When Is The Right Time?

Recently, a friend and small business owner asked me: “At what point should someone start considering Bankruptcy?”  This is a difficult question to answer, and it varies greatly depending on the situation.  Nevertheless, as one of the Arizona bankruptcy judges – Judge Case – has stated, “Fundamentally, bankruptcy is a matter of timing.”   So, it is important to establish your timeline as you are feeling overwhelmed by debt.
Bankruptcy is a major step to take, and for most people it has never crossed their mind as an option.  As a result, most people are unfamiliar with what Bankruptcy even really is; let alone whether or not they should consider it.  The current economic conditions have put many people in this rather foreign territory. 
As I explained to my friend, there is no general rule about when one should consider filing or when they should in fact file.  However, there are several common circumstances that, taken together, can provide a litmus test as to whether you should seriously consider Bankruptcy.

Personal Bankruptcy and Your Small Business

Many individuals facing potential Bankruptcy are small business owners.  They may be the only or one of a few shareholders of an S-Corporation or only member of a Limited Liability Company.   This complicates the nature of the Bankruptcy estate and limits what can be accomplished in the discharge.
Generally speaking, a small business that is incorporated under state law is its own legal entity, separate from the actual people that own it.  However, in a Bankruptcy, the Trustee takes control of the Debtor’s assets and property as if they were the true owner.  They can do with those assets anything that a typical owner of property can do.  The debtor’s ownership of an LLC or small corporation is an asset of which the Trustee may take possession.  If the business has significant assets, inventory or accounts receivable, the Trustee may find a way to assert control of these, and in some cases, dissolve the business.

Fighting Back Against Harassing Calls from Debt Collectors

If you have ever been behind on your bills, you have no doubt experienced the collection call.  If you have ever been really far behind in your bills, these calls are a regular part of daily life…sometimes too regular.
In addition to their frequency, collection calls have quite an unsavory reputation for content.  In many ways, this reputation is well deserved.  In these difficult times collection agencies are being particularly aggressive in pursuing debtors.  After all, they are usually paid according to what payments they bring in. 
How would you like to turn the tables on those abusive debt collectors, and make them pay you instead of you paying them?  Debt collectors are strictly regulated in how, when and with what they can contact debtors.  Unfortunately, violations of those regulations are rarely pursued because many debtors do not know their rights.  But, finish reading this post and you will learn a little about the FDCPA. 

Who's Who in a Bankruptcy Case

Bankruptcy can be a confusing and overwhelming process.  In addition to dealing with all the forms, the deadlines, the costs and the laws, there are many people involved in this process that you may be unfamiliar with.  Here is a basic Who’s Who of Bankruptcy:
Debtor: This is the person filing for Bankruptcy protection.  Saddled with debt beyond the ability to pay, this person is asking the court for a clean slate or a manageable reorganization and payment plan.  Ideally, this person is represented by an attorney.

Secured Creditors: These are parties that have lent money to the debtor in exchange for a security interest in the property of the debtor.  The classic example is the home mortgage lender or your car loan holder.  If the debtor defaults on these loans, the Secured Creditor has a right to foreclose on the house or repossess the car that the debtor loaned the money against. In Bankruptcy, these creditors have a higher priority over an Unsecured Creditor.

Why You Shouldn't Feel Guilty About Filing for Bankrutpcy

Consumer spending, one of the primary indicators of economic health and growth, is made possible by readily available credit to consumers.  Unfortunately, the ease with which consumers can get credit for goods and services also makes it very easy to get into unmanageable debt.  While many good, hardworking people can maintain their debts, it only takes a trip to the hospital or family emergency or loss of work to miss a payment and send that debt spiraling out of control.
An unmanageable debt is a terrible burden to bear.  Debtors often feel ashamed at their inability to pay, indignant towards their creditors, fearful of legal repercussions and powerless to solve the issue.  Such a situation makes going about daily life extremely difficult, puts strains on families and hinders the debtors’ ability to find help and a solution.  Bankruptcy law exists to remedy these problems.