HOW TO STOP YOUR CREDITORS COLD!

Wipe Out Your Debts!

If you're afraid to answer the phone because your creditors have

been calling every night; and you're worried that one of them is

going to call your boss and tell him you're a deadbeat; and

just trying to pay off your bills leaves you almost nothing for

food - it time you thought about bankruptcy!

With a small amount of money, a lawyer (and even he's not

necessary a lot of the time), and a careful evaluation of your

assets (what you own) and your liabilities (what you owe), you

too can make a new start with the help of the Federal and State

bankruptcy laws. But don't rush into this without carefully

determining which is the right way for you, for there are

several different ways to stop your creditors cold, and choosing

the wrong way can result in your losing much more than you might

otherwise have to.

Straight Bankruptcy Usually Costs Less, and It's Quick!

If you have very few assets, and lots of debt, and not enough

income to pay the debts off, even on an extended plan (more

about that later), then you will probably have to file straight

bankruptcy. You must file the proper forms (or "schedules")

which you can purchase from any really good office supply

stationery store in your nearest city, especially one in a

district where there are lawyers' offices.

Bankruptcy is not a very complicated court action, so don't be

too afraid of it. You will need to know which district you live

in for Federal Court purposes; look in the telephone (white

pages) under U.S. Government - Courts, and locate the U.S.

District Court in your nearest city. Probably that court has

jurisdiction; but check this out by phoning the Clerk of the

Court and asking him, giving him you home address. You will

have to fill out several "schedules" or lists of your creditors:

creditors having priority, creditors having security, and

creditors having unsecured claims without priority. You must

list every creditor, for any one that is not listed can still

sue you and collect, even after the bankruptcy! If you don't

know if a debt is secured (backed up by a related asset, like

refrigerator bought on an instalment loan) or unsecured (made

only on your personal reputation, with no related asset), ask

the creditor. Include as a creditor the name of anyone for whom

you co-signed a loan or note, and anyone who co-signed for you.

What Will You Have Left?

Will you be put out in the cold without food, clothing and a

house to live in after your creditors get paid? Not at all -

because most State bankruptcy laws allow some of your assets to

be "exempt" from being used to pay your creditors! You must

check the specific laws of your State, but usually, the house

you live in, the tools of your trade, your personal clothes

(within reasonable limits) and certain specific basic home

furnishings are all not taken away from you. In fact, in this

totally absurd world we live in, many States now permit you to

also keep your TV set(!), because, apparently, they regard it as

a necessity for life!

Where to File

Once you have all the forms filled out and notarized, bring them

to the Clerk of the U.S. District Court in your district, along

with $50. You don't have to notify your creditors - the Clerk

does that, while also reminding them that now that you have

filed bankruptcy papers, they may not press you for any more

money, but may come to your hearing.

Usually your creditors don't show up, since by that time you

have filed bankruptcy, you have very few nonexempt assets left

that they are interested in. Whatever assets you do have that

are not exempt (if any) must be sold under the Court's

supervision. Any money thus realized is added to whatever cash

you may have had at the time you filed (if any) and the total

amount (which might be, and often is, as low as $50 or $750 is

divided up by the trustee appointed at your hearing and your

creditors get paid on a pro rata (proportional) basis to the

amount you owe them. If your assets add up to an amount that,

for example, only allows each creditor 3 1/2 cents for every

dollar of debt you owed them, then that 3 1/2 cents is all he

gets!

About three months after you have filed, you adjudged

"bankrupt". and you can start over again to incur, pay bills and

establish a new credit record. Be careful, however, about

talking to your old credits at this time. They may offer to

help you out by extending new credit, and manoeuvre you into

signing "reaffirmation" of your old debt! Ready anything you

sign very closely, and don't agree to repay any debt that you

have already discharged through your bankruptcy!

Lawyers for Complications

There are some people who should definitely hire a lawyer to

help them through their bankruptcies, especially people who have

assets like real estate that they want, somehow, to keep. Aside

from real estate, if you have been accused by any creditor of

fraud, you should also have a lawyer handle your case. If you

decide you don't need a lawyer to handle your bankruptcy, you

are still responsible for filling out all of the forms

accurately and completely, and every bit as carefully as if a

lawyer had done them. Leaving out a creditor's address from a

schedule, or forgetting a loan you co-signed can bring lawsuits

against you even after your bankruptcy. So be careful, and if

you find the bankruptcy process is too complicated, do see a

lawyer!

Keeping Your Assets Instead

If you've fallen behind in paying your bills, but you don't want

to declare straight bankruptcy, you may want to clean up your

financial mess instead through Chapter XIII of the Federal

Bankruptcy Laws. Also known as the Wage Earner Plan, Chapter

XIII differs from straight bankruptcy in two most important

ways: you must pay off the entire amount of your debts (no 10

cents on a dollar here), and within a 3 year period. but the

good part is you are not declared "bankrupt", so no one ever

knows that you needed relief under any part of the Federal

Bankruptcy Acts.

The major advantage of the Wage Earner Plan, besides not being

recorded permanently on your credit record, is that you get to

keep all your assets, exempt and non-exempt alike (assuming you

still have any left!). This is quite important, if, for

example, you have a good paid-up car, or expensive household

furnishings or a boat or other valuable assets that you want to

keep. Under Chapter XIII, you can get your current debts

"stretched out" to three years, which may well result in lower

total monthly payments than you are currently paying, and as

long as you pay off your debts in accordance with the agreement

files with the Court, month by month, no creditor will be able

to sue you to try to seize any other of your assets, and force

their public sale at disadvantageous prices.

Even if they have begin to sue you, once you file for relief

under the Bankruptcy Act, either under Chapter XIII or under

Chapter XI, straight voluntary bankruptcy, they can't touch you!

They are immediately restricted to getting from you only what

the referee or trustee will give them and that only after the

court proceedings have been completed. Often, if the creditor

threatens to sue you, the most effective thing you can do to

stop him (besides paying the debt!) is to tell him frankly that,

if he sues you, you have no other recourse than to declare

bankruptcy. This will often make your creditor willing to

negotiate the debt, and you may be able to satisfy him by paying

the debt back, but over a longer period of time (with smaller

monthly payments) than you originally contracted for.

Creditors know well that if you file bankruptcy, the chance of

their getting payment in full on their overdue account is very

low, so it is in their interest to try to ease your credit

burden at least for a while.

Make Yourself "Judgment-Proof"

If a creditor goes ahead and sues you, and gets a judgment

against you, he can then get a court order directing the sheriff

to seize your personal property, sell it and pay the creditor

the amount of your debt. However, if you have no valuable

assets, there is nothing for the sheriff to seize, and you are

what is generally called "judgment proof", or in other words,

can't be made to pay the debt. Because they know this is likely

to happen, street-smart debtors often hide their possessions, or

move them out-of-state, before the sheriff (or marshal) arrives.

This is, of course, illegal. The creditor's next move is to

try to "garnishee your wages, which he does by getting a court

order directing your employer to set aside part of your wages or

salary every pay period and turn the amount over to him.

However, he can only do this if he knows, or can find out, where

you work. But even if your wages are garnisheed, there are

limits on what a creditor can take! Laws vary from State to

State. In some states wages cannot be garnisheed at all while

in others only small amounts are exempt from garnishment.

If you have no job, and no visible assets, or you live in a

State where your wages cannot be garnisheed, your creditors

actually have very few ways of ever collecting on that judgment!

Harassment and Other Creditor Tools

Before your situation gets bad enough to need bankruptcy relief,

and before your creditors actually sue you, they will try to

make you pay up using informal techniques, rather than formal

court orders, as this is far less expensive and time-consuming.

First among these informal attempts may be turning their bills

over to a collection agency which may then begin harassment, by

calling you often and at odd hours by telephone, by trying to

talk to your employer about your debts, and/or by threatening

you with legal actions, etc. Many of these techniques that they

use are illegal! Yes, a creditor or agency can write you

letters, call once a day seeking payment, try to bring legal

action against you, but he is forbidden by law to harass you or

invade your privacy, or use deceptive means to get you to pay

your bills. He may not use foul and abusive language over the

telephone, tell anyone beside you the reason for his phone call,

insist on payment for a product or service that you claim to

have a legitimate grievance about, nor issue false threats (such

as saying that he is going to drag you into court to collect

$35, when in fact his agency's policy is not to file suit on

accounts of less than $100, because of the high legal costs

involved). He may not inconvenience you (by calling you at work

when you are not easily able to receive calls), or invade your

privacy (telling your employer or your neighbor that he is

trying to collect a debt from you).

There are books that provide detailed additional information on

personal bankruptcy, and include sample letters with which you

can try to arrange "stretch-outs" on your own with your

creditors before bankruptcy is necessary. Some include sample

bankruptcy forms filled out that you can use as a model. Since

the accurate filing of all your debts and assets is so

important, it's a good idea to follow their detailed

instructions closely, with or without a lawyer, so that once you

get your creditors off you back, they stay off!