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Unless you take control of your finances when they first start spiraling out of hand, you will find it very difficult to manage them later. Despite your best efforts, bankruptcy might be the only way you might be able to get rid of your debts. However, filing for bankruptcy is a decision that can be quite emotional as well as confusing. Since most of the legal jargon goes above your head, Dallas based bankruptcy law firm Recovery Law Group says that hiring a lawyer is the best way to deal with bankruptcy. If you have not yet consulted with a lawyer, you can call 888-297-6023 to discuss your case with experienced bankruptcy lawyers.
The primary thing before going ahead with bankruptcy is to know what is involved in the procedure. When you file for bankruptcy, you are declaring to the court that you are in no position to pay your debts. The court-appointed trustee inspects your assets and liabilities to understand which debts can be discharged. Once the court is assured of your inability to pay your debts, you can declare bankruptcy. Filing for bankruptcy also puts a hold on foreclosure, repossession or wage garnishment as well as other collection actions of the creditors. However, it is important to realize that certain loans are not discharged in bankruptcy. These include:
- Child support and alimony
- Student loan debt
- Government debts like fines, penalties, taxes
- Any expensive item (car, jewelry, boat, ) purchased just a few days prior to a bankruptcy filing
Despite putting an end to creditor actions including suing you, you might have to pay back some debts, depending on which chapter of bankruptcy you have filed under.
Bankruptcy Chapters
The most common bankruptcy chapters are:
- Chapter 7 – The courts can sell all non-exempt property, in this case, to pay back your creditors. Any remaining debt (unsecured, nonpriority) is deleted. Though bankruptcy discharge is given within 3-6 months, the downside of this bankruptcy chapter is that you might end up losing your home (or the equity in it) as well as your car if it is not covered in the exemptions. Chapter 7 bankruptcy filing is available to those people who don’t have enough income to pay back their debts. This bankruptcy chapter remains on your credit report for a duration of 10 years.
- Chapter 13 – This chapter involves repayment of your debts through a court-approved Over a period of 3-5 years, you end up paying some portion (or the entire amount) of your debt. You can protect your assets (home, car, etc.) and even pay previously due mortgage payments through the repayment plan. This bankruptcy stays on your credit report for 7 years.
Apart from these two chapters, Chapter 11 is used for business bankruptcy filing, while Chapter 12 is for a bankruptcy filing by fisherman and farmers.
What happens when you file for bankruptcy?
Filing for bankruptcy is a tough and emotional decision which can have ramifications in various aspects of your life. For starters, bankruptcy information is public i.e. banks, business associates, potential employers, etc. can have a look at your bankruptcy details. Once you file for bankruptcy, you might find it difficult to get any loan, even after a bankruptcy discharge. Your credit score hits hard and you might have to strive hard to make amends after getting a bankruptcy discharge.
Filing for bankruptcy also involves various costs. Apart from the attorney’s fees, you need to pay $310 in bankruptcy filing fees for a Chapter 13 case. The attorney might charge somewhere between $1,500-$6,000 for this bankruptcy chapter! In the case of Chapter 7, the filing fees is $335 and bankruptcy lawyer might charge $835-$3,835 for their services.
Preparing for bankruptcy is important
Once you have come to the realization that bankruptcy is the only way out for you to get rid of your debts, it is important that you are aware of the requirements of the process. Before filing for bankruptcy, you can look for other debt-relief options like debt settlement, debt consolidation or lowering of interest rate by the creditor. Cutting down on extra expenditures, taking up another job, etc. are some other ways how you could avoid bankruptcy.
You could opt for financial coaching where an impartial perspective would be provided with respect to your financial situation. Organized financial paperwork might come in handy when you talk to a lawyer or a financial coach. Get all your debts organized and list every one of them including child support and student loans etc. Trusting professionals is extremely important if you wish to get rid of your debts. Seek the counsel of experienced bankruptcy attorneys Dallas to get your bankruptcy successfully discharged.