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Liquidation Or Straight Bankruptcy - Chapter 7 Bankruptcy

By Frank Miller


Under the current U.S. Bankruptcy Code or law, the system provides essentially TWO basic categories of outside assistance that a debtor filing for bankruptcy may use - assistance provided by an attorney, and assistance provided by a non-lawyer. And both of these parties come under what is called "Debt Relief Agents or Agencies." Basically, the non-attorney assistance provider, who also goes by a name such as Bankruptcy Petition Preparer (BPP), preparers the documents upon which bankruptcy is filed with the Court for bankruptcy processing, while the attorney (or, more accurately, the help he hires that does such work) prepares the same set of documents, EXCEPT that the lawyer assistance-provider can supposedly give a debtor "legal advice," and can appear, on the debtor's behalf, in the administrative hearing on the bankruptcy case administered by the Court "Trustee" (who is not a Judge, but a court-appointed administrator) that will oversee the bankruptcy case.

Chapter 7 bankruptcy is the option for the debtors to get rid of all the debts that they owe to various creditors. In this method, the bankruptcy court appoints a trustee to liquidate all the assets of the debtor and settle the claims of the creditors with the money thus collected. The advantage to the debtor is that he or she is now responsible to pay as much debt as is the value of their assets.

That claim was NOT at all true. In deed, almost every credible study that had been conducted on the subject, and most experts that testified before Congress, had held otherwise. However, Congress disregarded such evidence. In stead, it promptly responded by passing the BAPCPA law, any way. In consequence, the stated and yet unmistakable purpose of this law was essentially to discourage debtors from filing bankruptcy by making it more stringent and expensive to file. The new law was to do that by forcing people who, it was said, could actually "afford" (through a determination by a complex "means test" calculation) to repay some of their debts, into filing for bankruptcy under Chapter 13, instead of under Chapter 7 - that is, the type of bankruptcy (Chapter 13) which requires that the debtor will repay at least some, if not most or all, of their debts.

But lo and behold, today, it is now some 5 years later into the new bankruptcy law. The actual results and effects of the new law are just beginning to emerge. And the question is: has the BAPCPA law actually attained the basic objective for which it had supposedly been originally designed? Actually, on one major goal of the law - the goal of discouraging debtors from filing bankruptcy and drastically curtailing the rise in bankruptcy filings by debtors - the BAPCPA law has, to date, turned out to be a woeful failure. In deed, as we speak today, there is a NEAR RECORD RISE IN BANKRUPTCY FILING. For example, in the 12-month period ending June 30, 2010, bankruptcy filings rose 20 percent, according to statistics released by the Administrative Office of the U.S. Courts. A total of 1,572,597 bankruptcy cases were filed nationwide in that period, compared to 1,306,315 bankruptcy cases filed in the previous 12-month period ending June 30, 2009, making it the highest number of filings for any period since the BAPCPA law went into effect in October 2005.

Service: In full Service bankruptcy work, the service of the non-lawyer debt relief agent or agency basically involves their staff gathering the various documents and required tons of papers and information together, and orderly arranging them and preparing all the legal forms and paperwork required by the debtor to file for bankruptcy with the bankruptcy court. For the better ones among them (they are not at all equal, some are far better than others, and quite a number of them are just about worthless!), these agencies use workers who are often highly trained and experienced paralegals (they average several years of work and/or training in the industry), and who are skilled at the preparation of legal documents and bankruptcy papers, and are often well versed and knowledgeable in bankruptcy filing law and procedures. With the Full Service bankruptcy petition preparers (at least those of them who are of the reputable and better categories), the debtor tends generally to get a better service and greater attention, and more one-on-one interaction for his or her case, along with the obvious far lower prices.

Therefore, the prudent way is to let your bankruptcy attorney be aware of all the facts so that they could help you find the best possible solution.




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