Deciding to file for bankruptcy is a major decision that an individual faces.  A hasty decision is never a good idea.  It is usually always a good idea to talk with an attorney so that the individual contemplating bankruptcy has a better understanding of the process, regardless of whether or not that person decides to actually hire the attorney.  You can learn more about all the people involved in a bankruptcy.

The first question that individuals usually ask is how can I afford an attorney if I am filing for bankruptcy?  According to http://www.bankrate.com/brm/news/debt/20070615_bankruptcy_cost_lawyer_a1.asp, there are five ways one can reduce the cost of a bankruptcy attorney.  First, a debtor should add attorney payments to the bankruptcy case.  Debtors can stop making payments on certain debts, such as credit cards, in order to pay for a bankruptcy lawyer.  Second, look for reduced fees and pro bono attorneys.  Many attorneys have free consultations.  Third, limit the scope of the legal representation.  Limited scope of legal representation allows an individual to go to an attorney and have the attorney represent you on only part of your case.  Fourth, another possible route is free legal help.  An individual should ask if their local Bankruptcy Court has a pro se desk.  Finally, there are other resources out there that can be used to help an individual through the bankruptcy process.

The second most frequently asked question is how much do attorneys charge to file a bankruptcy?  According to http://www.ehow.com/about_5318883_much-do-attorneys-charge-bankruptcy.html, each attorney has a different way of charging for a bankruptcy.  Some will charge by the hour and some will charge a flat fee.  However, some will ask for a retainer with the rest of the payment to follow.  In addition to attorney charges, additional fees come about in a bankruptcy that you need to be aware of when choosing a bankruptcy lawyer.

According to http://www.bankruptcylawnetwork.com/2007/06/29/how-do-i-pay-my-bankruptcy-attorney/, most bankruptcy attorneys will offer the option of paying fees in installments, and in many cases an attorney can advise the prospective client how to restructure debt payments in anticipation of bankruptcy in order to free up enough money to pay the fees.  The best tip is to look for a bankruptcy lawyer who offers a free or low cost initial consultation, and get the attorney’s advice.

Bankruptcy is a huge decision for a person in debt.  The question becomes for that person, when does filing for bankruptcy make sense?  According to http://www.investopedia.com/articles/pf/08/bankruptcy-filing.asp#12870097117542&close <http://mail.ssrl.com/exchweb/bin/redir.asp?URL=http://www.investopedia.com/articles/pf/08/bankruptcy-filing.asp%2312870097117542%26close> , there are a few circumstances in which filing for bankruptcy can be beneficial.  The first is if the debtor has already tried to negotiate with their creditor.  If a debtor has tried to negotiate with a creditor and they have not been successful, then a debtor might have no choice but to file for bankruptcy.  Second, if their liabilities exceed their assets, a debtor may have no choice.  The major reason that debtors file bankruptcy is because they cannot pay their debts.  The third reason that filing might be right is if a debtor is trying to keep their IRAs.  The federal bankruptcy laws shield a debtor’s retirement accounts.  A debtor might want to consider filing bankruptcy to protect these accounts.

Deciding whether to file bankruptcy or not is a personal decision.  According to http://consumer.abi.org/consumers/should-i-file-for-bankruptcy <http://mail.ssrl.com/exchweb/bin/redir.asp?URL=http://consumer.abi.org/consumers/should-i-file-for-bankruptcy> , some people find it helpful to file a bankruptcy case when they cannot pay their bills and they do not anticipate having the ability to pay their bills in the near future.  Other people file because their financial situation is causing them emotional distress or depression, or because they would like to free themselves of debt now, if legally allowed, and have their income and assets to themselves in the future.  Some people may find that bankruptcy is worth it even if they do lose some of their assets.

There are no set rules as to when a debtor should file for bankruptcy.  It is a personal decision and only the debtor truly knows if bankruptcy is right for them.  According to http://www.bankruptcyhq.com/bankruptcy-should-i-file <http://mail.ssrl.com/exchweb/bin/redir.asp?URL=http://www.bankruptcyhq.com/bankruptcy-should-i-file> , studies suggest that bankruptcy may be right for a debtor in any of the following scenarios: the debtor has a large number of dependents, the debtor is older in age, the debtor has a large amount of dischargeable debt, or the debtor has a small amount of savings and assets. These are all important things to consider in deciding whether to file for bankruptcy, but each debtor must weigh the pros and cons based on their individual circumstances.

Considering Bankruptcy?

IF A BORROWER SELLS HIS HOME IN A SHORT SALE WILL THERE BE A TAX ON THE FORGIVEN DEBT?

Although I do not offer tax advice and will refer questions regarding tax liability associated with any transactions to a CPA or tax attorney, it is well known that a short sale of one’s personal residence does not result in taxes on the forgiven debt.   The Mortgage Debt Relief Act of 2007 [PL 110-142 (Dec. 20, 2007)] would probably apply.  The IRS web-site (http://www.irs.gov/individuals/article/0,,id=179414,00.html) indicates there is no debt forgiveness on a “non-recourse” loan (see IRS Publication 4681, p.11 updated Dec. 11, 2008).  In Arizona a purchase money loan for a residence, even if it is not your residence but is used as a residence by a tenant you rent to, is a non-recourse debt because of the Arizona anti-deficiency statutes (see A.R.S. Sec. 33-729(A).  Remember that this information is not a substitute for competent legal advice after an attorney is able to review your entire financial situation.