentation and firming up our strategies, Dan was also preparing to come to Dalian.

However, the day before Dan was to leave the United States, he learned that the pollock’s transport vessel, the IVAN POLZUNOV, had secretly changed its plans in an effort to avoid arrest. It would not be calling Dalian on July 4, 2003; it would be calling Qingdao on July 8, 2003. Because all legal documents had been prepared for the Dalian Maritime Court, Bolshoretskoe’s change in plans necessitated we completely change our plans also. With time so much of the essence, we asked Sunfanlong, who works in Qingdao Wincon law firm, to work with us and we transferred all legal documents to him.

Successful Arrest of the cargo
On July 7, 2003, Dan arrived in Qingdao. The IVAN POLZUNOV arrived in Qingdao the next day and began to discharge 15 containers of pollock for transshipment to Europe. When the judge, Wincon’s lawyer and Dan saw that the containers were being offloaded on trailers for transport to the container terminal, they went straight to the terminal to deliver the arrest papers on all 15 containers. However, after waiting nearly five hours at the terminal and waiting well into the night, only three containers had arrived and been arrested. Nobody seemed to know what had happened to the other twelve containers. We were concerned Bolshoretskoe and/or Alimex had learned of our arrest warrant and had hidden the other twelve containers. Adding to our worries was that we had by now learned that Alimex was to ship all 15 containers to Europe the very next day. We checked everywhere for the missing twelve containers. We checked with various trucking companies. We checked all around the terminal. Nothing. Eventually, we learned that the twelve containers had been in the terminal all along, but had been issued separate bills of lading from the first three and placed in a somewhat separate area. We had succeeded in arresting all fifteen containers.

After our having engaged in twelve days of intensive e-mail and telephone communication together, Dan showed up at Dalian’s airport. His high praise of our work conveyed his satisfaction of our efficient job. Dalian and Qingdao’s picturesque scenery and modern city construction impressed Dan deeply and changed his previous imagination regarding this part of China. He loved the food and our culture and talked about returning some day with his family on holiday.

Hard success to acquire guaranty and lift the arrest
Now that we had the pollock under arrest, we would need to maintain it in its frozen condition at the terminal. Pollock is a valuable fish and the costs and risks during the arrest period were high. The sooner we could resolve the dispute, the sooner the fish would be on its way, and the better it would be for all parties.

The day after we arrested the cargo, we received a letter from Alimex’s lawyers in Denmark, claiming Alimex owned the arrested cargo, not Bolshoretskoe, and threatening Daxin with criminal action. Alimex’s lawyers copied this letter to the court and to Daxin. Though confident that it was in the right, this threat of criminal action did not sit well with Daxin. We replied to Alimex’s lawyers by lecturing them on Chinese and international law and by declaring that Alimex would suffer even more losses if it insisted on pursuing litigation in China instead of cooperation. The reaction from Alimex’s lawyers was overwhelming. They wrote me a letter filled with furious and derogatory words and stated they would never communicate directly with us again. The case had fallen into deadlock.

Despite the initially tough attitude of Alimex’s lawyers, we knew we could not abandon our efforts to achieve a settlement, particularly since we knew settlement made sense for all parties. We proposed a three way agreement between Daxin, Alimex and Bolshoretskoe, whereby Alimex would keep its purchase price funds and not pay any party for the fish until the dispute between Daxin and Bolshoretskoe had been resolved through arbitration in Canada. Alimex would then pay the winner of the arbitration up to the purchase price of the fish. Alimex would also agree not to pursue any claims against Daxin for wrongful arrest. Upon the signing of this agreement, Daxin would release its arrest of the cargo. Daxin secured oral agreements from both Bolshoretskoe and Alimex to go forward with such an agreement.

For the fish to go out on the next liner to Europe, Dan and I had to work overtime in drafting the appropriate agreements. This time, the multitude of languages and time zones (China, Russia, Singapore, Seattle, and Denmark) worked to slow us down, and by the time Bolshoretskoe received its Russian language copy of the agreement, only a few hours remained before the pollock needed to be loaded on the liner to Europe. But, at the last minute, Bolshoretskoe changed its mind and decided it would not sign. All our hard work had been for naught. We were all exhausted.

The next liner to Europe was leaving in six days. During the weekend, we stopped talking with opposing parties and communicated with only Dan and Daxin. We went back over the case history and analyzed each party’s positions and risks. We concluded that Bolshoretskoe was Daxin’s real adversary. It was Bolshoretskoe that owed the money and it was Bolshoretskoe that had avoided payment for so long. It also was Bolshoretskoe that had backed out of its oral agreement. There had been no prior conflicts between Daxin and Alimex. Though Alimex was listed as the consignee of the pollock on the Bill of lading, it had yet to actually pay for the fish. Above all else, Alimex wanted the pollock sent to Europe so it could fulfill its commitments with its European buyers.

If we could persuade Alimex to provide a deposit or the purchase price to the Qingdao Maritime Court, we would lift our cargo arrest. If, on the other hand, Alimex insisted on paying the purchase price directly to Bolshoretskoe, the arrest would remain in place, and Alimex would be unable to fulfill its supply contracts with its European buyers. Daxin would be left fighting a two front war against Alimex and Bolshoretskoe in the Chinese courts.

We told Alimex that if it did not immediately settle, we would move the court to require Alimex pay the Pollock purchase price to the court and seeking the immediate sale of the pollock at auction. Within hours, we received contact from a Chinese lawyer retained by Alimex, who would, he informed us, be going to court to have our “illegal” arrest thrown out. The court ignored him.

The next liner for Europe was coming to Qingdao the next day and it finally began dawning on Alimex that if it wanted to get the pollock to Europe and to its customers, it would need to settle with us. Intensive settlement talks began anew and another oral agreement was reached. Alimex would guarantee to pay up to the amount of the pollock purchase price to whomever prevailed between Daxin and Bolshoretskoe. Alimex also agreed not to pursue any claims against Daxin arising from Daxin’s allegedly wrongful arrest of the cargo. A settlement was drafted and signed and the parties worked diligently to get the arrest lifted in time for the product to make it on that day’s liner to Europe.

Daxin had a Guarantee Agreement from an established and well funded Danish company and we had achieved a smashing victory on this exciting arrest of cross-border transshipping cargo.

Somewhat smooth sailing in recovering Daxin’s award.
We then filed Daxin’s case against Bolshoretskoe in the Qingdao Maritime Court. Bolshoretskoe consistently failed to attend any court hearings and we eventually secured a default judgment against it.

Alimex then paid Daxin all but US$15,000 of the amount it had guaranteed, but claimed entitlement to withhold US$15,000 for itself to help pay for the costs it had incurred in China defending against Daxin’s arrest. One e-mail from Dan threatening arbitration in London (pursuant to the Guarantee Agreement) for the $15,000, plus all fees and costs, convinced Alimex it had no case on this either. Alimex paid the remaining US$15,000 to Daxin and the case was over.

After six months, close cooperation and flexibility by lawyers on both sides of the Pacific had given us full and total victory.

A few months after I closed the case, Dan sent me an e-mail telling me he had heard from one of his Danish clients that Alimex’s Danish lawyers had told them of our great job on this case. Dan and I have since worked on a couple additional cases together, but it will be this first one that I will always remember. In thinking of this case, I know I will never forget the sleepless nights I spent communicating with lawyers and parties in four times zones. But I also know that the pride I feel from knowing how much we achieved, despite having to work through the laws of so many countries under such tight deadlines, is what will always stand out. Our wisdom, our legal knowledge and our strenuous diligence had garnered us high praise not only from our foreign colleague and from our client, but also admiration from the opposing party.

About the author:

Zhao Xiaomei (Meggie) is a senior partner at the Fada law firm in Dalian, China, where she focuses on international and maritime law.

Debt Collection Misconduct

Due to the apathetic nature of debtors and the persistent nature of creditors, there have been serious blow-ups that have happened during the many years of the Debt Collection industry’s existence. It could have been as minor as verbal disagreements. But, it could have also been as grave as lawsuits, threats, or even actual acts of physical harm.

This is why the Fair Debt Collection Practices Act was established in the United States of America. The law is meant to prohibit abusive practices by debt collectors. And these practices can be summarized into three.

1) False Statements and Actions

Some collectors are good actors, while some are better strategists. But debtors should always be cautious because collectors are usually good with words and could sense what the average debtor fears, since they have already interacted with a lot of them. Forcing a debtor to divulge information or pay by means of misleading statements and actions is never acceptable to the law.

Among the common misleading statements and actions that collectors could make are:

-Falsely accuse the debtor of committing a crime -Threaten the debtor that he/she will get arrested -Pretend to be people who they are not (E.g. Government personnel, Lawyers) -Imply that legal documents have already been sent or are on the way even if these aren’t -Alter the amount of the debt -Use of falsified documents, especially those of legalities

2) Unfair Practices

The most unethical of collectors sometimes charge a debtor an amount that is separate from his/her actual debt. This shouldn’t be the case unless there is really a provision by the law. Collectors can also mislead debtors into paying for collect calls and telegrams they use. Baseless legal threats are welcome additions in this category as well.

3) Harassment

This is the worst form of abuse that collectors could commit because the acts under this category can cause more serious physical, emotional, and psychological effects on a person.

Some of the acts are: -Use threats of physical harm or violence -Use of profane language -Public humiliation of debtors with the use of print and broadcast media

Make sure any collection agency you select for your business is not violating any collection laws.


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Personal Bankruptcy

Sometimes, the formal and legal declaration of personal
is the best way to go when you’re “snowed
under” with bills, and you just can’t see your way clear to survive.

Actually, bankruptcy allows you to make a fresh start.
Generally, it takes only a small amount of money, a
careful evaluation of your assets and your liabilities.
In many cases, a lawyer is not necessary.

If you have very few assets, mountains of debt, and not
enough income to meet your obligations, then your best
bet is almost always the filing of straight bankruptcy.
What you’ll need is the proper forms “S3010 Bankruptcy
forms, for an Individual Not Engaged In Business.”
These can be purchased from any full-line office supply
store, especially in an area serving attorneys’ offices.

You’ll need to know which district you live in for Federal
Court purposes – so look in the white pages of your
telephone book under U.S. Government – Courts – and
take down the address of the nearest U.S. District Court.
Check it out to be sure that your residence is in this
court’s jurisdiction.

You then fill out the forms you purchased, listing all of
your creditors – those with priority being listed first –
meaning those who have extended credit to you against
some sort of security or collateral, followed by those
who have extended credit to you on just your signature
or reputation. You must be sure to list all of your
creditors because any that you fail to list, will be
able to sue you and collect even after the bankruptcy
has been adjudicated. At the same time, be sure to
include the names of anyone and everyone you may
have co-signed a note or a loan for, as well as anyone
who may have co-signed for you.

The laws governing personal bankruptcy vary in all
states, but generally, a bankruptcy judgement will
not take away the house you live in, basic home
furnishings, a car that’s necessary towards your
gainful employment, nor the tools of your trade.
Check these things out to be sure against the list
of items regarded as the necessities of life by
your state.

When you’ve got all the forms filled out, and notarized,
you take them to the Clerk of the U.S. District Court in
your jurisdiction. You pay the clerk $50, and from there,
you’re home free. The clerk notifies your creditors, and
reminds them that being as you’ve filed bankruptcy papers,
they cannot bother you about your debts anymore.

However, they are invited to your hearing. Usually they
don’t show up, because by that time, you have very few,
if any, nonexempt assets left that they are really interested in.

But, whatever assets you do have that are nonexempt,
will be sold by the Court to appease your creditors.
Any money realized from these sales is then added to
the total amount of money you may have turned over
to the court at the time of your filing, and divided equally
amongst your creditors according to priorities.

After all of this has taken place, and usually about 3
months after you’ve been adjudged bankrupt, you can
start all over again to incur debt, pay bills and establish
a new credit rating. However , you should be especially
careful about talking with your old creditors because
they may attempt to maneuver you into signing a
“reaffirmation” of your old debt. The thing to do is to
be sure that you carefully read anything you affix your
signature to, and don’t agree to pay on any debt that
has already been discharged through your bankruptcy!

In some bankruptcy filings, it is definitely advantageous
to hire an attorney to represent you. This is especially
true for people who have assets such as real estate they
want to protect, and/or people who has been operating
home-based businesses or been accused of fraud.
Remember this, if you decide to process your bankruptcy
without a lawyer, then it is your responsibility to fill out
all the necessary forms accurately and completely, and
every bit as precisely as if you had paid an attorney to
do it for you. Leaving out a creditor’s name or address
or forgetting a loan that you co-signed for, will surely
bring on litigation against you even after your bankruptcy
has been adjudicated. Be sure you understand all the
papers, ask the Court Clerk for advice, and if you run
into problems, then take it in to an attorney.

Besides the regular bankruptcy laws, there’s also a little-known
and little-used method of getting reorganized with your debt,
particularly when you’ve got a steady job and just need more
time to straighten your indebtedness out. This is the
wage-earner’s provisions of Chapter XIII of the Federal Bankruptcy laws.

Basically, these provisions allow you to make new arrangements
with your creditors and pay off all your debts over a new 3-year
period of time. When you filed for indebtedness relief under
the provisions of this law, nothing is recorded permanently
on your credit record. You get to keep all your assets, but
you must pay off all your debts. But, so long as the Court
grants you relief under these provisions, and you pay your
creditors according to the repayment schedule agreed upon
by the Court, your creditors cannot bother you. Even if they
have begun a suit against you, once the Court has given
you relief, they cannot touch you! Once you’ve filed under
these provisions, your creditors are immediately restricted
from even contacting you, and get only what the referee
or trustee doles out to them.

Often times, if a creditor threatens to sue you, the most
effective thing you can do is to tell him frankly that if he
sues you, you’ll have no other alternative except to file
bankruptcy papers. In many instances, this will cause
him to take a second look and to do whatever he can to
assist you in paying him the money you owe, but over a
longer period of time, and at smaller monthly payments.
The absolute bottom line is that your creditors know only
too well that if you do file for bankruptcy, their chances of
receiving even half of what you owe is practically nil. Thus,
it’s in their best interest to do everything they can to help
you to continue making payments on the amount you owe,
regardless of how small those payments may be.

When a creditor does sue you, and gets a judgement against
you, he can then get a court order directing the sheriff to
seize your personal property and sell it, with all monies
realized going to the creditor to satisfy your debt. When
they see this about to happen, many people connive to make
themselves “judgement proof.” In other words, they hide their
assets or move them out-of-state before the sheriff or marshall
arrives. This is illegal, but is done as often as not.

Many creditors will attempt to “garnish” your wages. This is
done by getting a court order directing your employer to set
aside part of your wages or salary every pay period and turn
it over to him. First, of course, he has to find out where you
work; and even then, in most states, there are limits set
relative to how much a creditor can garnish your wages.

If you have no job, and no visible assets, or you live in a state
where your wages cannot be garnished, your creditors actually
have very few ways of ever collecting from you.

Many techniques used by creditors and collection agencies
are illegal. A creditor or agency can write letters to you; call
you once a day in quest of a payment; and even knock on
your door to ask about a payment. but he is forbidden by
law to harass you or invade your privacy, or use deceptive
means to get you to pay your bills. He cannot use foul
and abusive language over the telephone, tell anyone other
than you the reason for his phone call, inconvenience you
or in any way threaten your job or your reputation in the
neighborhood where you live.

Still, the best idea for reorganization and settlement of your
debts when you find yourself in an untenable position, is
in-person visits and explanations of your situation with your
creditors, and a desire to explore other possible ways of
mutual satisfaction without involving collection agencies
or bankruptcy.

Business Law – Debt Collection

In your small business debt collection laws will eventually become important, as your debt grows and some clients do not pay. To collect small business debts legally, you must send a written notice that collections have begun, within five days of first contacting the debtor for collections. The letter must include dispute instructions.

Small Business Debt Collection Laws Forbidden Practices…

-Collect any amount beyond the actual debt, unless you really can do so legally.

-Continue collections on a debt if the debtor has disputed the debt, unless you provide the debtor with written proof.
Continue contacting the debtor if within 30 days of first contact, the debtor disputes the debt.

-Credit a payment the debtor has made to a non-disputed debt to a debt the debtor has disputed.

-Deposit a post-dated check before the post-date.

Small Business Debt Collections Laws: What You Can’t Say

– Give a false name.
– You are an attorney or government representative, if you are not.
-You have an attorney working for you or that you are going to assign the case to an attorney, if you really do not.
-The debtor has committed a crime, unless you are 100% sure they have.
-You work for a credit bureau, if you really do not.
-The debt is more or less money than it actually is.
-You are sending or have sent legal forms when you really did not.
-You are sending or have sent papers that are not legal forms, if they really are legal forms.
-The debtor will be arrested–no one is arrested for nonpayment of debts anymore.
-You will seize, garnish, attach, or sell the debtor’s property or wages, if you do not really intend to or cannot legally do so (and unless the debt is secured with collateral, you probably cannot).
-You will sue or take other legal action, if you do not really intend to, or are not legally able to do so.

Small Business Debt Collection Laws Forbidden Third-Party Disclosures


1) Give any credit-related information that is not 100% accurate.
2) Tell anyone other than the debtor that you are collecting a debt.
3) Telephone any number other than debtor’s more than once.

Small Business Debt Collection Phone Calls


-Call after 9 pm or before 8 am.
-Forget to give your name and your company’s name.
-Call repeatedly or in a way intended to annoy.
-Make a collect call.
-Make any threats.
-Use profane or obscene language.
-Leave a message that reveals this is a debt collection.

Small Business Debt Collection Mailing

Never send:

-Envelopes or mailings with any reference to debt collection on the exterior.
-Anything that looks like an official, legal, or government document, if it is not.

These simple small business debt collection laws guidelines should help stay with the collection laws.

L.S. Attorney New York State

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