What if I Cannot Afford a Bankruptcy Attorney?

A dilemma often faced by debtors is the ability to pay for an attorney to guide them through the bankruptcy process. After all, if they cannot afford to pay their bills, how can they afford legal fees? When totalling up legal fees, court filing fees and other costs such as the mandatory credit counseling and debtor education classes, the costs for filing for bankruptcy often exceeds $2000.

One of the most common ways that debtors will save money for legal fees is to simply stop paying on debts that will be included in their bankruptcy petition. Most debtors struggle to make their minimum credit card payments when they could be using the money to hire an attorney. However, you should consult a qualified bankruptcy attorney before you stop paying your creditors.

Most bankruptcy attorneys will take payments over time so long as the fees are paid in full before the case is filed. For the most part, legal fees in a Chapter 7 case must be paid in full prior to the filing of the case. Otherwise, the money owed to the attorney is discharged like other debts.

Some creative attorneys will take a deposit and send a letter of representation to all of the debtor's creditors. This usually stops most creditor harassment for a period of time. In some cases, the creditors might violate state or federal fair debt collection laws and this could to lead to a monetary settlement that could provide the funds necessary for your bankruptcy legal fees.

Finally, a Chapter 13 bankruptcy is often an option to pay legal fees over time while still receiving the benefit of the automatic stay. In one current case, my client is 3 months behind on his car payment and he does not have the fees to pay for a Chapter 7 bankruptcy yet. His $2500 car has a $6500 loan against it, so we plan on filing a Chapter 13 bankruptcy to not only deal with the past due car payments, but to strip the lien from his vehicle down to the current value and pay his legal fees over time.

If you are struggling with how to pay for filing a bankruptcy case, please contact us to discuss your options.

About the Author: Carl H. Starrett II has been a licensed attorney since 1993 and is a member in good standing with the California State Bar and the San Diego County Bar Association. Mr. Starrett practices in the areas of bankruptcy, business litigation, construction, corporate planning and debt collection.

Don't Get a Christmas Debt Hangover

According to Wikipedia, "Consumerism is the equation of personal happiness with the purchase of material possessions and consumption" or "retail therapy" as my wife calls it. This results in an odd phenomena I often see debtors go through this time of year: guilty over not being able to purchase Christmas presents for friends and family. We often end up counseling clients that regaining control over their finances is more important than buying Christmas presents.

When January rolls around, will you be suffering from the guilt of a Christmas debt hangover? These tips should help prevent a holiday financial catastrophe:

1. Reduce your gift exchange list. Do you really need to to purchase gifts your 3 aunts, 2 uncles, 10 cousins and the odd assortment of nieces and nephews? Probably not. Just be honest with your friends and family and exchange greeting cards instead.
2. Budget, budget, budget: Make a list of who you really must purchase gifts for, set a dollar limit and stick to your budget. After you make your list, refer to Rule No. 1.
3. Don't use credit cards to purchase gifts. Unless you are the type of person who is extremely disciplined and pays off the credit card bill each month after accumulating airline miles, avoid the temptation to delay paying for the purchase. If you do purchase a Christmas gift on a credit card, refer to Rule No. 1.
4. Shop online instead of at the mall. Shopping at a mall can often lead to those impulse purchases that you end up regretting later. Take the time to research your purchase carefully. If you shop online, only use a well-established website such as Amazon.
5. Host a holiday pot luck instead of exchanging gifts. Christmas memories of pleasant times with friends and family will last longer than a forgotten trinket.
6. Buy smarter. Clip coupons, search the Internet for bargains and watch your Sunday paper for holiday sales.
7. Start buying now. If you purchase your gifts early and a few at a time, you'll be under less pressure closer to Christmas and less likely to overpay for an impulse purchase.
8. Avoid Starbucks. Instead of spending money on a $5 latte, save that money for Christmas gifts. You would be surprised how quickly the cost of self-indulgence adds up.
9. Buy gift cards. You typically spend less on a gift card than a present and the recipient can choose choose something they want.
10. Avoid the extras. Christmas is the time of year for "extras"...that one little extra decoration, the stocking stuffers, the last minute gift that seems so perfect. Refer to Rule No. 1 and Rule No. 2.

True friends and family don't want you be stressed or overcome by holiday debt. Spend wisely and without guilt.

About the Author: Carl H. Starrett II has been a licensed attorney since 1993 and is a member in good standing with the California State Bar and the San Diego County Bar Association. Mr. Starrett practices in the areas of bankruptcy, business litigation, construction, corporate planning and debt collection.

Who Will Know About My Bankruptcy?

Question: I want to file for bankruptcy, but I don't want my family or friends to know. Can they find out about my bankruptcy?

Answer: The documents in your bankruptcy case, like most court documents, are public record. The bankruptcy court will mail notice of the bankruptcy to your creditors, but there are also people who can find out about your bankruptcy through a variety sources.

People who will find out about your bankruptcy:

1. Your creditors, co-debtors and others that you choose to notify of your bankruptcy. Your attorney must list all of your creditors in your bankruptcy papers as well as any co-debtors. Anybody else that you choose to include in the mailing matrix will receive notice of your bankruptcy filing.


2. The major credit bureaus. The bankruptcy will send electronic notices of your bankruptcy to the major credit bureaus as well as Dun & Bradstreet. Even credit card companies that you don't owe money to can see the bankruptcy on your credit report.


3. Vendors and other advertisers. Vendors and advertisers can purchase mailing lists of new bankruptcy filings. Some debtors have reported receiving solicitations for credit counseling services or even credit card offers that appear to be taken from mailing lists purchased from the court.


4. Your ex-spouse. When the bankruptcy laws changed in 2005, a new provision was added that requires the Trustee to send a letter to the person receiving child support, advising of the bankruptcy, case number, filing date, creditor's meeting date and probable discharge date. This letter also gives the name and address of the state agency to contact if the child support does not continue being paid.

How people may find out about your bankruptcy case:

1. Newspapers. Some newspapers publish data on new lawsuits and new bankruptcy filings. Information such as the date you filed bankruptcy could end up in a local news .


2. Search engines. Some bankruptcy court websites publish court calendar information for upcoming cases. Search engines like Google might pick up this information and it could should up if someone ran a search for the debtor's name.


3. Courthouse records. Any member of the public can go to the court to review records for free or pay for electronic access to most bankruptcy court records. Some banks like Wells Fargo actively search these records to see if an account holder has filed for bankruptcy.


4. Your employer. While employers are not typically informed of a bankruptcy, a Chapter 13 trustee could request an earnings withholding order to your employer if you get behind on your Chapter 13 plan payments.

In most cases, friends and family will not find out about your bankruptcy unless you tell them or they happen to stumble across the information online. Nonetheless, the information is publci record and there is no way to prevent someone from discovering that you have filed for bankruptcy.

About the Author: Carl H. Starrett II has been a licensed attorney since 1993 and is a member in good standing with the California State Bar and the San Diego County Bar Association. Mr. Starrett practices in the areas of bankruptcy, business litigation, construction, corporate planning and debt collection.

Changing Banks Prior to Filing Bankruptcy

Debtors who have decided to file for bankruptcy should plan ahead to be ready for the short term consequences that might result. For some debtors, pre-bankruptcy planning may include closing bank accounts and moving their money to a different financial institution.

Reasons to switch to a different bank or credit union include:

• Avoiding having your bank account temporarily frozen. Some banks like Wells Fargo have a policy to place an administrative freeze on any account of a newly-filed Chapter 7 debtor with a balance exceeding $5,000. Other institutions like Union Bank are even more strict on this issue. One colleague told me about a case where Union Bank had frozen a debtor's bank account that contained only $16. In theory, the banks are protecting assets of the bankruptcy estate. In reality, this type of bank policy creates a huge inconvenience to customers and does little to preserve bankruptcy estate assets.

• Ending automatic withdrawals. Many debtors set up automatic withdrawals taken from their bank account to pay credit card bills. Even with the filing of a bankruptcy, there is not guarantee that automatic withdrawals will stop. It is easier to close a bank account than to get money back that a creditor improperly withdrew from your account.

• Avoiding set offs. Sometimes debtors bank with an institution that has also issued credit cards to them or provided other forms of credit. It is not uncommon for a bank to claim money from a debtor's bank account as a set off against other money owed by the debtor. Closing your account or keeping a low balance will minimize the risk of a claim of set off.

Debtors considering bankruptcy should avoid banking with Wells Fargo, Union Bank of California and any financial institution to which the debtor owes money. If a creditor does improperly remove money from your account after your bankruptcy is filed, contact your attorney immediately.

UPDATE:  Wells Fargo completed its purchase of Wachovia in December 2008.  I have heard from colleagues in other parts of the Wachovia is now engaging in this same practice, so debtors filing for bankruptcy should strongly consider moving their money from Wachovia before filing their case.

About the Author: Carl H. Starrett II has been a licensed attorney since 1993 and is a member in good standing with the California State Bar and the San Diego County Bar Association. Mr. Starrett practices in the areas of bankruptcy, business litigation, construction, corporate planning and debt collection.

Conducting a Financial Triage

Nearly every day, we are contacted by debtors desperately seeking help and answers: "Do I qualify for bankruptcy?" "Will I lose my house?" "Will bankruptcy ruin my credit?" "How long does bankruptcy take?"

Analyzing a debtor's bankruptcy options is like a doctor seeing a patient for the first time. Before the doctor can diagnose and treat a patient, the doctor gets a medical history and conducts tests. Once the test results are in, the doctor can recommend a course of treatment for the disease or condition. A bankruptcy attorney reviews the debtor's financial status, a financial "triage', and recommends a course of action to treat the debtor's financial ailments.

Every case is different. A debtor trying to get caught up on their house payments might be better off in a Chapter 13 bankruptcy. A debtor with limited assets and lots of credit card debt might be better off in a Chapter 7 bankruptcy.

In order to assess a debtor's global financial picture, we begin by asking potential clients to complete an online questionnaire that provides a bird's eye view of a debtor's financial situation. We also request the same types of documents that must be submitted to the court and the bankruptcy trustee to document the debtor's eligibility for bankruptcy. And finally, we conduct a detailed interview and consultation to assess the potential client's needs and goals so that we can create an orderly plan to assist the client.

In some cases, the debtor is facing an emergency that requires fast action such as a foreclosure sale, a wage garnishment or an eviction. Careful analysis of the matter is still required, but an experienced bankruptcy attorney can provide emergency assistance in appropriate circumstances. Our firm is nimble enough to take on emergency cases and can file bankruptcy literally 24 hours a day.

If you are in Southern California and would like more information about our bankruptcy services, please contact us.

About the Author: Carl H. Starrett II has been a licensed attorney since 1993 and is a member in good standing with the California State Bar and the San Diego County Bar Association. Mr. Starrett practices in the areas of bankruptcy, business litigation, construction, corporate planning and debt collection.