I filed Chapter 13 bankruptcy a few months ago. I have been documenting the experience to share with the people who will find themselves in need of this information in the next few years. It's not a topic for casual conversation for most people, and the web is rife with e-books, courses, services and other junk.
I'm not an attorney, and I won't offer any advice, and don't intend this narrative to persuade you to take any particular action or opinion. This is just my experience, and of course my own particular perspective will shade it.
The story begins in 2005, when a business failure coincided with family illness and other non-financial problems. We struggled to cover our bills by selling personal possessions - furniture, TVs, a timeshare, tools, sporting goods and more. Finally, in early 2006, my husband found a job. By then we were more than 6 months behind on our credit card account payments, and struggling to get the mortgage and car payments paid no more than a month late. Relatives were giving us food, and I had become depressed to the point of thinking and talking about suicide.
The financial situation was complicated and worsened by my depression. I felt unworthy; incapable of making a decision, frustrated by my inability to find work while at the same time conflicted about actually having to give up self-employment and find a job again. And this, my friends, was the problem. Without some element of faith that I could feel better, I was hopeless and self-defeating. Until I found the means to believe in myself again, I was unable to move away from failure.
Happily, I did find a way out of my depression, and the answer was within myself. If you are feeling like I was, there is an answer, inside you, and your mission will be to find the way to connect with it. This article is not intended to help you find that answer. The path is different for everybody, and it may lie in religion, renewing physical activity, meditation, intellectual pursuits, or a combination of some of these, or something else entirely. You'll know it when you find it, and if you listen, it's probably already calling to you.
Exploring Credit Counseling/Credit Management Options
Two weeks prior to my husband's return to work, I started believing that we'd find a solution to our situation. Up to this point I had been screening caller IDs, allowing the answering machine to take all calls from bill collectors. I began talking to some of the bill collectors to see if there was any way I could negotiate my way out of this situation, but it was really serious. I was beginning to get court notices that we were being sued by some of the credit card companies. Just when we had a paycheck to rely on, we faced the possibility of garnishments!
So, I wrote down the toll-free numbers of various credit help organizations I saw advertised, and made some calls. I decided to work with a debt management company, who would act as intermediary with all my creditors and attempt to set up payment arrangements that I could afford. I had to go through my income and budget with the counselor, and provide details of all debts.
This exercise forced me to get organized and stop avoiding the facts and details of the situation. I created charts and lists of my debts and their respective collection agencies, and faced the bottom line. I was appalled that what might have started as about $35,000 of unsecured debt had now climbed up to over $55,000, due to all the interest and late charges! Unfortunately it wasn't finished compounding.
During the month in which the credit management company was involved, the calls decreased but didn't stop. It turned out that there were a few of my accounts that would not work with them, and they were not attorneys and couldn't resolve the 2 lawsuits.
The monthly payment, even though it was not comprehensive and didn't cover all our outstanding debts, was more than we could come up with in a month, at that point. We came to realize that it was time to look into filing bankruptcy.
Bankruptcy, the Last Resort
I decided to look in the phonebook for a local bankruptcy attorney. That was highly confusing, and I wasted a good bit of time making calls, leaving messages, and learning that it was corporate bankruptcy they did, not personal. I finally went online and clicked on a Google ad for Total Bankruptcy. This site offered to connect you with a bankruptcy attorney for your area, if you fill out required info. I decided to try it and divulged all my detailed personal financial data.
I received back an email reply that a particular attorney would call me during the time window I had selected, the next morning. He actually called me back within an hour of my completing the inquiry, and cordially offered to wait and call again later, or talk now if I had time. Since this was fresh in my mind, I liked the momentum, and asked him all the questions I could think of. He was very direct and detailed and I felt very comfortable, so I decided to work with him then on the spot. He was from a city over 50 miles from my home, but he assured me that we could do everything by email and fax, and if I wanted to meet him, we could arrange to meet halfway. The Federal Bankruptcy Court location was halfway between us, so it was quite workable.
Because of certain property that we wanted to keep, and because we believed we could afford to keep our house and vehicle, we elected to file chapter 13, in which we would have to make monthly payments based on a means test and our assets and debts. This is all I can really say about that without getting into the kind of info a lawyer knows, so I'll leave it at that.
In order for my attorney to draft the Bankruptcy Petition, I had to provide details of my possessions, debts, income, etc. For details on that process, I write more about it here: http://www.happy-after-bankruptcy.com/steps-to-filing-bankruptcy.htm
The draft of the petition was 40 pages long, and he sent it to me in a .pdf file via email about 2 weeks after I gave him all of the information.
Old Law - New Law
Now, I can't really speak about the old law versus the new law when it comes to the October 2005 Bankruptcy Reform Act, except for one thing. There is now a requirement for credit counseling from a service approved by the US Dept. of Justice. http://www.usdoj.gov/ust/eo/bapcpa/ccde/index.htm
This link can take you to all the approved services.
The credit counseling was the biggest waste of $49.95 that I have ever spent, and a waste of 2 hours of my time, as well. I essentially had to input all of the same info I provided to my lawyer (see above) into slow-loading on-line forms, then I had to participate in a phone conversation with a "credit counselor", who just repeated the information we'd submitted. There was no value whatsoever added to my understanding of my finances, credit, or anything else. Enough about that.
As soon as we made the decision to file, I gave all my creditors the attorney's name and contact info, and they stopped calling! It was wonderful. The mortgage company and the auto lease company required a case number, but that was provided within days of filing the petition. All contact stopped.
This is where a word of caution is in order. There were 2 accounts we needed to keep paying, and they stopped sending us bills. They also disabled our on-line bill payment access. So, all of a sudden, we had no routine method of making payment. Without any contact it was easy to let a couple of months slip by, and as I was mailing checks, they were preparing a "Motion for Relief from Stay". My attorney said this was common, but I wish I had known about it and avoided it.
Part of my Chapter 13 filing included a plan to pay off the amounts I was liable for, after the means test had been addressed. I had to make monthly payments to the Bankruptcy Court Trustee, using certified funds. These payments actually started prior to any hearings or court appearances. They were calculated based on my income, and would continue for 36 months, or until all amounts due under the plan were satisfied.
Going to Court
A part of the process of filing bankruptcy involves going to the Federal Bankruptcy Court location - at least once in most cases. The first required appearance for me took place 5 weeks after we officially filed. It was called the Section 341 Meeting of Creditors. This served 2 purposes: the Bankruptcy Trustee took a number of statements from us after checking our photo ID, and these statements were sworn to and notarized, and our conversation was recorded. Also, this was an opportunity for our creditors to appear in person to make claims against us. In our case, no one else showed up. We arrived early and were first to meet with the Trustee. It was over in about 20 minutes.
Roughly a month after the Section 341 Meeting, the hearing took place to confirm our Debtor's Chapter 13 Plan - which was essentially the payback arrangement. Our lawyer stated that we didn't have to both be there - it would look better to the court if one of us did attend, but neither of us were required. I decided to attend, and this time I had to wait for my case to be called on the docket. I had time to observe hear the discussions related to the cases before mine.
What an eye-opening experience. There were people who had multiple criminal charges and/or civil lawsuits filed against them, complicating their bankruptcy filing. There were people (not present) who hadn't been in touch with their lawyer for months, and the lawyer was representing them blind. There were people with injuries and health problems that were seriously complicating their financial situation. When my name was called, my lawyer told the judge that I was current in my Chapter 13 Plan payments, all was in order, and my plan was approved. It took about a minute.
This 40-minute period in court, waiting my turn, served me very well in emphasizing that I could be so much worse off than I am! I spent most of my drive home really counting my blessings.
Right now I am working on moving forward to get back on my financial "feet". Looking back over the past year, I'm relieved to know that there is a system in place for dealing with my debts, and that I can face the future feeling like I have a fresh start. I will continue to document my experience on my site, and invite you to read my articles, as my future unfolds.