Understanding Bankruptcy and Alternatives
Filing for bankruptcy takes careful planning. It’s usually your last resort when all other options have failed. Due to the long-term legal and financial consequences of declaring bankruptcy, there are many rules that must be followed before you’re eligible. For example, it’s necessary to show the courts you have obtained credit counseling and considered alternatives. Bankruptcy is controlled exclusively by the federal judicial system, which strongly recommends hiring an attorney or seeking free legal services before attempting to file. Learn more here about bankruptcy alternatives.
Creating a Checklist to Avoid Dismissal
Before filing for bankruptcy, there are a number of important questions you should ask yourself. There are also several key steps that you need to take. First, it’s necessary to ask yourself if you really need to file for bankruptcy. If you don’t, you probably won’t be approved anyway. You also need to calculate income, expenses, and assets, find a trustworthy attorney, and select a credit counseling program. It’s helpful to be methodical and to use a checklist. Failure to take the right steps and find the right credit counseling could result in more wasted money and a bankruptcy dismissal where they throw out the case. Check here to make sure your bankruptcy checklist is complete.
Changes in Bankruptcy Law
Before getting started it’s important to note certain changes in bankruptcy laws. These changes went into effect in 2005 under The Bankruptcy Abuse Prevention and Consumer Protection Act. While the changes don’t affect some people applying for bankruptcy, they may affect others. An informed decision begins with understanding the law, the bankruptcy process, and what has changed. It’s important to better understand the changes in bankruptcy law before you make any final decisions.
Filing Under Chapter 7 or Chapter 13
Understanding how bankruptcy works means understanding the process and laws related to Chapters 7 and 13 of the Bankruptcy Code. Depending on the details of your financial situation, you might be eligible to file under Chapter 7 or Chapter 13. Which route you choose has a lot to do with your income and what assets you want to keep. Your debts can either be resolved quickly, or over a several-year period. It’s helpful to read up on frequently asked questions related to each route. This website provides both Chapter 7 bankruptcy FAQs and Chapter 13 bankruptcy FAQs.
Calculating Chapter 7 Bankruptcy Means
To have all your unsecured debts completely eliminated under Chapter 7, you must qualify under the Chapter 7 means test. Using your personal information, or a basic estimate, an online calculator can help determine this for you. When filing, you must also fill out an appropriate form in which you enter your income, expense information, and data from the Census Bureau and IRS.
Qualifying and Qualifying Debts
Your debts qualify for bankruptcy relief when you can prove you are unable to pay them, but a great deal depends on your financial situation and which chapter you are filing under. Debts can be either unsecured or secured. Secured debts include mortgages, cars, and debts related to property you’re still paying for. Unsecured debts include credit cards, bills, collections, judgments, and unsecured loans. More essential than knowing which debts qualify for bankruptcy is knowing whether or not your own financial situation makes you eligible for this major step. To determine this, a full financial assessment is necessary. You can start by reading more about debts that qualify.
Defaulting on a Student Loan
If you have defaulted on a student loan, there are several options open you. Bankruptcy is one of them, but if your goal is to have a student loan discharged under Chapter 7, this can very difficult. Nevertheless, taking certain steps as soon as possible can help prevent wage garnishment, and knowing your options can help you make the best choice before matters become more difficult. Under Chapter 13, your defaulted loan can be consolidated with your other bills, giving you a better payment plan or a temporary reprieve from making payments. Read more to figure out how to pull yourself out of student loan default.
What You Can Keep
Depending on how you file for bankruptcy, there are certain assets you can keep. Different states have different exemptions, and in certain states you can choose between state and federal bankruptcy exemptions. If you need to have debts discharged, are out of work, and cannot afford a repayment plan, some assets might be lost. In most cases, however, people who file for bankruptcy can keep their homes and cars and much of what they own while they repay their debts under a modified plan. It all depends on your unique circumstances and how you file.