Filing for bankruptcy is without question one of the most stressful periods of time in a person’s life. Unfortunately, society attaches a number of negative stigmas to personal bankruptcy leaving many debtors feeling insecure and devalued. Most people going through bankruptcy would rather keep it secret from their friends and family, and many debtors even experience severe emotional reactions to the stresses of bankruptcy.

But bankruptcy can be a good thing too. Not only for your wallet, but your emotions and health as well. All of the stress that comes with piles of debt and harassing creditors can cause serious health concerns for many people. Filing bankruptcy provides much needed financial and emotional relief. Most people feel a heavy burden lifted from their shoulders after filing their bankruptcy paperwork. And the day you receive your discharge paperwork, it can feel like a second chance at creating a debt free and financially healthy life.

Without question there are a lot of different emotions one goes through during a bankruptcy, but it’s important to keep your emotions separate from the bankruptcy process. Too many times people make emotional decisions regarding filing bankruptcy. Its all too common for homeowners to come to attorneys seeking bankruptcy information in an effort to save their home, the same house they have two mortgages on, owe more than the home is worth, and have all around negative equity in. Why do they even want to keep this house? It’s usually because of an emotional attachment to the home they can’t seem to shake. Often times they even know reaffirming their mortgage is a bad idea. I only share this story to illustrate how important it is to separate your emotions from the business of bankruptcy.

It’s also important to understand that millions of Americans go through the same process each year. Chances are, at least one of those friends or family members you don’t want to know about your financial troubles has gone through a bankruptcy themselves. But there is one person who you should never hide any aspect of your financial affairs from, your bankruptcy attorney. Your bankruptcy lawyer has been there before and it’s important to share everything with your attorney about your financial affairs. Talk with your attorney about your feelings and concerns, and listen to his input, as seasoned professionals who understand the bankruptcy process and how to get you back to a financially manageable life (after all that is the main goal of any bankruptcy) he will know what works and what doesn’t.

And most of all, remember there is a light at the end of the tunnel. Filing bankruptcy can help reduce all that stress and helplessness that comes with uncontrollable debt, putting you on the track to financial freedom.

One of the most important things you can do as you prepare to file bankruptcy is to stay well organized and keep exact records of all your financial dealings. These documents and expenses are used by the court to determine your financial capacities and what forms of bankruptcy protection you are eligible for.  In simple terms, saving all your receipts is a must when filing for bankruptcy protection. This is because like any other area of law, a bankruptcy hearing requires evidence; evidence in the form of financial documentation.

According to the US Bankruptcy Code Section 727, a bankruptcy discharge can be denied if a debtor has “concealed, destroyed, mutilated, falsified, or failed to keep or preserve any recorded information” that might be used to ascertain the debtor’s financial situation and standing. In other words, the trustee is going to examine all of your assets and expenses. Failing to adequately record and document your financial transactions can create all kinds of problems in a bankruptcy case, ranging from having an expense disallowed in your budget to having your entire bankruptcy case tossed out for failing to adhere to Section 727.

While preserving receipts for all your transactions should go without mention, it happens more often than one might think. Common problems that can arise in bankruptcy filings stem from debtors paying rent with cash, to even handling smaller expenses without receipt such as childcare fees, charitable donations, and even loans. Debtors who pay rent or the nanny with cash (especially to relatives or friends) risk the appearance of “fraudulent transfer” which if suspected can be disastrous on a bankruptcy hearing.

The best practice in any situation, but especially leading up to bankruptcy is to collect receipts for all your expenses, large or small, and let the trustee determine which are meaningful. Always create documentation for loans, even if the loan came from a family member. Otherwise the loan could be included as monthly income and affect your means test score. Keep copies off all your bank statements as well, and be sure to provide all your receipts and financial documents to your bankruptcy attorney prior to the filing date. And of course, if you are unsure about whether or not to include an expense or receipt consult with your attorney beforehand.

In summary: Make sure to put everything in writing before filing for bankruptcy.

If you find yourself considering bankruptcy chances are you also find yourself struggling to manage a pile of debt. For many, bankruptcy is the best way to get out from underneath that pile of debt and get started on a path to developing healthy financial habits. However, for some bankruptcy may not be the best method for financial recovery. In these instances debt settlement becomes a viable candidate for developing a secure and healthy financial future.

Debt settlement can be a good alternative to bankruptcy, and judging by the number of debt settlement companies out there many people are choosing to go this route when rectifying their finances. Furthermore these debt settlement companies present the process as simple and painless for the consumer. All their promises make debt settlement seem like the perfect remedy.

But there is a problem with the debt settlement industry; lack of regulation. There is no oversight on debt settlement companies and that makes for problems. Plenty of people have thought they were receiving welcomed financial relief only to be ripped off. Furthermore debt settlement companies cannot offer legal help. When dealing with these companies a suitable adage is “buyer beware.”

In fact, the problems surrounding the debt settlement industry prompted the Federal Trade Commission (FTC) to place a ban on advanced fees for debt settlement companies just earlier this year. In addition to banning companies from charging advanced fees the modified rules also now require companies to estimate the length of time and amount of money required to pay off a consumer’s debts. The FTC also barred these companies from exaggerating success rates and using other devious marketing tactics.

In a statement to the media FTC Chairman Jon Leibowitz stated, “Too many of these companies pick the last dollar out of consumers’ pockets. Far from leaving them better off; (they) push them deeper into debt.” The attention of the FTC and subsequent announcement shows a downright scary trend among debt settlement providers.

Sure there are a few bad apples in every industry and I’m sure if you tried hard enough, you could find an unscrupulous practicing attorney. However, attorneys have something generally preventing them from cheating their clients; disbarment. No attorney I know would be willing to risk years of schooling and practice to make a quick buck off those who have fallen on hard times. The oversight and regulation held upon the legal community keeps most predators at bay and protects legal consumers.

A good way to determine if you should look at debt settlement over bankruptcy is to budget first. Make a table listing all of your expenses and debts. Be realistic in the amounts you can afford to pay. Generally speaking it takes a one time payment of between 40 and 60% of the amount you owe for a creditor to settle the debt. Some debts can be negotiated to as little as 15%.  If you can save this kind of money while still maintaining enough income to cover your basic living expenses debt settlement might work for you.

The best way to determine if debt settlement is the best option for you is to speak with a bankruptcy attorney first. By nature bankruptcy attorneys are experts in negotiating with creditors and settling debts. After all, communicating daily with creditors and lenders about outstanding debts is a large part of the business. As a result bankruptcy attorneys know when a settlement makes sense and when it doesn’t. Many times a bankruptcy lawyer can even negotiate with lenders on your behalf.

However if you do choose to work with a debt settlement company, make sure to do your homework. Check with the Better Business Bureau and speak with local non-profit help organizations about the company. Don’t simply trust your money to anyone claiming to reduce your debt by 80 percent. It’s important to protect yourself, and if you need legal advice about your finances always seek the help of an attorney.

A recent news article in the Arizona Republic paints a grim outlook for those facing foreclosure in the coming months. While the article doesn’t deal directly with bankruptcy law it does deal with some of the major contributing factors considered when determining whether or not bankruptcy is a viable option. The article discusses how foreclosures in the Phoenix area dropped to a new 32 month low in November, but warns homeowners that the relief to the plummeting housing market is only temporary as experts attribute the new lows to foreclosure moratoriums put in place by the valleys biggest lenders led by Bank of America.

Bank of America pushed back over two months worth of foreclosures to revise internal policy and counter claims involving “robo-signing” of thousands of mortgage documents without first reviewing them. The article goes on to point out that starting in early 2011 Bank of America will have 2 months and over 8,000 foreclosures to catch up on in Phoenix alone. The ultimate message if you are sitting on the verge of foreclosure; be prepared for paperwork early next year. If you didn’t have a chance to read it you can catch the article here.

The question poised by many homeowners staring at foreclosure is; which is the better option, foreclosure or bankruptcy?  Here are so facts to consider:

Bankruptcy Can Halt the Foreclosure Process

For many homeowners facing foreclosure bankruptcy can help. When your bankruptcy attorney files for bankruptcy, whether it’s Chapter 7 or Chapter 13, the court will automatically issue an Order for Relief including an Automatic Stay. The Automatic Stay provides immediate relief for debtors by requiring creditors to immediately cease all collection activities while the bankruptcy is pending. This includes any attempts to foreclose on a house and evict the tenant.

The Automatic Stay stalls the foreclosure process and typically buys individuals three to four months to catch up on missed payments and reorganize their finances. However, Order of Relief doesn’t permanently put a stop to the foreclosure. Home lenders can ask the court for to lift the stay during the bankruptcy process, especially if the homeowner had been served with foreclosure paperwork prior to the bankruptcy filing date. Your bankruptcy attorney is the best source for information on whether or not your bank is likely to seek a lift on the Automatic Stay.

Bankruptcy Can Keep You in Your Home

Not all forms of bankruptcy can offer complete protection from foreclosure. For example, Chapter 7 protection can delay foreclosure, but inevitably results in the liquidation of most all assets. As a result those filing a Chapter 7 bankruptcy almost always lose their home.

Chapter 13 is more effective at helping borrowers keep their homes. Through Chapter 13 lenders are able to make payment plans to repay the arrearage on their mortgage. There are financial qualifications to ensure you are able to make suitable payments for both your current mortgage as well as the outstanding amounts, but assuming you are able to make all the necessary payments you will avoid foreclosure.

Chapter 13 can also provide relief by potentially eliminating second and third mortgages. Home values have fallen to record lows, and many home owners in the Phoenix area now owe more on their original mortgages than the value of their homes. When the first mortgage is secured by the entire value of a home, there may no longer be equity to secure the later mortgages which may change the status of second or third mortgages to unsecured debt. In Chapter 13 bankruptcy unsecured debt takes last priority and often times does not have to be repaid at all.

Bankruptcy May Lessen the Impact on Your Credit

It’s important to acknowledge that both foreclosure and bankruptcy have adverse impact on your credit standing. However, bankruptcy can be the better option for rebuilding credit. First, bankruptcy discharges most all debt while foreclosure does nothing to reduce credit card, auto loan, or other forms of debt which may have contributed to the overall financial crisis one may be experiencing. By filing bankruptcy you are able to start rebuilding healthy credit quicker. Additionally many banks and mortgage lenders look particularly unenthusiastically upon foreclosures and may be more understanding of a bankruptcy when considering an application for a home loan. Even if you are faced with no alternative to losing your home bankruptcy may be the more effective route.

There are many factors I haven’t presented here which need to be considered when looking at bankruptcy versus foreclosure. Among them are the value and equity of the home, the ability to make timely payments and more. If you are facing possible foreclosure and want to learn if bankruptcy could be a more suitable option for you, the first thing you should do is schedule a consultation with a bankruptcy attorney to review the individual merits of your case. Each bankruptcy is unique and working with an experienced bankruptcy attorney who understands the laws surrounding bankruptcy is pivotal to getting back in control of your financial future.

The timing of the date for filing bankruptcy is important.  You have a small exemption of $150 per debtor for money in your bank account on the date that your bankruptcy is filed.  There is no exemption for cash on hand.  If, on the date your bankruptcy case is filed, you are holding a pay check that was not deposited or any other payment instruments such as cashier’s checks or money orders, the trustee could require that you turn them over to pay something to your creditors.  The trustee is entitled to take any sum over $150 in your bank account for the benefit of your creditors.  The trustee will require that you provide them with a copy of your bank account which shows the sum in your account on the date your bankruptcy was filed.  If possible, you should bring that bank statement with you to the Meeting of Creditors (Sec. 341 hearing) which is usually scheduled approximately 35-45 days after your case is filed.  This is only possible if your bank has issued a bank statement prior to your hearing date prior to your hearing date.

Part of the process of preparing for filing bankruptcy includes monitoring your bank account so that the amount in your account ON THE DATE YOUR BANKRUPTCY CASE WAS FILED will not exceed the amount which is exempt under the law ($150 per debtor if you are using Arizona exemptions).  The following steps should be taken to help you avoid losing money that could have been used to pay your bills:

• Stop using checks to pay bills at least 2 weeks prior to filing bankruptcy.  Remember you have no control over when the payee will cash or deposit your check and if the check has not cleared your bank, the bank will report exactly what was still in your bank account.  It is not wise to simply write checks which are sent out to various payees because the checks may take from several days to several weeks to clear the bank.  Until the checks are actually paid by your bank, that balance is still counted as being available to you in your bank account.  Thus if you were to file bankruptcy at a time during which you have several outstanding checks, the trustee will be entitled to take that amount over $150.  Then when the outstanding checks are presented to your bank, you will have overdraft fees or bounced checks.
• Purchase money orders or cashier’s checks to pay your regular bills or buy groceries, gasoline etc.  This will result in an immediate debit to your account and also provides a convenient receipt.  However, don’t hold the money orders or cashier’s checks; send them out via mail before the date your bankruptcy case is filed.  If you still hold them, it may be possible for you to get cash by seeking a refund from the issuer.  There is no exemption for cash on hand when filing bankruptcy.
• If you use debit cards to pay for anything, the money will come out of your account more quickly than when paying with a paper check; however, it doesn’t happen instantly so be careful to monitor your account during the last few days before filing bankruptcy.
• Schedule the date for filing the bankruptcy case on a date just prior to your next pay day so that your pay check is not deposited just before your bankruptcy case is filed.
• If a large deposit has been made to your account shortly before filing your bankruptcy, the trustee may ask you to document how that money was spent.  You may be asked to provide receipts for the items you purchased or even a list of what you purchased.
• You can monitor your account and purchase money orders or get cashier’s checks for the bills you have to pay and send out those money orders and cashier’s checks prior to the date your bankruptcy is filed.

 Bankruptcy is one of the most difficult decisions an individual ever has to make.  Before making a decision on whether or not to file for bankruptcy, an individual should talk to an attorney and explain his or her situation.  According to http://www.daveramsey.com/article/the-truth-about-bankruptcy/ <http://mail.ssrl.com/exchweb/bin/redir.asp?URL=http://www.daveramsey.com/article/the-truth-about-bankruptcy/> , bankruptcy is not something that he would recommend any more than he would recommend a divorce.  Few people who have been through bankruptcy would report that it is a painless wiping-clean of the slate, after which they just start fresh.  Bankruptcy is listed as one of the top five life-altering negative events that a person can go through along with divorce, severe illness, disability, and loss of a loved one.  Bankruptcy leaves deep wounds both to one’s credit report and to one’s psyche. 

            According to http://www.debtconsolidationcare.com/avoid-bankruptcy.html <http://mail.ssrl.com/exchweb/bin/redir.asp?URL=http://www.debtconsolidationcare.com/avoid-bankruptcy.html> , there are seven reasons to avoid bankruptcy.  One, an individual’s credit is badly hit if that person files for bankruptcy.  Two, an individual may lose their property.  Three, not all of an individual’s debts can be eliminated.  Four, creditors and lenders of an individual may repossess property.  Five, bankruptcy has an adverse effect on an individual’s other finances such as buying a house, renting a home, or buying a car.  Six, an individual may not qualify for a secured loan for at least 2-4 years.  Finally, not all retirement plans are protected, if an individual files for bankruptcy. 

            Remember, there are a lot of benefits to filing bankruptcy, if a person has no other option.  However, a person who is contemplating filing for bankruptcy has to consider the negative effects of filing for bankruptcy. 

            According to http://www.financial-edu.com/why-should-you-avoid-bankruptcy.php <http://mail.ssrl.com/exchweb/bin/redir.asp?URL=http://www.financial-edu.com/why-should-you-avoid-bankruptcy.php> , there are four good ways to avoid bankruptcy.  One way to avoid bankruptcy is to do debt consolidation.  Another way to avoid bankruptcy is through individual voluntary arrangements which enable an individual to reach a compromise with their creditors and avoid the consequences of bankruptcy.  Third, an individual could use counseling services from many free organizations for effective debt management.  Finally, an individual has the option to sell off everything, including their valuable assets, to pay off their various debts.

Planning for bankruptcy in Arizona can get tricky.  Here are some tips to follow.

1. Do continue to make payments on vehicles which you intend to keep. Read More.
   
2. Don’t borrow from or withdraw 401K, IRA, and ERISA qualified savings and retirement plans to pay bills.  Read More.
3. Don’t borrow money on your home to pay unsecured debts such as credit cards, utilities, debt on surrendered or repossessed vehicles or medical bills.  Read More.
4. Do give “friendly” creditors a security interest in non-exempt property.  Read More.
5. Don’t pay $600 or more to relatives or business associates who have lent you money. Read More.
6. Don’t use your credit cards when you know that you are planning to avoid paying them through bankruptcy.  Read More.
7. Don’t put property you own into someone else’s name to avoid it being taken by creditors or the trustee. Read More.
8. Do close bank accounts where you owe money.  Read More.
9. Do reduce the amount withheld from your pay for taxes.  Read More.