10 things you should know before filing bankruptcy

Think bankruptcy is the solution to all of your debt? Here are the pros and cons of filing as well as some alternatives to consider.

circumstances. Grundy and Johnson- Parker say they hold in-depth debt-assessment sessions with potential filers before they become clients. “I conduct a free initial consultation,” says Grundy, “during which I sit down with debtors and get a rough picture of their debt situation.” There is also a lot of explaining to do before the filing. “For instance, if you purchased a car, never made a payment and then filed for bankruptcy, you can bet that creditor is going to want that property back,” says Grundy.

After talking things over with clients, Grundy then lets them “go home and think over their decision. If they want to become our client, with an education bankruptrupcy and a list of the information we’ll need to file a petition for them. All the while it’s continuous counseling.”

Unfortunately, an attorney specializing in consumer bankruptcy may prod you to file even when there are alternatives. Our two examples at the beginning of this article, Kim and Keith, both paid a flat $700, a fair market price, for legal advice. Still, their attorneys failed to take the positive step of counseling them on whether to file. To avoid being railroaded into a bankruptcy filing you might well have avoided, call your local bar association for help in finding a reputable attorney. Depending on where you live in the U.S., expect to pay anywhere from $500-$1,200 for a basic Chapter 7 bankruptcy. But keep in mind that other factors may drag out the time the lawyer may spend on your case. For example, his or her efforts to fight off a creditor could mean extra billings above the basic fee. You should find out upfront what extra costs may be involved, and work with the lawyer to anticipate any extraordinary circumstances.

If you’re concerned about the costs of a bankruptcy proceeding, you might seek out free or low-cost legal services. Filing for bankruptcy is your constitutional right, one that many organizations and city agencies help fund through programs they offer for those that qualify. “Bankruptcy is an option that’s always been there for people who can afford a lawyer. Now firms that provide pro bono services are seeing an increase in demand for such services,” says Julia Gordon, deputy director for the National Association for Public Interest Law in Washington, D.C.
To determine the kind of help you’ll need, contact a credit counselor through the National Foundation for Consumer Credit (800-388-2227). Another avenue is a service like Tele-Lawyer (800-835-3529), which lets you speak with a lawyer who specializes in your topic or situation. The cost is $3 a minute.

Filing for bankruptcy is by no means an irrevocable act that binds you to a course of action, particularly if your circumstances change. Experts say you’ll have plenty of time to back out before your court date, even if you’ve already filed a petition. Putting a halt to the proceedings is simply a matter

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