The question that most people ask the bankruptcy lawyer when they first walk into the office is, "If I file bankruptcy will I lose everything?"The reason that many people feel this way is because debt collectors spend a lot of time threatening people with scare tactics of what will happen if they use the bankruptcy filing to wipe out their debt. Obviously, it must be working because many people avoid filing bankruptcy at all costs because they think that they will never be able to own anything or get credit ever again.
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The truth is, debt collectors know that the automatic stays put in place once the bankruptcy petition is filed and they will not even be able to contact the debtor. If they do, they will be in violation of the automatic stay and could have sanctions brought up against them from the bankruptcy court. For the ones that continue to be persistent, the debtor can actually get damages and legal fees for their bankruptcy lawyer because of the flagrant violation.
Filing Chapter 7 bankruptcy was designed to eliminate a large amount of unsecured debt and allow the debtor to get a fresh start. Because of this, Congress added generous bankruptcy exemptions to the bankruptcy code allowing an individual to keep a fair amount of their personal property. Filing bankruptcy is a federal court procedure but the states have their own laws to work in conjunction with federal law. Every state will have their own set of bankruptcy exemptions to protect one's property from the creditors. When someone has to file bankruptcy they can use either the federal exemption laws or the laws of the state in which they are filing. Most people will use his state bankruptcy exemptions because they are more tailored for the area in which someone resides. For example, in the corn belt they might have an exemption to protect a farmer's tractor and make it exempt no matter what the value of the property. These were written knowing that the farmer would be out of business and not be able to get a second chance if the tools of his trade were taken away.
In today's economy, rarely does anyone filing Chapter 7 bankruptcy lose any property. The bankruptcy trustee is really looking for easily liquidated items or cash. The trustee will always weigh the cost of collecting an item and selling it versus the reward. Nowadays, the value of property has decreased significantly making it harder to liquidate most property. If someone had a car with a blue book value of $8000 and only $5000 was protected by bankruptcy exemption laws, the bankruptcy trustee probably would not be interested in liquidating it because if they seized the property and sold it for $6000, it wouldn't be worth their cost and time spent for liquidating property.
This once again gives fuel for the idea of having a bankruptcy lawyer represent the debtor. An experienced bankruptcy lawyer will know exactly what bankruptcy exemption laws use and will also know what is expected of the bankruptcy trustee for a successful bankruptcy discharge. It's hard to put a value on that knowledge that an attorney will receive from their experience. Before you believe something that someone tells you, a person should consider the source and speak to an expert to learn what its real and what's not.
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