03 Nov 5 Things You Must Understand About Filing Bankruptcy
If you want the benefits of bankruptcy, keep in mind that it’s more than just telling your lawyer, “I’d like to file bankruptcy.” As Oscar said to office manager Michael Scott on the TV series “The Office,” “You can’t just say the word bankruptcy and expect anything to happen.”
You need to understand these important things:
1. Don’t expect your lawyer to do all the work. Bankruptcy–any chapter–is collaborative. You need to discuss things with your lawyer. She’ll ask questions. There may be a need for further information or documents. YOU will have to do certain things and provide certain information. Your lawyer does not drive your car, live in your house, or open your mail. And if you’re lazy, the process will be miserable. Your lawyer will fantasize about choking you like a rubber chicken at a hockey game–and for good reason. So get off the couch, open your mail, and get the information to your lawyer.
2. Don’t expect to file bankruptcy if your tax returns aren’t filed–especially when it comes to Chapter 13 bankruptcy. The bankruptcy system requires that your tax returns be filed. (For an in-depth look at this requirement for Chapter 13 bankruptcy, see “IRS to Chapter 13 Debtors: File Your Tax Returns by February 5!”)
The IRS gets a bad rap for being difficult to deal with; however, they’re a pretty reasonable creditor. I’ve never been treated rudely or unprofessionally by anyone at the IRS. But they want your tax returns filed.
Got a good excuse for not filing them? Doesn’t matter. Get them filed. It pains me to even listen to all the “dog ate my homework” excuses clients come up with for not having their tax returns filed. I know it’s a pain (for some at least), but it’s got to be done. Apply the Nike Doctrine: Just Do It!
3. Don’t hide things from your lawyer. This is a really stupid idea, so get it out of your head. I can’t tell you how many times I find out my client bought a car, or transferred an asset, or did something else without bothering to tell me. Here’s the tough love truth: It’s just a really bad idea. Don’t do anything without telling your lawyer! And NEVER hide anything from your lawyer.
4. Don’t expect that there will be no consequences from filing bankruptcy. Keep in mind that you’re getting out of a repaying a sizable amount of debt–at least in most cases. Don’t whine to your lawyer about why your mortgage company won’t report your payments on your credit report. You discharged the debt. You don’t owe it anymore. The lien remains, but the liability doesn’t. I mention this because it’s what many of my former clients complain about–especially those who unloaded a ton of debt by filing bankruptcy and feel entitled and indignant that their on-time mortgage payments aren’t getting reported. (See “Should You Reaffirm Your Mortgage?” for more on this).
There are some (relatively minor) side effects to filing bankruptcy. If you don’t want ANY side effects, then get out your checkbook and repay your creditors in full.
5. Read what your bankruptcy lawyer sends you. I can’t tell you how many times clients totally ignore my written instructions. If I, for example, tell you (in bold and in italics) that you need your social security card and driver’s license for your bankruptcy hearing, then you need those things. No, you didn’t just find out the night before your hearing when we reminded you (for the second or third time). You got a letter three weeks earlier but just chose not to read it. READ WHAT YOUR LAWYER SENDS YOU.
The bottom line here is that bankruptcy is WORK for you. You must, as some teacher probably told you, apply yourself. But if you do, the rewards are worth it!
Latest posts by Russell DeMott, Charleston Bankruptcy Lawyer (see all)
- Running on Empty: “What If I Can’t Make My Chapter 13 Payments?” - December 3, 2013
- 5 Things You Must Understand About Filing Bankruptcy - November 3, 2013
- Calling Your Bankruptcy Lawyer - October 3, 2013
- Filing Bankruptcy? Then Know Thyself! - September 4, 2013
- Reverse Mortgages as an Alternative to Bankruptcy - August 7, 2013