Here’s an email I got yesterday.

“Dear Mr. Weed,

“Just an update.  I did receive my clearance and thank you for your help.  I have a new question for you.  My mortgage on my house was included in my bankruptcy.  I have been paying it for the last year.  They recently changed my rate and raised my monthly payment by $1000 a month.  They offered me a refinance package that would only raise my payments by $400 a month.

“Here is my question.  If I accept the refinanced mortgage, am I still covered by the bankruptcy, or is this a brand new loan and would no longer be covered by my bankruptcy from 3 years ago. ”

The answer is good news.  The bankruptcy does still protect you.  As long as you do NOT sign a reaffirmation for the mortgage during your case (one lawyer says reaffirming a mortgage is “nuts”), then the law still protects you with that lender for as long as you own that house.

(It also protects you from any new company or debt collector who later takes over that loan.)

You can pay for three or four years; and then decide to move out and owe them nothing.  You can get a loan modification, pay for a while, and then change your mind and move out and still owe them nothing.

You can sign in blood that you promise to keep paying; and then change your mind and move out and you are still protected.

For how long? People ask me.  Until the house is paid for.  Once the house is paid for, you can’t give it back to the mortgage company. Why?  Once the house is paid for, there’s no mortgage company to give it back to.

(This is an improvement that came into the law in 1978.  Under the Bankruptcy Act of 1898, a new promise brought back the old debt.

(Now when you get back to good credit, if you refinance the loan with a new mortgage company–maybe to get a better interest rate–then you have a new loan.  And you are back on the hook.)

If you do change your mind and move out, make sure you keep paying the HOA.  After bankruptcy, you still owe the HOA for as long as you are the owner of the house.

After filing bankruptcy, people say they sleep better. That’s one of the exciting findings of a new survey, done through SurveyMonkey.com, of those who filed bankruptcy in 2009 and 2008.

In all, 93% said life was better because they filed bankruptcy.  Nearly all, 88%, said better sleep was one of the reasons why.

Eighty eight percent of people in recent survey said sleeping better was one reason life was better because they filed bankruptcy.

Studies show that financial stress plays a major factor in sleep disorders.

Lack of sleep, in turn, increases your risk of cancer and heart disease, and affects both your mental and physical abilities.

Sleep is so important for everything we do.  So it’s no surprise that people mentioned it as one of the big reasons their lives are better because they filed bankruptcy.

Here is a typical comment from Allana, who filed bankruptcy in the winter of 2009.  ”I’m no longer stressed out all the time, I can sleep at night, and I’m just happier in general.”

When the survey asked people what advice they would have for you, here’s what some of them said.

Erik:  ”Filing bankruptcy gives you a fresh start and can bring peace to your household.  It was my last hope.  I wish I had done it sooner.”

Diana:  ”I am living life again, not stressed and felling hopeless.”

Darren & Naemi:  ”We were very scared, but decided to go ahead with our decision; and we are so glad that we did.  Now we can sleep well like normal people.”

Susan:  ”Saved my life and made the stress go away.”

The survey comments, looking back over two or three years, are backed up by what people tell me almost every day.  ”After I met with your paralegal, I got my first good night’s sleep in months.”

The survey was conducted September – December 2011.  Participants were one hundred eighty four people who filed bankruptcy with the Law Office of Robert Weed in 2008 and 2009.

Filing bankruptcy gets rid of most of your debts; but it does not necessarily get rid of most of your problems.

For some people, real estate that they already moved out of is a problem.  Filing bankruptcy does not mean the bankruptcy court takes over your house.   Unless the bankruptcy trustee thinks they can sell it and make some money to pay people off, the trustee will abandon the house.  That means, it goes back to you and the bank.

It goes back to you and the bank, meaning you are still the owner.  You are the owner until the bank takes over; and sometimes the bank is in no hurry.   So you still have all the obligations of the owner.  Paying the HOA or condo associations; mainting code standards (like cutting the grass), and paying the real estate taxes.

For several years I’ve told people–be sure you pay the hoa; and make sure you cut the grass; but you can probably ignore the taxes.

Why did I tell people they could safely ignore the real estate taxes?  At the foreclosure sale the county will require the taxes to be paid then, and the county will wait for the foreclosure.

What I’m seeing around here is that the counties are tired of waiting.  In the last two months, I’ve seen two people get garnished for real estate taxes on homes that are sitting empty, waiting for foreclosure.

"I'm changing what I tell people about paying the real estate taxes after bankruptcy."

Why this change?  The counties are desperate.  Counties get a whole lot of their revenue from real estate taxes.  With real estate value down, county revenues are down.  The Obama stimulus plan made up a lot of the gap.  Republicans in 2011 blocked doing more of that.

So the counties are desperate.  And they are starting to garnish the homeowners for the unpaid real estate taxes.   The county needs the money NOW and they don’t have to take your to court to garnish you–they can just do it.

So, should you pay the real estate taxes? Not if the bank is paying, which they often do–even if you’ve stopped paying the bank.

Before you do anything, call the county and see if the bank has paid them.

But if the bank isn’t paying, should you?  It’s certainly the safer choice.

You probably want to make a payment arrangement.  Because if the bank does finally foreclose, then the buyer will have to catch up and you’ll be off the hook.  You don’t want to pay any faster than you have to.

(Of course this reinforces my advice: until there’s an actual foreclosure sale, DON’T MOVE OUT.)

PS  Nothing is more local than county government.  Lots of people all over the country post questions on my website.  And I’m glad to answer what I can.  (Thank you for your interest, too.)  But your guess will be better than mine about what county governments are doing in PA or NV or FL.  I don’t even know anything about Virginia, away from the counties in the DC area.  Sorry.

I’m one of a handful of lawyers in the country who promises to fight the credit bureaus–sue them if necessary–after your bankruptcy is over.

I want to make sure that all the debts discharged in your bankruptcy are reported by the credit bureaus as “discharged in bankruptcy.”  That should be automatic, but it’s not.  Let me tell you how I found out.

This young couple drove up from North Carolina, sat in front of me, and pounded on my desk.   It was 1999, but I still remember.  ”We filed bankruptcy with you in 1996; our credit report still isn’t right.  You didn’t finish your job.”

Up ’til that time, I had never looked at an after-bankruptcy credit report.  Never talked about it with any other lawyers;  never had it come up at any of our meetings or conventions.

But when I thought about it, these folks were right!  When a bank, or car dealer or mortgage company wants to know if bankruptcy cleaned up your credit, where do they go?  Do they look at the records of the bankruptcy court?  No.

They look at your credit report.

If the credit report isn’t right, I had to agree the lawyer (me) hadn’t finished the job.

By 2001, I had seen hundreds of after-bankruptcy credit reports.   And I was shocked.  Three of the major credit card companies constantly ignored the bankruptcy.  They left late status, charge offs, past due balances just parked on people’s credit reports.

A big reason it took people seven years to get back to good credit, is most people NEVER got their credit reports right.  The problem wasn’t the bankruptcy.  It was those bad debts, charge offs and past dues that were left parked there.

The more I found out, the madder I got.  I started suing the creditors and the credit bureaus.  I urged other lawyers to sue them, too.  I spoke on this twice at the National Convention of the National Association of Consumer Bankruptcy Attorneys (NACBA).  And once at the credit report conference of the National Association of Consumer Advocates (NACA).

Today things are a lot better. Two months after bankruptcy, a little more than half of the people now have their credit reports right. That still means a little less than half the people, do not have their credit reports right.

Today, things are better.  Within two months after the bankruptcy is over, a little more than half the credit reports I see now are right.

But that still means, a little less than half the credit reports are not right.    When your case is over, there’s about a one in three chance that at least one of your debts will be parked on your credit report as a bad debt.  It will look like you still owe the money.

A handful of lawyers have been suing on this for the past seven or eight years.  A couple of the top credit report lawyers in the country also got involved.  My good friend Charles Juntikka, from New York City, brought in David Boies, who is famous for doing billion dollar law cases.

With all that, still three or four people out of ten people coming out of bankruptcy will have at least one creditor who says you still owe the money.

I still work with all our clients, to fix their credit reports when your case is over.  If there’s a bad debt showing there, we draft up a letter for you to sign, asking the credit bureaus nicely to fix it.  If that doesn’t work,  we write up a second letter.

If two letters don’t work, we sue.   On average, we sue credit bureaus two or three times a month, to get people’s credit reports right.

Recently, we took a look at the records of all the courts here in Northern Virginia.  I wanted to see who else around here sued the credit bureaus.  As far as I can tell, we are the only bankruptcy lawyers in Northern Virginia that do.

If you select me to be your lawyer, and get our help to get your credit report right, you can thank those people who drove up from North Carolina and told me I didn’t finish my job.

About a month after we file your bankruptcy papers, we go with you to your bankruptcy hearing. The U S Trustee’s office here in Alexandria, Virginia schedules fourteen hearings an hour.  For many people, the bankruptcy hearing takes three minutes or less.

You want to be one of the people who is in and out in under three minutes.

Karen, from Woodbridge, says "You could tell the trustee at the meeting of creditors had alot of respect for Mr Weed and his associates."

There are three different ways you can get in trouble at your bankruptcy hearing.  You want to avoid all three.

First, your creditors can come and ask questions, getting ready to object. (Your bankruptcy hearing, in fact, is called the “meeting of creditors.”  For most people, there are no creditors at the meeting.)

When creditors do come, what are they looking for? Creditors most often object if they think you ran up your credit cards when you knew you were planning to file bankruptcy.

That’s one reason we have our clients get their credit report from Experian.com/reportaccess. That’s the best internet credit report for balance history. And studying your balance history, we watch out for changes in your account balance that might trigger a creditor objection. (And, we plan a strategy, if something looks bad.)

The second way to get into trouble is with the Office of the United States Trustee. The US Trustee is part of the Department of Justice. Their job is to look for mistakes and fraud in your bankruptcy papers.

The most common mistake is calculating your bankruptcy means test incorrectly.  Your means test is a formula, put in the law by Congress in 2005, that determines whether you are making too much money to file Chapter 7 bankruptcy.

That’s why we take all the time you need to go over your family budget in detail. At the beginning of your case.   Many people tell us they are living paycheck to paycheck–but their first budget shows they are drowning in cash.  We spend the time it takes to figure out where you really need to spend your money–and how to put that into categories that the law allows.  (This blog tells you more about that.)

What’s worse than having your bankruptcy opposed because of a math mistake? Having it opposed for fraud.  The U.S. Trustee can order a random audit of your bank accounts for the last six months.  If there’s something that would be hard to explain, maybe we need to wait another few months.

The U.S. Trustee also runs a computer search on some people–looking for hidden property.  We run a computer search on you, too.

We want to spot possible problems before they are problems.  ”What’s this house on Main Street, in Disputanta?”

“That’s my grandfather, we have the same name.”  Ok, we’re ready for that if it comes up.

“What’s the property in your name in Luray?”

“Oh, I forgot to tell you my mom deeded the house over to me and my brothers.”  Well, then we should probably hold off on the bankruptcy until we are sure it’s not going to cost mom her house.

I was waiting for one our hearings to come up, about a year ago, when the U.S. Trustee asked the person in front of us, if he knew anything about property at a certain address.

“No I don’t,” was the answer.

“The deed shows that it is in your name,” said the U.S. Trustee.

“Not mine,” was the anwer.

“Let me show you this photograph.”

It went down hill from there.  Ouch.  That guy was looking at a perjury prosecution.

We spend a lot of time with you at the beginning of your case–when we first meet.  Asking questions, answering your questions, and going over our forms.  We want to make sure we have complete information about you and your finances–so you don’t have any problems with the U.S. Trustee.

Usually, if things are going right, there will be no creditors at the meeting of creditors; and the U.S. Trustee won’t be there, either.

But you will always see the appointed Bankruptcy Trustee for your case.  In Alexandria, there are five men and two women who are appointed Bankruptcy Trustees.  The court’s computer randomly assigns your trustee.  (Except that Klinette Kindred cannot be your trustee if I am your lawyer, because before she was a trustee, she was a lawyer in the Robert Weed law firm.)

The Bankruptcy Trustee conducts the meeting of creditors.  He reviews your file carefully before the bankruptcy hearing, so in most cases has only a few questions.

The Bankruptcy Trustee is looking to see if you had more property than you are allowed to keep under Virginia law, so that some of it can be sold to pay part of your debts.  Knowledge of Virginia exemption law, and careful planning, can usually avoid the trustee selling any of your property.

Also, like the U.S. Trustee, your Bankruptcy Trustee is also looking for mistakes or possible fraud on your bankruptcy papers.

The Bankruptcy Law Firm of Robert Weed has done more than twelve thousand bankruptcy hearings.  (We’ve in the the room watching another fifty thousand.)  We use our experience to make sure you are prepared for yours.

Teresa, from Falls Church, gave us five stars and wrote, "I also knew sitting in the lobby at the bankruptcy court in Alexandria that we made the right decision."

In the fall of 2011, we did a three year after-bankruptcy survey of our former clients.  We asked them to look back and tell us how we did. They gave us 4.6 stars (out of a possible five) for the way we handled their bankruptcy hearings.

Our current clients also say good things.  Karen, from Woodbridge, gave us five stars, and said,  ”You could tell the trustee at the meeting of creditors had alot of respect for Mr Weed and his associates.”

Teresa, from Falls Church, gave us five stars and wrote,  ”I also knew sitting in the lobby at the bankruptcy court in Alexandria that we made the right decision. Some attorneys were presenting their clients with issues and documents that were presented in our initial consultation with our lawyer at Mr. Weed’s office! This right before the actual hearing!!”

Bonnie, of Leesburg, gave us 4.6 stars.  She said, “After watching other individuals there with other attorneys, I am so glad I made the choice I did.”

(I should add that every case is different.  And your results depend on the law and facts of your case.  Sometimes we know people are going to run into problems that will pop up at their hearing.  If bankruptcy is what they need to do, even with possible opposition, and we just prepare the best we can, document our position, and go ahead.)

A lot of people who think they need a business bankruptcy really don’t.   They often need to do a personal bankruptcy, instead.  And they need to just dissolve their LLC or S corporation.  Does this apply to you?

You probably don’t like to hear from me that you need to file a personal bankruptcy.  After all, Donald Trump has been through three or four business bankruptcies and NEVER filed a personal bankruptcy.  Why?

One reason is Donald Trump has business lawyers who make sure he doesn’t put a personal guarantee on his business debts.  What about you?  Did your landlord, your bank, the yellow pages, and your supplier make you sign a personal guarantee?  (Mine all did.)  If you have a personal guarantee then your biggest problem is they will come after you,  personally, for those debts.  Filing a bankruptcy for your business does not help you with that.  Not one bit.  Ouch!

If you are personally liable for business debts that you can’t pay, you need to look into a personal bankruptcy.

Do you need a business bankruptcy, too?  It depends.

Are you Donald Trump, with seven casinos?  A dentist with hundreds of thousands of dollars in equipment?  A manufacturer, with dozens of people working for you.  Then the answer is, yes.  You probably need  a Chapter 11 business bankruptcy.  (I don’t do Chapter 11.  In Northern Virginia, you might want to talk to James Reynolds, or Daniel Press. )

If your business is you, some tools, and your truck, then you most likely do not. Or suppose you a free lance photographer, with camera equipment.  Or a graphic designer, with expensive computers.  Again, most likely there’s no need for a business bankruptcy.

And if you have gone out of business completely, then you almost certainly do not need to file a bankruptcy for your business.

(North Carolina bankruptcy lawyer Billy Brewer, one of the smartest people I know, says a bankruptcy for an out-of-business corporation like an expensive funeral for a ghost.   Since there’s no body, no grave site, and no mourners, what’s the point?)

I saw where a well known, well respected, business lawyer charged $2500 to do a Chapter 7 for an excavating business that had been closed for over a year.  (He probably thought he was cutting them a break, because that $2500 was low for the amount of paper work required.)

On the other hand, you can close an out of business corporation in Virginia by filing two papers, each with a $10.00 filing fee.   That’s s savings of a lot of time and $2480.00.

What are those papers?   They are the “articles of dissolution” and “articles of termination of corporate existence”.  Both forms can be found here.

If your business is set up as an LLC, there’s a solution that’s even cheaper.  You can file a “statement or resignation of registered agent of a limited liability company” found here–there’s no fee!–and then if no new registered agent is appointed, you’ll get a notice after thirty days and then automatic cancellation two months later.

You can do this before or after your personal bankruptcy–but there are reasons why you might want to do it before.

Suppose your S corporation owns an F-350 truck, paid for, that you use to bring tools and materials to your job sites.  If you file a Chapter 7 bankruptcy for your business corporation, the bankruptcy trustee will take and sell your truck.  You don’t want that.

If you file a Chapter 7 personal bankruptcy, the bankruptcy trustee will take over your corporation, and then sell your truck.  Same result.  You still don’t want that.

Now suppose you file those two papers and close your corporation.  Or that one paper so they close your LLC.  Now the truck belongs to you.  That’s a lot better.

Under Virginia law, a “poor debtor”–that’s you–can protect from the bankruptcy trustee your motor vehicle, worth up to $6000 and your tools worth up to $10,000.   Your F-350 is your vehicle, and it’s also one of your tools.  Now you can protect it because it belongs to you, not your corporation or LLC.    Sweet.

And you, the person, can continue doing what you did as an S corporation or LLC.  Painting, dry wall, lawn service, whatever.

Then, if your accountant or business lawyer thinks you should, after a year or so, you can set up a new S corporation or LLC.

(You do not want to set up a new business right away after you dissolved the old one.  You should not go straight from Weed’s Lawn Service LLC to Weed’s Lawn Service, Inc.  Why not?  Under Virginia law, the new corporation or LLC would be liable for the debts of the old one, if it is a “mere continuation” of the old business.   You want the trail to grow cold, before you go back to a corporation or LLC.    But’s it’s ok to stay in business as yourself.  And you can stay in business as a dba:  Robert Weed dba Weed’s Lawn Service.  Your personal bankruptcy protects you.)

I don’t take the “car wash” approach to bankruptcy.

Car wash approach?  What’s that?

At the car wash, you drive up, pay them, they run your car through, and you drive off.  The car wash doesn’t care where you have been, or where you’re going.  They don’t care what happens once the car wash is over.

The car wash doesn't care where you've been or where you are going. Your lawyer should.

As your lawyer, I do care about those things.  I care about where you’ve been and where you are going–that can have a lot of impact on when and how I file your papers.  And I certainly care what happens to you afterward: if somebody tries to take away from your the new start, I sue.

Let me give you an example.  Late last month a couple came to see me at the recommendation of a friend.  They had had the “car wash” experience when they filed bankruptcy in 2009 with another lawyer.

About six months later,  they got contacted on a yellow pages account, from a small business they had.  The yellow pages said they would sue their business; and sue them personally, as guarantors.

They didn’t even bother to talk to the lawyer who had done their bankruptcy–he had told them (after the personal bankruptcy was over), that they still needed a business bankruptcy, too, and he didn’t do business bankruptcies.

Not knowing where to turn,  they decided to try to work something out with the yellow pages company.  They weren’t able to work anything out and the yellow pages eventually got a judgment against them and their business.  Then a friend steered them to me.

We spent an hour together.  I told them they did not need to file a business bankruptcy.  A chapter 7 for their business would do exactly nothing for them.  A corporation cannot get a Chapter 7 bankruptcy discharge.  They did need to set up a new business; and working with their business advisers, select the best time to start doing their business in through the new business.  (I gave them my blog on that.)

Second, it was an outrageous violation of the law for the yellow pages to sue them personally!  Business debt or not–their personal liability was cleaned up by their personal bankruptcy!

How does this end up?  Instead of paying the yellow pages on this debt, the yellow pages will have to pay them–for violating their after bankruptcy rights.

But they would never have found that out–not from a lawyer who handled their case like a car wash.

Planning to file bankruptcy?  You will need to round up bank statements.  You’ll need them at the beginning of the bankruptcy process; and you’ll need them again near the end.

Since you need to tell the bankruptcy court about all your accounts when you file your bankruptcy papers, you want to talk them over with your lawyer early–in time to identify and fix any problems.

Bring bank statements on every account in your name, when you first meet with your bankruptcy lawyer.You will need to tell the court about every account your name is on. So you and your lawyer needs to know what those accounts are.

Does that include the account with only five dollars that you never use any more?  Yes.

Does that include your mother’s account that she “just put your name on in case of emergency”?  Yes.

Does that include the account where only your wife’s paycheck goes, but is in both names?  Yes.

Does this includes credit unions, too?  Yes.

Does it includes accounts you have with your minor children?  Yes.  And also college savings plans you have for them.

Does it includes money markets?  And investment, brokerage accounts?  Yes and yes.

More than just banks, it includes every place you have money.

When you first talk to your lawyer, you need to talk about all those accounts.  So bring bank statements–and other accounts–with you.

Is your mother’s $200,000 life savings–in the account you are on “for emergencies”–going to be a problem?  You want to talk that over when you first meet with your lawyer.  Do not wait and bring it up when you are signing the final draft of your bankruptcy papers.

The same thing with your wife’s account that’s “in both names.”

When you bring in the bank statements, then you are not guessing.  You and your lawyer can see whether, and how, your name is listed on each account.  And how much money goes through it every month.

Both of those can be important to getting your bankruptcy approved–without having the bankruptcy trustee take some of your money.  (Or worse, take some money that’s not yours–that belongs to someone else in the family.)

Getting through bankruptcy, without losing any money, may take some planning.  Your lawyer may have your wife change her direct deposit to a different account–one only in her name.  Your lawyer may want mom to take all the money out and put it in a different account.  Maybe the lawyer will just want proof of where mom got all that money.

Besides the bankruptcy trustee maybe grabbing those accounts, some of your creditors might try to get to them.   Your lawyer will want to compare your accounts with your creditors–and may suggest you change banks for that reason.

All that takes time and planning–so make sure you bring in all those bank and other account statements at the beginning.

Toward the end of the bankruptcy process, you are required to show those statements to your bankruptcy trustee.  What statements?  Every one that your name is on.

Those will mostly be the same accounts that you went over with your lawyer at the beginning, but maybe with some changes.  If you have accounts that you don’t use, your lawyer may have told you to close them.  If your accounts were in a bank where they weren’t safe, you may have new accounts now.

The bankruptcy trustee is looking at your account statements for two reasons.  First, because the law (Bankruptcy Rule 4002) requires it.  Second, to see if you had too much money on the day you filed your bankruptcy case.  (“Too much money” meaning enough that the bankruptcy trustee can grab some of it.)

Sometimes getting those bank statements is a problem, if you wait until after your case is filed.  Some banks, and especially some credit unions, stop sending statements when they get notice of the bankruptcy.  And they may cut off your internet access, too.

(Stopping the statements and cutting off internet access is most likely a problem if you owe money to that bank.  They don’t want to be violating the bankruptcy law by trying to collect your old debts, so they just stop sending you ANYTHING.)

I recommend a two step process.  First, when you come in for your court preparation appointment, bring your most recent bank statements.  Those may be a few days, or even a few weeks old.

Then, the day after your bankruptcy case is filed and your papers go down to the court, get an internet print out from the end date of the last statement on through to the day after your bankruptcy is filed.  Take care of that right away–in case the banks and credit unions cut off your internet access when they get notice of the bankruptcy.

Taking care of bank statements–and all account statements–both early and late in the bankruptcy process, is a key to have your bankruptcy case go smoothly.

The 2005 bankruptcy law is unfair to families.   If you have children, you need to fill out your bankruptcy budget very carefully.  Here’s why.

The means test in the 2005 bankruptcy law is easy on singles, and hard on big families.    Here’s an example:  a household of one is allowed $300 for food.  A family of four is allowed $757.   That’s ten dollars a day to feed the first person in the family–$5.07 a day each for the next three.  (When you go above four, it drops to $4.80.)

Congress set this up so that just trying to take care of your kids is called bankruptcy “abuse.”

There’s not much we can do about the unfairness of what the bankruptcy law allows for food and clothing.   But, other things you spend money on for your children, you are allowed to claim your real cost.

Those are the areas where you need to focus when you fill in your bankruptcy budget.

Child care.  Most families pay for child care by the week.  And then multiply by four to calculate the monthly.  But you should multiply by 4.333.  Because there  are more than twenty eight days in a month–usually thirty or thirty one.   So don’t short yourself.  Budgeting those extra three days could be the difference between having your bankruptcy approved and having it turned down.

Besides pre-school or after school care, budget for baby-sitting.  Most families, maybe once a month, both mom and dad have to go somewhere, together, and you need a sitter.   That twenty bucks or so goes in your bankruptcy budget, too.

Do you send the kids to summer camp?  That’s child care–and goes into your child care budget.

Are the kids lagging in school?  Let’s make sure we take advantage of that.  (In bankruptcy everything is upside down–bad is good; good is bad.)  So having trouble in school is an advantage in bankruptcy.

Kids struggling in school? Money for tutoring is allowed in your bankruptcy means test budget.

You are allowed to budget $125 per month to pay for schooling.  Now if the kids are in full time private school, at $125 a month doesn’t begin to cover it.  But if the children need tutoring to get through a tough class–or need to pay for summer school to catch up–that could be that $125 per month you are allowed in your bankruptcy budget.

(This schooling budget only covers kids up through age 17.  Congress says they are on their own for college.)

Are the kids having big trouble in school?  If the children are “challenged,” then the $125 per month cap doesn’t apply.  Your bankruptcy budget for education for employment of physically or mentally challenged children is unlimited.   (And goes past age 18, too.)

I see some parents who put their kids in private school because they couldn’t handle the public schools.  In that case, you can claim that whole expense.

Health and medical.   The bankruptcy means test allows you $60 per person for health and medical expenses.  Most people think they spend a lot less–but actually spend a lot more.

A lot of what you think of as grocery money can actually be counted at health care.  And for healthcare, unlike groceries, you can claim above the allowance.

Let’s start at Walgreens or CVS.    Vitamins–that’s health care.  Tylenol, allergy medication–health care.   Shampoo and toothpaste goes in the grocery budget–but anything stronger is health care.   Does your dentist recommend Listerine–that’s healthcare.

Lots of families are spending $20 or more per person on over-the-counter stuff that you can claim in your health care budget.

Prescriptions.  Should be obvious, but don’t leave it out.

Glasses or contacts.  According to the Vision Council of America, approximately 75% of adults use some sort of vision correction.   I’m spending over four hundred dollars a year–thirty five dollars a month–on glasses.  Your children may be spending more–because they lose or break them.

The dentist.  Just routine dental check ups can cost a couple hundred dollars a year.  Maybe half the people I talk to about bankruptcy tell me they are avoiding the dentist because they can’t afford what it will cost.  Budget that in.

You are allowed to claim the dental work you’ve been putting off  as health care.

Braces.  Approximately 4 million people are in braces in the US at any one time.    Orthodontics can cost a couple hundred dollars a month.  If the children need braces, put it in your budget.

Runny noses and broken arms.  In addition to preventive care, children (and adults) catch cold and flu, break their arms, and end up at the doctor’s one way or another.  Allow something for the unexpected in your bankruptcy health care budget.

Mental health.   A Gallup-Healthways Well-Being Index survey conducted in 2009 revealed that about 40 million American adults had recently been diagnosed with depression.

When life knocks you down, there can be changes in the chemistry of your brain.  People need help–counselling or medications or both–to get back to their right mind.  Things that caused your financial problems–unemployment, break-ups, other health problems–can also bring on depression.

If depression is impacting your family, be sure to add that to your health care budget.  (And be sure to take care of it, too.)

Don’t forget these categories

Charitable giving.  Most people have a good handle on what they give to their church, their favorite cause, or other regular commitment.

But if you have children (or even if you don’t), you get hit for donations for Girl Scout cookies, the high school band, and that kind of thing.  I’m guessing most families spend at ten dollars a month on these neighbor-to-neighbor charities.

Elderlies.  Along with the family in your home, many of us are helping out parents or grandparents.  One of the very few good changes in the 2005 bankruptcy law, help for elderly (or disabled) family members is now expressly ok.  (This includes family overseas.)  

To get your bankruptcy approved, we need to show the court where you need to spend your money.  People who come to talk to me about bankruptcy have been living from paycheck to paycheck–usually for a long time.  But they are often so stressed, they really don’t know where the money has been going.

I hope this article helps you think clearly about your budget–so we can get your bankruptcy approved.

When people talk to me about filing bankruptcy, I often tell them to change banks.

Here are three reasons.

1.   If you have money in a bank you owe money to: change banks.  A bank is allowed to pay themselves for money you owe them.  If you have money in Bank of America and you have a mortgage, or equity loan or signature line with them, they can grab your money to pay themselves.

Credit Unions are especially quick.  And credit unions can also offset credit cards, too.  (Banks are not allowed to do that.)  As a precaution, get your money out of any bank you owe money to.

"Before you file bankruptcy, here are three reasons to change banks."

2.  If you have money in Wells Fargo: change banks.  Even if you don’t owe them any money, Wells Fargo will freeze your bank account when they hear about the bankruptcy.  They think bankruptcy law requires them to do this–even though no other bank thinks that way.  (Henry Sommer, former president of the National Association of Consumer Bankruptcy Attorneys, jokes that maybe they just do it to collect bounced check fees.)

Whatever the reason, close your account at  Wells Fargo.

3.  If you are in danger of garnishment: change banks.

Do you have a warrant-in-debt or other court paper?  Once a creditor has a judgment against you, they can garnish your bank account.

How do they know where you bank?  They will look at the last check you wrote them–maybe a year or more ago–and they will hit that bank.  So, make sure when they do that, you don’t have any account there any more.  (Just getting a different account number at the same bank doesn’t work. )

Where should you go?  I like to tell people the universe is full of banks.  As long as you don’t owe them any money, and it’s not Wells Fargo, and you haven’t banked there before, any bank will do.

(Some people are afraid as soon as they open a new bank account, everyone will know.  That’s not true.  This is still America.  Your private business is still, mostly, private.)

Some people’s credit is so bad they have trouble opening a new account.  If you are worried about that, try TD Bank.  They will open an account for people who can’t get one anywhere else.  (People also tell me they really like TD.)

Here’s one thing you should not do.

Don’t put your money in someone else’s bank account.  That is not allowed.  If you put your money in someone else’s name, you can lose your bankruptcy discharge.  When your bankruptcy is over, the court would tell everybody you owe money to, that it’s open season on you again.   Don’t do that.

While we’re talking about bank accounts, close your orphan accounts.  You know, those accounts that still have $5.00 in them from when you used to bank there, where you used to live.  Close them.

When we go to the bankruptcy court together, you have to turn in account statements for all your accounts.  You don’t want to be fumbling around with six accounts when you only really need one.  You also don’t want to get sent home from court to look for that last account statement on the account you never use.  Close them!  You’ll save yourself (and me and the bankruptcy court) a lot of headaches if you take my advice on that.