A SurvivAl Guide

A Su rv i va l

Guide

to Pre-Bankruptcy

W h at You S h o u l d K n o w b e f o r e You f i l e for Ba n k r u p t c y

Material adapted from Mitchell Allen's A Survival Guide to Debt

This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher and author are not engaged in rendering legal, accounting, or other professional services. If legal advice or other expert assistance is required, the services of a competent professional should be sought.

Published by Greenleaf Book Group Press P.O. Box 91869 Austin, TX 78709

Copyright ?2010 Mitchell Allen All rights reserved under all copyright conventions. No part of this book may be reproduced, stored in a retrieval system, or transmitted by any means, electronic, mechanical, photocopying, recording, or otherwise, without written permission from the publisher.

Distributed by Debt Education and Certification Foundation For ordering information or special discounts for bulk purchases, please contact Debt Education and Certification Foundation at Booklets@debt-.

Design and composition by Greenleaf Book Group LLC Cover design by Greenleaf Book Group LLC

Part of the Tree NeutralTM program, which offsets the number of trees consumed in the production and printing of this book by taking proactive steps, such as planting trees in direct proportion to the number of trees used:

Printed in the United States of America on acid-free paper 10 11 12 13 14 15 10 9 8 7 6 5 4 3 2 1 First Edition

Contents

Introduction 1 First Steps to Fixing the Problem 4 Delaying Foreclosure 5

Stalling Repossession 6 Dealing with Creditor Calls and Mail 7 Consumer Protection 10

The Fair Credit Reporting Act 10 The Fair Debt Collection Practices Act 12 The Fair Credit Billing Act 12 Taking Stock 14 Monthly Cash Flow Statement 14 Types of Debt 17 Your Situation, Your Strategy 22 Handle the Debt on Your Own 22 Credit Counseling 28 Debt Settlement 30 Personal Bankruptcy 32 Bankruptcy Myths and Facts 33 Myth: Bankruptcy Is for Irresponsible People or Losers 33 Myth: Bankruptcy Is for People Who Are Flat Broke 34 Myth: Bankruptcy Results in Losing Everything 35 Myth: I Will Never Recover from Bankruptcy 35 Myth: Filing Bankruptcy Will Cause Me to Lose My Job 36 Fact: Bankruptcy Makes Creditor Calls Stop 37 Fact: Bankruptcy Halts Foreclosure 38 Fact: Bankruptcy Allows You to Keep Certain Assets 39

iv Debt Education and Certification Foundation

Fact: Bankruptcy Can Give You a Fresh Start 39 Fact: Bankruptcy Is Not an Immediate "Clean Slate" 39 Fact: Bankruptcy Cannot Relieve You of Certain Obligations 40 Chapter 7 Personal Bankruptcy: Liquidation 42

1. Analysis of Your Financial Affairs 43 2. Talking with an Attorney 43 3. Completion of an Approved Credit-Counseling Course 45 4. Filing the Case with the Court 45 5. The 341 Meeting (Creditors' Meeting) 46 6. Pre-discharge Debtor Education Course 47 7. Discharge 47 Chapter 13 Bankruptcy: Reorganization and Repayment 48 1. Analysis of Your Financial Affairs 49 2. Talking with an Attorney 50 3. Completion of Credit Counseling 51 4. Filing the Case with the Court 51 5. The 341 Meeting 51 6. Approval by the Court 52 7. Repayment Period 52 8. Pre-Discharge Debtor Education Course 52 9. Discharge 53 If You Are Unable to Make Payments 53 Dealing with the Root Causes 55 Resources for Financial Education 55 What Now? 58

Dear DECAF Student,

If you are reading this booklet, you are likely considering or are in the process of filing for bankruptcy. And if you are considering filing for bankruptcy, you have been facing some difficult financial decisions in your life. Bankruptcy may be the solution to your financial problems--or it may not be. That is why the first step in the bankruptcy process is to educate yourself about your options. And you do have options.

Regardless of why you are in your current financial situation, there is a path back to financial security. Remember: you are not your debt. This booklet is designed to give you supplemental material to the course you recently completed. It will provide you information and resources so you can emerge from your current financial situation stronger and better equipped to deal with your finances. Though all of the material here may not apply to you, my hope is that much of it will, and that you will use it to make the best choices for your situation and your goals.

I wish you and your family the very best.

Good luck,

I n troduction

Debt Education and Certification Foundation, or DECAF for short, is an

Executive Office of the United States Trustees (EOUST) approved* provider

of pre-bankruptcy credit-counseling courses and post-bankruptcy personal

financial courses. DECAF is not a law firm and offers no legal advice. Please

consult with an attorney if you have any questions about filing bankruptcy or

bankruptcy alternatives.

The unpleasant fact is that a number of factors--some of which you may

have been able to control and some of which you probably couldn't--have

landed you in the middle of serious money problems. Perhaps you are a small

contractor who lost a key client to competition or unexpected government

regulation; or maybe you worked for the same corporation for twenty years

and have watched helplessly as tough economic times hammered the value of

your stock or destroyed your pension; or maybe you've lost your job and haven't

been able to find work for months; or maybe you didn't have health insurance,

were in a serious accident, and now have medical bills that you have no hope

of being able to pay. Or maybe, like many

Americans, you have a history of living beyond your means and your spending habits have caught up with you.

Regardless of the reasons behind your financial troubles, you should know that you are not alone. More than 70 percent of

More than 70 percent of Americans live from paycheck to paycheck.

Americans live from paycheck to paycheck.

A survey we recently conducted emphasizes the complexity of the causes

of financial problems. Those we surveyed about why they were considering

bankruptcy gave the following reasons for their money problems:

* Approval does not endorse or assure the quality of a provider's services.

2 Debt Education and Certification Foundation

? Unexpected expenses--77 percent ? Unemployment or business loss--70 percent ? Unnecessary spending--50 percent ? Illness or injury--38 percent ? Divorce, separation, or death of a loved one--29 percent ? Addictions (including gambling) and other reasons--7 percent

You may notice that these percentages add up to more than 100 percent. Many people cite multiple factors contributing to their financial problems. Money stress--sometimes caused by job loss or problems with a business--often leads to marital problems or can cause a person to develop dependency on drugs or alcohol. No matter how you analyze it, money problems are often complex and can involve multiple factors. Let's take a more detailed look at the causes cited.

? Unexpected expenses or straight up "bad luck"afflict a surprising number of people. We can mitigate some of these causes of financial trouble by educating ourselves on financial matters, but sometimes events are out of our control and we just have to roll with the punches, as when two family vehicles die in one month.

? Job loss or other reduction of income, especially in a weak economy where new or extra work is difficult to find, quickly creates financial shortfalls. And most people in America either don't or aren't able to follow the standard financial advice that says we should all have three to six months' worth of expenses in savings to fall back on when this happens.

? Unnecessary spending, poor financial decisions, and bad spending habits can be a result of a lack of discipline or an inattention to one's financial situation. Many people engage in these activities to fill emotional voids in their lives.

? Serious medical problems, even when covered by insurance, can drain savings and income and lead to large debt balances. And if you've lost your job, you may have also lost your health insurance or your ability to

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