While bankruptcy can provide relief and a fresh start from most debts, it is also considered the "debt option of last resort".
Filing for Bankruptcy
Filing for bankruptcy can be a difficult pill to swallow, especially if you consider yourself a responsible individual. However, there is some good news: The stigma surrounding bankruptcy is largely gone, especially in the wake of the recent recession, and many people opt to take advantage of bankruptcy laws that have been enacted for their protection. This article will help to explain what goes into filing, and provide you with the bankruptcy information you need regarding what to expect during the process.
Make sure bankruptcy is your last real option.
While bankruptcy offers a financial clean slate, it's important to recognize that a bankruptcy will appear on your credit report for 10 years. The recently amended US Bankruptcy Code states that an individual who is considering bankruptcy must first obtain some type of credit counseling. This counseling is designed to ensure that bankruptcy is truly the ONLY viable option, so that the individual is not harming his or her credit any more than is absolutely necessary.
To review debt relief alternatives to bankruptcy in California and to get a free debt relief analysis, along with a free savings estimate, simply answer a few online questions. It's free and there's no obligation.
Determine which type of bankruptcy is right for you.
As an individual filing for bankruptcy, you'll most likely choose between two types: Chapter 7 and Chapter 13. Chapter 7 involves the liquidation of assets in order to pay back creditors, while Chapter 13 revolves around debt consolidation so that it can be paid off month by month. Your unique financial situation, especially when it comes to the assets you have and want to protect, will ultimately determine which bankruptcy you decide to file for.
A trustee will work to determine if, in the case of Chapter 7, all of your assets are exempt. If they are, a "no distribution" will be filed with the courts, meaning nothing is going to be liquidated. However, if the trustee determines that you do indeed possess non-exempt items, these can be seized and liquidated to provide payments to your creditors. Depending on your particular assets, you may or may not have to pay back creditors when filing for Chapter 7, but with Chapter 13, you will have to pay back your creditors as much as possible over a determined three or five year period.
To review debt relief alternatives to bankruptcy in California and to get a free debt relief analysis, along with a free savings estimate, simply answer a few online questions. It's free and there's no obligation.
Decide how you want to file.
You can decide if you want to file for bankruptcy yourself or with the help of a trusted bankruptcy attorney. And while some people do choose to go it alone, we recommend hiring a bankruptcy lawyer who can answer all your questions, determine which Chapter is right for your financial situation, provide you with the necessary bankruptcy forms and help you complete the mandatory "Means Test" for bankruptcy filing.
Explore the costs involved.
Lawyers charge different amounts for their services based on several factors. While some charge a flat fee for all the dealings pertaining to your bankruptcy case, others charge based on the amount of debt you owe (we recommend going with the flat rate option in almost every instance). In general, a lawyer's services usually run between $1500 and $2000, but depend on where you live and other factors.
In many instances, those who file for bankruptcy don't have the financial means to pay the filing fees. In Chapter 7 cases, lawyer fees cannot be grouped along with other creditors, so these fees must be paid in full before completing filing. If this doesn't happen and you still owe money to your lawyer after filing, it becomes uncollectable, and so your lawyer can either choose to waive the fee or stop representing you. With Chapter 13 however, the attorney fees don't need to be paid upfront, and can be grouped together with other debts that get paid off over the duration of the bankruptcy.
Channel all your creditors to your lawyer's office.
Once your lawyer's services are being retained, you need to refer all your creditors to your attorney. At this point, your lawyer can speak to your creditors on your behalf, effectively putting an end to those annoying, harassing phone calls. Also, once your case has been filed, "Automatic Stay" goes into effect. This means that legally, none of your creditors can contact you about your debts - this Stay is vigilantly enforced, and your creditors can be prosecuted if they act against it.
For a review of debt relief alternatives to bankruptcy in California and to get a free debt relief analysis along with a savings estimate, simply answer a few questions online.
Await a Meeting of Creditors.
After your lawyer submits your bankruptcy case, you will be informed of a meeting date for your creditors. This is known as a "341 Meeting," named for the section of US Bankruptcy Law that requires it. The purpose of this meting is for the Bankruptcy Trustee to determine that you have given truthful responses to questions posed about your financial status, and that you fully understand what filing for bankruptcy will mean to you, short term as well as long term. Prior to the 341 Meeting, you lawyer will meet with you individually to ensure all debts are accounted for and your assets have been properly documented. He will brief you about what to expect at the upcoming 341 Meeting, where you will be sworn in and have your answers recorded. The 341 Meeting usually only lasts about 10 minutes, but is one of the most important parts of the entire bankruptcy process.
Stop using your credit cards!
This may seem like a no-brainer if you're considering filing for bankruptcy, but it's important to note here anyway. With the exception of the "Reaffirmation" clause, which allows you to retain one or two lines of credit for use in emergencies and for unexpected larger purchases (such as airline tickets), continuing to use credit cards gives your creditors just cause for challenging the validity of your bankruptcy case. If you accrue debt knowing you will not be able to pay it back, your creditor can challenge the filing with a lawsuit or adversary proceeding; don't let this become yet another headache for you - the moment you decide to file, it's time to cut up the cards.
Wait 60 Days, then breathe a little easier.
In a Chapter 7 case, your creditors have 60 days to challenge the terms of your bankruptcy case. After the 60th day, you will receive a Discharge of Debt notification. This means that you are no longer responsible for your debts, and your collectors can't ever take another penny from you. In the case of Chapter 13 filings, you will receive this notice 30 to 60 days after your final payment has been made in accordance with the Plan that is approved at the onset of the bankruptcy filing.
Make sure that you recognize that certain debts may not be entirely forgiven, such as student loans and various types of taxes. This is another reason we strongly recommend hiring a qualified bankruptcy attorney - to make sure you know exactly what to expect through the entire process when, and if, you ever need to file for bankruptcy.
For a review of debt relief alternatives to bankruptcy in California and to get a free debt relief analysis along with a savings estimate, simply answer a few questions online.
