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My wife and I filed for Chapter 13 last month and just made our first payment. 

The last 30 days have possibly been the most humbling I can ever remember.  I’m not sure I can fully describe my story in one message or even one conversation. The story, like the event itself, built over time until it was too late to fix. 

We lived in Chicago after I graduated from law school and we lived above our means from day one.  We had the money to make the payments each month and the career path pointed upward.  I’m not sure we ever put our arms around the amount of debt we were carrying, just that we kept making payments and believing that the income and/or profit from house sale would catch up. Read the rest of this entry »

• Avoid bankruptcy if you can.  A BK will stay on your credit reports for seven to 10 years, and any decent person hates going back on his or her word.  Still, ask yourself if you’re trying to avoid bankruptcy for purely egocentric/ethical reasons.   

From MSN Money’s Liz Pulliam Weston:

If, despite your best efforts, it would take more than five years to pay off your credit cards and medical bills, or you would need to use assets that would otherwise be protected in bankruptcy — like retirement accounts and home equity — then you should at least consult with a bankruptcy attorney about your options.

I wouldn’t recommend bankruptcy any more than I would recommend amputating part of a leg.  But if you have late stage bone cancer and you’ve exhausted every other possible treatment option, you do what you have to do.

• Don’t max out your credit cards.  Until I had the fortunate moment of clarity that led me find a BK attorney, I thought I’d wait a few months and, if I maxed out, look into bankruptcy then.  This is considered credit card fraud and your creditors can challenge your bankruptcy for it.

• Your sense of honor may tempt you to pay off a low-balance card or two before you file.  Don’t.  When your debts are discharged, you will lose all of your credit cards regardless of your account balances.  Put the money towards hiring a good attorney.

• If you have a credit card or credit line with your current bank, open checking and savings accounts with another bank and shift your money over before you file.  Otherwise, the banks may freeze your money once they are notified you have filed your BK.  If you don’t owe your bank any money, you’ll probably be fine. 

• Hire an attorney.  Yes, you can get the petition forms online and do it yourself.  Thanks to the so-called bankruptcy “reform” legislation of 2005, filing a BK is a complicated maze of income requirements and other regulatory hoops.  You’re better off having an attorney lead you through the process and prepare your petition.  Otherwise, you risk having to return for another trustee meeting to correct your petition’s mistakes and you are naked and defenseless if your creditors come after you.  Read the rest of this entry »