Bankruptcy is often seen as a last resort for individuals facing financial challenges, but it is crucial to understand the process, dispel common misconceptions, and recognize the significance of seeking legal counsel. In Connecticut, bankruptcy laws may have specific nuances that individuals should be aware of when considering this option. At Cohen, Burns, Hard & Paul Law Office, we are here to provide professional guidance and support throughout the bankruptcy process and address any questions or concerns you may have.
Common Misconceptions About Bankruptcy
One common misconception about bankruptcy is that it signifies personal failure and will destroy your credit. People will take drastic steps to avoid bankruptcy such as attempting to consolidate, which I have seen many people spend thousands of dollars without satisfaction, or drawing down on retirement funds which creditors could not otherwise reach.
Bankruptcy is a legal process designed to offer individuals relief from overwhelming debt and provide them with a fresh financial start including the fact that, while it will stay on your credit for a number of years, will nonetheless help to restore your credit in the ensuing months after the process is completed. Remember – you will look a lot more appealing to prospective post-bankruptcy creditors because you will have discharged much of your prior obligations, and would also be ineligible to file bankruptcy again for another eight years.
Another misconception is that bankruptcy will result in the loss of all assets. In the majority of cases, you will be able to keep your house, your vehicles and all the essentials of your household, as well as your retirement. The bankruptcy will discharge your personal liability on the underlying secured debts, such as mortgages or car loans, but the creditor retains their security i.e. mortgage deeds or titles to cars. As long as you pay the debts, you retain the car/home. If you default, while the creditor can foreclose or repossess, you would not be liable for any deficiency. In that sense, you actually can, ‘have your cake and eat it too!’
Why Legal Counsel is Essential
It is true that, as is the case in virtually any legal proceeding, and individual can represent his or herself. But navigating the process can have nuances and complexities which if not handled properly, can compromise the outcome. An experienced bankruptcy attorney can assess your financial situation, explain your options, and guide you through the process step by step. We can give you the benefit of over thirty years’ experience in the field, and do so at a very competitive and reasonable cost.
The General Process of Bankruptcy
The bankruptcy process typically begins with a thorough assessment of your financial situation, including income, expenses, assets, and debts. It is your obligation under bankruptcy law to make full disclosure of all your personal financial matters so we will make sure that you do not run afoul of this legal obligation. In the majority of cases, we strive to assist our clients in qualifying for Chapter 7 bankruptcy which entails an absolute discharge of all debts, [1] so the first step is determining whether you qualify. The following link would allow you as a prospective Chapter 7 debtor to assess whether your gross income based on household size, would qualify you to file:
https://www.justice.gov/ust/means-testing/20240401
Note that the income calculation would include the income of household members even if they are not part of the bankruptcy filing, usually a spouse but sometimes adult children or other relatives who may have earnings that contribute to the household in some fashion.
Common End Result of Bankruptcy
The ultimate goal of bankruptcy is to provide individuals and businesses with a fresh financial start. For many, this means eliminating or reducing debt, stopping foreclosure or repossession proceedings, and regaining control of their finances. While bankruptcy may impact credit scores in the short term, it is often a necessary step towards rebuilding credit and securing a more stable financial future.
Unique Aspects of Bankruptcy in Connecticut
In Connecticut, bankruptcy laws may vary slightly from federal regulations, particularly regarding exemptions and eligibility requirements. For example, Connecticut allows individuals to choose between state and federal bankruptcy exemptions, which can significantly impact the assets they are able to retain during bankruptcy. Connecticut now has a very generous homestead exemption which is $250,000.00 per person. So, if for example, a couple has a home with up to $500,000.00 in equity, each party may claim their exemption in total. The federal exemption is much smaller ($27,900.00 per person) but on the other hand, if your equity is slim, you can use up to $15,425.00 on your “wild-card” exemption which allows you to keep liquid assets without any categorical exemption, such as money in the bank, upcoming bonuses, tax returns, as well as assets for which you have exhausted your exemption. For example, if you do not own a home but have a nice $20,000 car with no loan, you could claim your federal motor vehicle exemption ($4,450.00) but put the balance under the wildcard ($15,425.00) leaving only an inconsequential $125.00 in non-exempt equity.
Conclusion: Seeking Legal Guidance for Your Bankruptcy Journey
Navigating bankruptcy can be a complex and emotionally challenging process, but with the right legal counsel, individuals can find relief from overwhelming debt and embark on a path towards financial stability. At Cohen, Burns, Hard & Paul Law Office, our experienced bankruptcy attorneys are here to provide personalized support and guidance every step of the way. Whether you are considering bankruptcy or have questions about the process, do not hesitate to reach out to our office for professional assistance. We are dedicated to helping you achieve a brighter financial future.
[1] There are certain exceptions to discharge, most notably taxes, alimony/support obligations, student loans and debts incurred by way of fraud or misrepresentation.
