BANKRUPTCY

The following information is summarized from the CT Attorney General's web site:

The Bankruptcy Code is meant to give you a chance for a fresh start, even though filing does have some serious consequences. But before you file, there are some things you should do that may be able to steer you clear of bankruptcy.

1. Do not ignore your bills! The longer you avoid your creditors, the angrier they will be and the less they will want to help you out. Let them know right away why you are falling behind on your payments and make it clear you intend to pay your debts.
2. Talk to the credit or collection manager where you owe money. They may be able to work out a more flexible payment schedule for you. In some cases they may agree to reduce or eliminate interest and fees. Bad loans cost them money, too, and they will probably get more if they work with you in your efforts to pay off your debts than if they force you into bankruptcy. By talking to your creditors and working out some sort of payment schedule tailored to your financial situation, you may be able to get back on your feet and avoid filing for bankruptcy.
3. Consider financial counseling. In Connecticut, the Consumer Credit Counseling Service of Connecticut, Inc., a private non-profit organization, licensed by the Connecticut Department of Banking, has ten offices located throughout the State. Fees are based upon a sliding scale. There are other agencies and businesses which also claim to be willing to deal with your creditors for you and help you setup a payment schedule. But before you hire one, there are some risks you should be aware of. Do not believe people who promise 'miracle cures' for bad debts; don't let anyone tell you they can cure your problems without any consequences. Before you hire a credit counselor, find out if they are licensed with the State; how long have they been doing such work; get referrals from others who have successfully used their services. Some of these counselors who advertise 'miracle cures' prey on people in financial trouble. Do not let a con artist make your situation worse.

Some important things to remember while meeting with a financial counselor:

• 1. Credit bureaus can legally report accurate negative credit information for ten years. If you have bad credit, beware of agencies that advertise "erasing'' it, because it cannot be done;
• 2. If you have a poor credit history, regardless of whether your past problems were due to illness or unemployment, in most cases time is the only thing that will heal your credit report; and
• 3. The only information that can be changed in your credit report are items that are actually reported wrongly or beyond the seven or ten year reporting period.

If you've tried these measures and you still believe filing is your best option, you should carefully consider the costs and benefits of filing bankruptcy. Some benefits are that when you file for bankruptcy, your creditors may not file any lawsuits against you and must stop any cases which are pending anywhere outside the bankruptcy court. Creditors must stop attempting to collect on your unpaid bills. They may not put a mortgage or lien on your property. They must accept any amounts the court decides you are required to pay them, even if this is less than the full amount you owe. Further, depending upon the type of bankruptcy you file, you may be able to prevent foreclosure of your home and protect certain of your assets from creditors' claims. The result is that when you are finished with your bankruptcy case, you will be given a "fresh start."

There are, however, some very serious costs to filing bankruptcy. A bankruptcy can appear on your credit report for ten years after the date you file your petition. It may be difficult if not impossible to get a loan or a credit card during those ten years. You will be limited for the next six in whether you can file again for bankruptcy, and under what circumstances. You may have some of your property sold to pay your debts. In many cases, even if you can temporarily stop a creditor from foreclosing on its mortgage or lien, that creditor will eventually be able to reclaim its property, unless you can make arrangements to pay that debt. Further, certain debts, particularly child support and taxes are in most cases not dischargeable.

It is always helpful to obtain legal advice to assist you through the bankruptcy process. If you do not have your own attorney, you can contact your local bar association for referrals, or you may qualify for Legal Aid. Look for an attorney who specializes in bankruptcy and in the type of bankruptcy case you wish to file. Ask him how many similar such cases he has handled in the past year.

Some unions or other groups may run their own legal services program. Also, do not feel shy about asking questions of the clerks in the bankruptcy court's office--they can be very helpful and probably can answer many of your questions. Lastly, if you do want to use a credit counselor, check them out carefully using the above-mentioned guidelines. Check with your Better Business Bureau or the Attorney General's Office to see if there is any record of consumer complaints against such counselor.

Bankruptcy is not a choice to be made lightly. Failing to pay your debts not only hurts you, it hurts everyone. Prices go up to cover the costs of bad debts and lenders are more reluctant to make loans. Everyone's taxes must be raised to make up for those lost in bankruptcies. In short, if you can stay out of bankruptcy, by all means do so. So, think about the costs and benefits, and make your choice wisely.

If you would like more information about bankruptcy and the types of bankruptcy, you can obtain two (2) free booklets, "Bankruptcy and You: What Kind of Bankruptcy Should I File?" and "Bankruptcy and You: Is it the Right Choice?" by e-mailing Attorney General Richard Blumenthal at attorney.general@ct.gov

TO FIND PROVIDERS IN CONNECTICUT'S COMMUNITY RESOURCES DATABASE:
Search by service name: Bankruptcy Courts

SOURCE: CT Attorney General

PREPARED BY: 211 /fj

CONTENT LAST REVIEWED: October2007