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Consumer Bankruptcy Law and Practice: 6.1.1 Explaining the Options to Clients

Whether, how, and when to file a bankruptcy petition is probably the single most important decision made in a bankruptcy case. Like most questions of legal strategy, it is rarely simple. It involves the interplay of a number of factors. Many of these are unique to each client; others turn on state law, custom, or practice in a community, or the provisions of the Bankruptcy Code.

Consumer Bankruptcy Law and Practice: 6.2.1.2 Protection of Property and Income from Unsecured Creditors

Bankruptcy is often the only sure way to protect a debtor’s property from execution by unsecured creditors. Bankruptcy may provide total protection for a home, car, or other vital property. The amount of property debtors are allowed to protect from creditors through use of exemptions in bankruptcy is, in many states, far greater than the amount they can protect in state law execution processes.8

Consumer Bankruptcy Law and Practice: 6.2.1.6 Litigation Advantages of the Bankruptcy Forum

An important factor to consider in opting for bankruptcy is the opportunity to litigate disputes with creditors in a federal court, which has at least initial jurisdiction over such disputes after a case has been filed.27 In some places the bankruptcy court may provide a far more sympathetic forum than the local state court, and it may be far more familiar with the applicable law.

Consumer Bankruptcy Law and Practice: 6.2.2.1 Generally

Despite all of the possible advantages that bankruptcy may provide, there are many valid reasons for choosing not to file a petition. Some of these concern problems in the cases of particular clients, and others relate simply to the fact that bankruptcy is not the only means to address a client’s legal problems and may not be necessary.

Consumer Bankruptcy Law and Practice: 6.2.2.4.2 Medical debts

Medical debts to doctors or hospitals with whom a patient would like to have a continuing relationship are often a source of concern. Particularly in small communities where there may not be many health care providers, clients may worry that a discharge will leave them with few options for future care.

Consumer Bankruptcy Law and Practice: 6.2.2.5 Clients’ Feelings of Moral Obligation

Another factor mitigating against bankruptcy may be the client’s personal feelings on the subject. This difficult subject, which is generally outside a lawyer’s training, must be discussed carefully and with understanding. Remember, it is not easy for clients suddenly to decide to seemingly discard those values that may have guided them since childhood.

Consumer Bankruptcy Law and Practice: 6.2.2.6 Cost of Filing a Bankruptcy Petition

Besides any attorney fees, bankruptcy carries an out-of-pocket cost for the filing fee, normally $338 in a chapter 7 case and $313 in a chapter 13 case.59 The chapter 7 filing fee may be waived by the court for a debtor unable to pay it.60 Debtors must also pay the costs of a consumer credit counseling briefing and a personal financial management education course, usually totaling $25 to $100, unless those costs are waived due to inability to pay.61 Occa

Consumer Bankruptcy Law and Practice: 6.3.1 Overview

Bound up with the decision of whether to file a bankruptcy case is the question of which type of bankruptcy offers the greatest benefit to a client. Although this decision may normally be changed at least once by converting the case after it is filed, it is nonetheless of obvious importance to ultimately settle upon the chapter offering the greatest advantages for the debtor.

Consumer Bankruptcy Law and Practice: 6.5.3.8 Less Common Reasons for Delaying a Petition

The situations described above are the most common scenarios in which the timing of the bankruptcy case can work to the debtor’s advantage or disadvantage. They are not the only ones. For example, if debtors have recently placed substantial amounts in education savings accounts, the amounts excluded from the bankruptcy estate under subsections 541(b)(5) and (b)(6) may be affected by a delay in filing. A quickly rising real estate market may dictate filing a bankruptcy case sooner rather than later so that the debtor’s home equity does not increase to an amount that cannot be exempted.

Repossessions: 2.2.1 History of Article 9 and Its Amendments

Article 9 of the Uniform Commercial Code (UCC) was approved in 1962, along with the rest of the UCC, by the Uniform Law Commission (then called the National Conference of Commissioners on Uniform State Laws or NCCUSL) and the American Law Institute (ALI). It has undergone significant amendment twice, in 1972 and 1999 (when the 2001 amendments were finalized).

Repossessions: 2.2.2 Substantive Overview of UCC Article 9

UCC Article 9 is the fundamental law regulating security interests and repossession of personal property. Article 9 offers a framework for determining when the creditor has a valid security interest, when and how it can repossess and dispose of the collateral, and the rights of the creditor and debtor after the collateral’s disposition.

Repossessions: 2.2.3.2 Effective Date of Revised Article 9

The drafters of revised Article 9 proposed a delayed effective date of July 1, 2001, in order to give as many jurisdictions as possible the opportunity to enact it.51 Most states adopted this effective date, although a few delayed the effective date by several months to a year.52

Repossessions: 2.2.4.1 Generally

Article 9 of the Uniform Commercial Code (UCC) applies to any transaction, regardless of its form, that creates a security interest in personal property or fixtures by contract.58 “Security interest” is defined at UCC § 1-201(b)(35)59 as an interest in personal property or fixtures which secures payment or performance of an obligation.