John Ventura's on a mission - a mission to inform consumers about their credit, debt and rights in a bankruptcy.
The director of the Texas Consumer Complaint Center at the Houston Law School (where he is an adjunct professor) is also a board-certified bankruptcy attorney with 30 years of experience. And he is alarmed by what he sees going on inside and out of bankruptcy court.
Since the change in the bankruptcy laws in 2005, Ventura said, the number of bankruptcy filings has increased about 40 percent.
Before the law changed, Ventura said, bankruptcy attorneys would routinely help consumers for the cost of the filing fees plus $200. But the cost of filing for bankruptcy has skyrocketed as the new law became more complex. The net effect is that those who can least afford it must pay more to their lawyers to file the necessary papers.
Part of the problem is that consumers really don't understand when they're able to file - or what will be discharged if they do go through a bankruptcy. Ventura is the author of an excellent new book, The Bankruptcy Handbook: Everything You Need to Know to Avoid Bankruptcy, Get Rid of Debt and Rebuild Your Credit.
Consumers typically can file for two types of bankruptcy, Chapter 7 and Chapter 13. A Chapter 7 bankruptcy is a complete liquidation of debt. You can file for this kind of bankruptcy to discharge or wipe out most of your debt. A Chapter 13 bankruptcy helps you reorganize your debt. Consumers get three to five years to pay most of their debts.
If you owe more than $336,970 in unsecured debt (such as credit card debt), and more than $1 million in secured debt, you'll have to file for a Chapter 11 reorganization.
Before you are even allowed to file for bankruptcy, you are required to get a Certificate of Compliance, which essentially means you have gone through a pre-bankruptcy counseling session with a certified bankruptcy counselor. This costs about $50, Ventura says.
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 also requires you to go through a post-filing debtor education class while you're in bankruptcy.This class will last two hours and cost up to $100.
You should also file for bankruptcy if "your wages are already being garnished, and if your state's Child Support Enforcement Office is about to seize one of your assets, take money from your bank account, intercept your state or federal tax refund, or take some other action to collect your past due child support debt," Ventura notes in his book.
The reason you should file for bankruptcy is that this legal action stops the clock on all of these actions. They won't proceed until your bankruptcy has been discharged or the court gives that creditor the right to move forward to collect the debt. If you're about to lose your home, Ventura says, filing for bankruptcy stops the lender from evicting you and taking the home.
Filing for bankruptcy isn't always the right choice. If you have no assets, are over 65 years of age, aren't working and are living on your Social Security benefits or cash withdrawn from a qualified retirement account (such as an IRA), filing for bankruptcy won't help. One thing is certain: Filing for bankruptcy will stain your credit history for a long time.
To find an approved bankruptcy counseling agency, go to the Department of Justice's Web site, http:--www.usdoj.gov/ust/eo/bapcpa/ccde/cc_approved.htm.
Contact Ilyce Glink through her Web site, www.thinkglink.com, by mail at Real Estate Matters Syndicate, P.O. Box 366, Glencoe, Ill. 60022 or calling her radio show at 800-972-8255 from 11 a.m. to noon Sundays.