Category: Bankruptcy

Since 2005, your ability to choose between Chapter 7 and Chapter 13 bankruptcy has been tightened. To be eligible for Chapter 7 protection, you have to pass a two-part means test. The test compares your income with the median income for a family with the same number of individuals and with your expenses and debt. If you do not pass the test, you cannot file Chapter 7 bankruptcy and must file Chapter 13. A Chapter 13 plan is a reorganization that provides for payments of a portion of some debts and all of certain debts such as home mortgages. You must have a regular income to qualify for a Chapter 13, and some other requirements must be met as well.

A Chapter 7 plan involves liquidation and no payment is made on most debts. There are some debts that must be paid such as taxes, some support obligations, some student loans, and some intentional torts, which are debts that arise because you have injured someone intentionally or while driving drunk. These are only general rules of thumb, and what will or will not be paid depends on your specific case.

For more information, see: 11 U.S.C. §§ 101–112 (2010); The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, 109 P.L. 8 § 707 (2005); U.S. Department of Justice, U.S. Trustee Program, Census Bureau Median Family Income by Family Size, http://www.justice.gov/ust/eo/bapcpa/index.htm (last visited July 17, 2012).

In April 2005, President George W. Bush signed into law the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA). This Act is the first substantial change in bankruptcy law for more than 25 years. According to the bill’s framers, the legislation is aimed at preventing consumers from abusing bankruptcy laws. Meanwhile, consumer advocates argue that the bill merely assists creditors, especially credit card companies, in their collection of debt. Regardless of its purpose, the new law makes numerous changes that will affect consumers wishing to file bankruptcy.  

The 2005 law made a variety of changes in bankruptcy law, so things you had always heard about how bankruptcy works may no longer be true. The new law includes some significant changes: 

•stricter income requirements for filers for both Chapter 7 and Chapter 13 bankruptcies, so fewer people will qualify; 
•required fiscal management classes before filing permitted, delaying the relief of bankruptcy; 
•increased costs associated with increased obligations and paperwork for bankruptcy attorneys; 
•fewer kinds of debt are eligible for bankruptcy relief, so bankruptcy filers will still owe them; 
•allowable amounts for living expenses permitted for Chapter 13 filers are now dictated by regulation rather than actual, possibly higher costs; 
•homestead exemption amounts, which currently vary widely from state to state, are limited; 
•less protection from creditors, because there is no longer an automatic stay for evictions, for actions against various licenses, or for certain family law actions; 
•harder for some Chapter 13 filers to keep their cars. 

For more information, see: 11 U.S.C. §§ 101-112 (2015); Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Public Law No. 109-8 (2005); FindLaw, New Bankruptcy Law: 2005 Bankruptcy Law Changes, http://bankruptcy.findlaw.com/chapter-7/faq-bankruptcy-law-changes.html (last visited June 10 , 2015).

If you are collection-proof, no. You are collection-proof if, by law, all of your assets and income are protected from a creditor trying to enforce a court judgment. This means that even if you are sued and lose in court, a creditor cannot collect anything, garnish your income, or repossess any property.  

If your only income source is social security or other government benefits, that income is collection-proof. Creditors are not allowed to seize government benefits. State exemption laws protect a certain amount of your property from seizure. Federal law also limits the amount of wages that a creditor can seize.  

If you are collection-proof, first talk with the creditor, explain the situation, and ask the creditor to stop contacting you. If you continue to get unwanted calls and letters demanding payment, you can write the collector a cease letter. A cease letter is a written request asking the creditor to stop contacting you. West Virginia law requires collection agencies and creditors to stop all contact once they receive a written request to stop.  

In the letter, explain your situation and why you are unable to pay. You might also describe the abusive tactics, if applicable, that the collector’s employees have used and the distress it has caused you. It is important to keep a copy of the letter for your personal records.  

If the calls and letters do not stop after you send the cease letter, contact a lawyer. Usually a letter from a lawyer will stop the harassment.  

For more information, see: 15 U.S.C. § 1673 (2015); National Consumer Law Center, Surviving Debt: A Guide for Consumers (5th ed. 2005); Thomas v. Firestone Tire and Rubber Company, 164 W. Va. 763, 266 S.E.2d 905 (1980).

The bankruptcy estate includes everything that the debtor owns at the time bankruptcy is filed. This would include property you own jointly with your spouse. However, there are restrictions on how jointly owned property can be liquidated (sold to produce cash). The federal bankruptcy laws allow the trustee (person who is responsible for distributing all the assets of the bankruptcy estate) to sell jointly owned property only if all of the following conditions are met: 

•the property cannot be easily divided; 
•selling just the debtor’s part of the property would produce significantly less money; 
•the benefit of selling the property outweighs the harm it will cause the owner who is not bankrupt; and 
•the property is not used to produce electricity, or natural or artificial gas.  

All jointly owned property must meet this test to be sold when only one spouse files for bankruptcy. For example, if you and your spouse owned a checking account, it would be easy to take out half the money. On the other hand, it would not be as easy to split the house in which you both live. That would require you to move out of your house and find a new home with only half the money. But if you both jointly owned a car, the trustee could probably sell the car, and give your spouse his or her interest in cash. 

For more information, see: 11 U.S.C. §§ 363(h), 541 (2015).

Often people incorrectly assume that if their spouse files for bankruptcy, they have to file, too. However, a person can file for bankruptcy individually, separate from his or her spouse. Even though you may file a joint petition for bankruptcy with your husband, you are not required to do so.  

In some circumstances, it is not desirable to file a joint petition. When one or both of the spouses were previously married, for example, only one spouse may be in debt. In this situation, there is no need for both people to file for bankruptcy. If the debts are shared, however, it may be in your best interest to file a joint petition with your spouse. If you are jointly responsible for the debts, the spouse who does not file for bankruptcy remains liable as a co-debtor, and may be pursued by creditors. Also, it costs the same amount to file individually or jointly, so by filing a joint petition, you will save money on fees, such as filing fees and lawyers’ fees. Federal bankruptcy laws provide special circumstances for spouses who wish to file jointly for bankruptcy. 

For more information, see: 11 U.S.C. §§ 109(a), 302 (2015); National Consumer Law Center, Surviving Debt: A Guide for Consumers (3rd ed. 1999); James W. Martin Jr., Bankruptcy, in The West Virginia Practice Handbook Vol.1 (The West Virginia State Bar, Young Lawyers’ Division, eds., 4th ed. 1996).

Bankruptcy may provide relief if you find that your income cannot support your bills. Sometimes, filing for bankruptcy may in fact have the effect of stopping a foreclosure on your home. 

When you file for bankruptcy, most creditors must stop trying to collect their debts from you because of an order called an automatic stay. An automatic stay is entered as soon as the bankruptcy court receives your papers. If a bank is threatening foreclosure, the bank may have to wait for the bankruptcy proceeding if the automatic stay has begun, or the bank may have to ask the court’s permission to continue collection efforts. 

The following is a common scenario: You may have a lot of bills from various sources. You may have large credit card bills, and also car and house payments. As the credit card bills mount, you begin to feel anxious about them. As a result, you choose to skip some house or car payments to pay the credit card bills. Then the bank threatens to foreclose on your home. Until you pay off your loan, the bank owns your house and has the right to sell it if you fail to make payments. If you stop paying your mortgage payments, the bank may threaten to foreclose. 

When you file a Chapter 13 bankruptcy, the bank may be reassured that you will pay your house payments. That way, they will not need to foreclose on the home. Chapter 13 bankruptcy allows you to keep your property while making installment payments to your creditors. 

The bankruptcy proceeding will set the amounts that you have to pay to some of your creditors, like credit card companies. This amount is often significantly less than what you had been paying them. It can be as little as 10%. This set amount is all you have to pay your creditors and it may leave you more money to pay your house payments. A foreclosure on your home may be prevented this way. Of course, if you do not have the income for this type of arrangement, the bankruptcy court will not approve your Chapter 13 plan and you may be unable to stop foreclosure. 

Depending on your personal financial situation, bankruptcy may be the answer to a pending foreclosure. If your bank threatens to foreclose your first step is to try to work out an arrangement with the bank to avoid foreclosure. If no satisfactory arrangement can be made a consultation with a bankruptcy attorney can help you determine how a Chapter 13 bankruptcy might help protect your interests. 

For more information, see: 11 U.S.C. §§ 109(e), 502, 507, 522, 1303, 1322, 1325, 1328 (2015); W. Va. Code § 38-10-4 (2015).

To answer this question, we should first explain the process of bankruptcy. The two types of bankruptcy are Chapter 7 and Chapter 13. Chapter 13 bankruptcy is often called a “reorganization.” You can file for Chapter 13 bankruptcy only if you have a source of regular income. This includes any regular type of income: wages, government benefits, alimony or support payments, for example. When you file for Chapter 13 bankruptcy, you create a written plan to show how you will pay off your debts over a set period of time, usually from future income. In Chapter 7, or liquidation bankruptcy, you may have to sell off some of your assets to pay your debts. Under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, an individual’s ability to file for Chapter 7 bankruptcy has been tightened, thus forcing more people to file Chapter 13. 

Understanding the two different types of creditors is also important when considering bankruptcy. Your creditors are grouped into two categories: secured and unsecured. A secured creditor is one who has an ownership interest in property until you pay your debt. The classic example of this is a bank that holds the mortgage or deed of trust to your home. The bank actually owns your home until you pay back the money it loaned you. If you do not pay the loan, the bank can force the sale of your house. This procedure is called a foreclosure. 

An example of an unsecured creditor would be a utility company. This type of company owns nothing of yours. The utility company would have to first sue you for what you owe and get a judgment in its favor before it could possibly make you sell anything to pay your debt. Credit card debts can be either secured or unsecured, depending upon what it says in the contract you signed. 

In Chapter 7 bankruptcy, the unsecured creditors get only a portion, if any, of the amount you owe them. The bankruptcy trustee examines your estate to see if any assets can be sold to satisfy your debts. However, most property is considered exempt and cannot be sold. The trustee will sell the nonexempt property, divide the proceeds, and distribute them to your creditors. They divide up a portion of the money that is collected when your assets are sold.  

In Chapter 13, you set up a plan to pay unsecured creditors installments at least the amount they would have received had you filed Chapter 7. Assuming that your home or other collateral is worth at least as much as you owe the bank, you pay the secured creditors your usual monthly installments plus you make arrangements to pay the back payments. If your home or collateral is worth less than you owe the bank, you may be able to reduce the amount of your monthly payments. The secured creditors usually end up receiving payments equal to the value of the collateral they hold, while the unsecured creditors often end up with significantly less than you owed them. 

The bankruptcy assets are all your assets that are in the bankruptcy estate. Some assets are exempt from the bankruptcy estate and therefore cannot be used to pay off creditors. One thing you can exempt is your interest in your home, up to $35,000 in West Virginia. Equity is how much of the value of the home you would have after the mortgage is paid. 

When you file Chapter 13 bankruptcy, you must create a written plan to show how you will pay your creditors. Your unsecured creditors must get at least as much as they would have had if you filed Chapter 7 bankruptcy. This amount is frequently as little as 10% of what you owe them. The Chapter 13 plan is usually spread over a period of time. This means that if you owed your unsecured creditors a total of $5,000, you may be able to pay them as little as a total of $500 over a period of three years. This would greatly reduce the amount of your monthly payments. In addition, your Chapter 13 plan must include provisions for your secured creditors. You will have to pay them an amount equal to the value of the collateral they hold. This would include making up past overdue payments as well.  

Your Chapter 13 plan must be approved by the bankruptcy court. For this reason, you must have an income. You have to show that you could afford to pay future payments on your home, and other secured debts, plus a small amount each month on the payments you previously missed. You would also have to show that you could pay some amount to your unsecured creditors. Finally, you would have to show that you could make these payments and still have enough money to cover your daily living expenses. If your plan is approved, you do not have to sell your home to pay the debt. 

If you don’t have any income, or you can’t make your house payments in the future, you may be required to sell your house. In these situations, you might be forced to liquidate your bankruptcy assets to pay your debts. 

However, even in those situations where you cannot make your house payments based on your income, there may be other alternatives. One alternative may be to rent the house, and another may be to refinance the home. Of course, you want to avoid selling the home through foreclosure. Usually a house sold through foreclosure does not command the full value of the home. As a result, many times you end up losing your equity.  

Bankruptcy is complicated. If you think you need to file for bankruptcy consulting a bankruptcy attorney may help you identify important details about the process that only an experienced professional is likely to know.  

For more information, see: 11 U.S.C. §§ 109(e), 502, 507, 522, 1303, 1322, 1325, 1328 (2015); W. Va. Code § 38-10-4 (2015); James W. Martin Jr., Bankruptcy, in The West Virginia Practice Handbook Vol.1 (The West Virginia State Bar, Young Lawyers’ Division, eds., 4th ed. 1996).

If you want to pay a certain debt for a special reason, such as to keep your car, you may reaffirm the debt. To reaffirm the debt, you must sign a Reaffirmation Agreement with the creditor and file the agreement with the court. To be valid, the agreement must be voluntary, it must not impose too heavy a financial burden on you, and it must be in your best interest. Further, the agreement can be cancelled before discharge of the debt or within sixty days of filing the agreement, whichever is later.  

You should consider carefully before reaffirming any debt because if the debt is reaffirmed, it is not discharged through bankruptcy. If you later find that you can’t pay the debt, the creditor can take action as if the bankruptcy had never happened.  

For more information, see: 11 U.S.C. §§ 101-112 (2015); 28 U.S.C. § 1930 (a 

mended in part by 2013 US Order 0014) (2015); National Consumer Law Center, Surviving Debt: A Guide for Consumers (5th ed. 2005); James W. Martin Jr., Bankruptcy, in The West Virginia Practice Handbook Vol.1 (The West Virginia State Bar, Young Lawyers’ Division, eds., 4th ed. 1996); United States Bankruptcy Court Southern District of West Virginia, Filing and Miscellaneous Fee Schedule, http://www.wvsb.uscourts.gov/content/filing-fees (last visited June 10, 2015).

Yes. The worst thing a debtor can do is hide assets or not disclose a legitimate debt to his/her attorney. Most assets and debts can be effectively dealt with in a bankruptcy case, and with proper planning can be addressed favorably. In addition, if you fail to disclose a debt in your original filing, you will have to pay an additional fee to amend your filing. Furthermore, the bankruptcy petition is signed under oath and failure to disclose properly is against the law.

A letter can be sent to the creditor to determine the amount and other conditions of the debt. If there is no response to the letter, you can indicate the amount of the debt to your best recollection.

What bills you pay will depend on your particular circumstances. Deciding on which bills to pay is one of the most important decisions that you will make. Creditors cannot be treated preferentially or unfairly. Nevertheless, in many Chapter 7 cases, the debtor is so short of funds that only necessities can be paid. The most basic necessities should be paid first, such as rent or mortgage, electricity, gas, water, food, and transportation expenses. Frequently, there is nothing left after these are paid. If there is, a case-by-case analysis of the remaining bills must be made.  

In a Chapter 13 case, a more sophisticated analysis must be made to determine how payments made will fit into the proposed plan. Special attention should be paid to transfers to friends and relatives as these may be undone, and exempt assets may lose their exempt status if transferred to a relative or friend.

Yes, but a reasonable deposit may be required.

Most pending litigation is stopped when you file for bankruptcy and the court imposes the automatic stay. The new law, however, does not provide an automatic stay for evictions, certain family law cases, and certain licensing cases. Any foreclosure on real estate is generally halted. The permission of the bankruptcy court must be obtained before the litigation or foreclosure may proceed further. Whether the litigation or foreclosure is stopped permanently depends on the particular facts of each case.

Yes. You will need to pay a filing fee, an administrative fee, and a trustee fee. You may also have to pay additional fees for filing certain documents. For instance, an additional fee applies if you file an amended schedule of creditors because you failed to include all of your creditors in your initial filing. However, if you learn that one of your creditors has changed address, you will not have to pay an additional fee to correct the creditor’s address.  

Some jurisdictions allow certain debtors to proceed In Forma Pauperis, which means without paying a filing fee at the time of filing. If you have limited income, you may qualify to file without paying a fee.

Surprisingly soon. Many debtors receive a letter almost immediately from their former creditors who will reestablish credit upon payment of some or all of the previous debt. This is called reaffirming the debt, and you are not required to do so. 

In addition, debtors are frequently contacted by credit card companies that will issue a card to be used up to a specific amount which has been paid to them as a deposit. This can be useful in situations where a credit card is required, such as for renting a car, and it can help you to reestablish your credit over a period of time.

Technically, you should stop getting calls as soon as the bankruptcy court enters the automatic stay. An automatic stay is an order entered by the court which requires collection efforts against you to cease, and the order is entered immediately when the bankruptcy court receives your petition for bankruptcy. However, creditors can ask the bankruptcy court to lift the automatic stay so that they may pursue collection efforts. Whether or not the court will lift the automatic stay depends on the facts of your individual case.  

Creditors who persist in their attempts to collect debts without the permission of the bankruptcy court may be sanctioned and subject to penalties. However, the automatic stay has limits that also protect creditors. For example, the stay may be terminated in situations that indicate a series of bad faith and abusive bankruptcy filings. Evictions are not automatically stayed, and alimony and child support do not stop when you file for bankruptcy. 

For more information, see: 11 U.S.C. § 362 (2015); The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, 109 P.L. 8 § 305-315 (2005); National Consumer Law Center, Surviving Debt: A Guide for Consumers (3rd ed. 1999).

Although the meeting with the trustee is called a Creditor’s Meeting, it is rare for creditors to appear. Some do, but most do not. Creditors are not permitted to embarrass the debtor at the hearings, which are typically very low-key and informal.

For most debtors, the meetings will be held relatively close to their homes, and the meetings are generally held in an office building. Since there are usually only 1 or 2 brief appearances before a trustee or in court, any travel involved is worth the effort.

Normally you will not have to go to court at all. You will have to attend a Creditor’s Meeting with a bankruptcy trustee, not a judge, and the meeting is normally held in an office. A bankruptcy trustee is appointed to represent the interests of the creditors and handle the bankruptcy proceedings. You have to attend court only if something unusual occurs.

Usually a debtor can keep most, if not all, of his or her belongings. Both federal and state laws exempt certain kinds of property from seizure. Sometimes, however, it is necessary to make arrangements with creditors that hold claims on particular items of property as security. Such arrangements are normally in the form of either redeeming the property or reaffirming the debt. You should consult your attorney before agreeing to redeem or reaffirm. 

It is very rare for creditors to ask to see the contents of a debtor’s home and even rarer that such a request is granted so long as reasonable assurances are provided to the creditors as to the value of the debtor’s belongings. Third-party appraisals are more common where there is a dispute as to the value of property. Even if your property is appraised, many of your household belongings are exempt from the bankruptcy estate. 

It is important to include all of your belongings on the bankruptcy form. Many of the items may be exempt from the bankruptcy estate. You are listing your belongings so the court knows what to exempt. The exempt items will not be taken from you.  

In West Virginia, you can only exempt what is permitted in the West Virginia Code. To qualify for West Virginia exemptions, you must have lived in West Virginia for 730 days. If you have not maintained residency in this state for the past 730 days, the governing exemption law will be the place were you spent the majority of the last 180 days. Examples of some of the things the West Virginia Code allows you to exempt are Social Security benefits, unemployment compensation, veterans’ benefits, disability benefits, and alimony. You are also permitted to exempt a certain amount of your interest in your home and your car. Consult an attorney to determine exactly what else can be exempted in your particular circumstances. 

Sometimes, confusion arises because of something called a bona fide security interest. When there is a bona fide security interest, something that would otherwise qualify as exempt does not. Property is subject to a bona fide security interest if the agreement under which it was purchased provides that if the buyer defaults on payments, the property may be sold in order to satisfy the buyer’s financial obligation. This is also sometimes called a secured debt, and the creditor is a secured creditor. For example, if you still owe money to the bank for your car, the bank may have a bona fide security interest in your car.  

If you do not include all of your belongs, your bankruptcy action may become frustrated or delayed. 

For more information, see: 11 U.S.C. §§ 521-522 (2015); W. Va. Code § 38-10-4 (2015); James W. Martin Jr., Bankruptcy, in The West Virginia Practice Handbook Vol.1 (The West Virginia State Bar, Young Lawyers’ Division, eds., 4th ed. 1996); National Consumer Law Center, Bankruptcy Basics (2007).

Yes. The Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) requires that debtors participate in mandatory credit counseling within the 180 days prior to filing for bankruptcy. The clerk of the court will maintain a list of education courses and approved credit counseling agencies. You will first have a briefing, which will be either individual or group, and it may take place in person, over the telephone, or on the Internet. Furthermore, the briefing must outline the opportunities for credit counseling and aid in your budget analysis. 

Although the credit counseling is mandatory, a small number of exceptions are included, such as when there are no approved credit counselors in a district or when the debtor is incapacitated. 

The law also contains provisions requiring the filing of certain materials with the bankruptcy court. For example, if a debt management plan is developed during credit counseling, the plan must be filed with the bankruptcy court. You are also required to file a certificate from the credit counseling agency detailing the services provided. 

For more information, see: 11 U.S.C. § 111 (2015); The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, 109 P.L. 8 § 105-106 (2005); Federal Trade Commission, Before You File for Personal Bankruptcy: Information About Credit Counseling and Debtor Education, .

Whether bankruptcy is right for you depends on your own individual circumstances. Bankruptcy is designed to give a fresh start to individuals and families with overwhelming debts. It is a last resort. Before you file for bankruptcy, you should weigh all your options carefully.  

You may be able to reduce your debts by negotiating with your creditors first. Creditors are the people to whom you owe money. They might be able to reduce your interest rates or lower your payments; it may be in your best interest to try to work the problem out before it gets to Bankruptcy Court.  

In some situations, however, bankruptcy is the best option. When making the decision to file for bankruptcy, factors to consider include: 

•your total debt;  
•the kinds of debt you have, and what your rights are regarding that debt;  
•your overall financial condition;  
•which of your assets are protected from creditors;  
•your income and whether any of your income sources are protected from creditors;  
•your ability to pay your monthly expenses excluding your debt;  
•the potential effect of bankruptcy on your credit rating; and  
•how much you are being harassed by creditors.  

You may also want to consider whether your situation is as bad as it is going to get. If you file for bankruptcy now, and then find yourself still unable to make ends meet, things could just get worse. If you file for bankruptcy under Chapter 7, you are barred from doing it again for the next eight years. In such circumstances, you may be better off waiting it out until you can make lifestyle changes that will better enable you to pay your bills. Each person has a different situation, and bankruptcy proceedings involve complicated rules and paperwork. Therefore, if you are considering filing for bankruptcy a consultation with a bankruptcy attorney can help you learn about how bankruptcy could apply in your particular circumstances.  

There are some general considerations to review as a preliminary step. First, bankruptcy may be damaging to your credit rating, and bankruptcy may appear on your credit report for up to ten years. If you later decide to apply for a bank loan, for example, you may have a difficult time getting approval. Some banks will not loan money to people who have ever filed for bankruptcy. However, other banks may look at your filing as a positive step toward reestablishing a solid credit history. Overall, if you are eligible for bankruptcy, filing will not usually make your credit rating worse. Most people filing for bankruptcy are already behind on their payments and often already have a bad credit rating. In addition, your credit rating may not be important to you for a special reason, for example, if you own your home mortgage-free. (See also the question on Credit Reports, p.132) 

Second, you may be in a situation where you have very little cash, yet many substantial assets. If so, you will want to be very careful. Although most of your property will probably be protected from sale, if you have certain types of very valuable property, you may not be able to keep it. If you file for Chapter 7 bankruptcy, many of your assets could be liquidated. When assets are liquidated, they are often sold for much less than they are worth. It is important that you explore all your options and consider all the consequences of bankruptcy before making a final decision.  

If you decide that filing bankruptcy would not be the best thing to do at this particular time, you may benefit from consumer credit counseling services. Consumer credit counselors generally help assess your financial situation, including your expenses, assets, income, and debt. They may call your creditors for you in order to arrange a payment schedule and help you set up a budget you can live with. These programs are generally inexpensive and can be very helpful. In fact, credit counseling is now a prerequisite to filing for bankruptcy. An individual must meet with a credit counselor in the six months prior to applying for bankruptcy. Beware, however, of debt management plans that only offer management of credit card debt. Many such plans may be advertised on TV. Only a plan that includes consideration of all your types of debt, plus your income and expenses, is likely to help you make progress toward getting a handle on your debt. 

Another option may be to take out a bill consolidation loan. When you take out a bill consolidation loan, you are only responsible for one large payment. Typically bill consolidation loans must be secured by your home, which may put your most valuable and protected asset in jeopardy, and the best rates and terms for these loans are not always the best option. Generally only seniors who are house-rich but cash-poor are good candidates for consolidation loans. Predatory lenders may offer bill consolidation loans that look attractive, but are actually filled with high or hidden fees and high interest. Converting unsecured debt, like credit card accounts and medical bills to secured debt is often not the best option because you could jeopardize your assets and give away some of your legal rights in the process. 

For more information, see: 11 U.S.C. 101-112 (2015); National Consumer Law Center, Surviving Debt: A Guide for Consumers (5th ed. 2005); James W. Martin Jr., Bankruptcy, in The West Virginia Practice Handbook Vol.1 (The West Virginia State Bar, Young Lawyers’ Division, eds., 4th ed. 1996).

Bankruptcy is a legal term used to describe people who have accumulated so much debt that they cannot pay their creditors. When a person becomes bankrupt, he/she may initiate a legal proceeding in court so that the person can be declared bankrupt. An advantage to filing for bankruptcy is that once a court declares a person bankrupt, it might also discharge a person’s debt. If debt to certain creditors is discharged, those creditors may no longer attempt to collect money for those debts. However, a significant disadvantage to filing for bankruptcy is that it can very negatively affect the filer’s credit score and ability to secure credit for many years. 

For more information, see: 11 U.S.C. § 101-112 (2015); National Consumer Law Center, Surviving Debt: A Guide for Consumers (5th ed. 2005); James W. Martin, Jr., Bankruptcy, in The West Virginia Practice Handbook Vol. 1 (The West Virginia State Bar, Young Lawyers’ Division, 4th ed. 1996).