While bankruptcy is often a last-resort measure, sometimes it’s simply unavoidable. Filing for bankruptcy will ruin your credit score, but it might be the only way of getting out of debt. Continue reading for more information about how and why to file for bankruptcy.
Don’t think that loading up your credit card with tax debt and then filing for bankruptcy is an answer either. Generally, this type of debt is not covered by bankruptcy filing, and you will still have a large debt owing to the IRS. Rule of thumb is if the tax is dischargeable, then the debt will be dischargeable. Therefore, you should not pull your credit card out for purchases if it is just going to be discharged during the bankruptcy.
If you know people who have filed for bankruptcy, ask them who they would recommend rather than relying on Internet reviews or worse, just randomly picking someone out of the phone book. There are lawyers out there who will take advantage of your financial state and not deal honestly with you. Make sure your filing process goes as well as possible by finding a trustworthy lawyer.
Research what assets are exempt from seizure before you decide to declare bankruptcy. The Bankruptcy Code provides a list of all the different kinds of assets that you can exclude. You need to read the exemptions for your state, so you know what property you can protect. If you don’t read it, you could have nasty surprises pop up later due to your prized possessions being seized.
You should never pay for your first consultation with a bankruptcy attorney. Make the most of this free consultation by asking lots of questions. Most attorneys offer free initial consultations, and you should take advantage of the chance to interview multiple practitioners. Do not make any final decisions until every question you have has been answered. You don’t have to make your decision right after this consultation. If you’re unsure, don’t hesitate to talk to multiple bankruptcy lawyers.
If you are making more money than you owe, bankruptcy should not even be an option. Although bankruptcy may feel like a simple method of getting out of your large debt, it leaves a permanent mark on your credit history for up to 10 years.
Make sure bankruptcy is truely your only option before filing. For example, you can always talk with a lawyer to see about different options through creditors or other means that will not require wiping the entire slate clean. Loan modification plans on home loans are a great example of this. Your particular loan holders can provide a lot of assistance if you’re just willing to speak with them. You can negotiate lower rates, longer terms, and other means of repayment that may keep you from having to file a claim. When all is said and done, the creditors want their money, so sometimes it’s best to deal with a repayment plan than with a bankruptcy debtor.
Chapter 7
If you have a co-debtor, consider the ramifications that filing a Chapter 7 bankruptcy will have. You can relieve yourself of any liability for debts that you may share with someone else through a Chapter 7 filing. Any co-debtor may well be held responsible for paying off the total remaining amount of the debt, though.
Make sure that you act at the appropriate time. Filing at the right time can make things go much more smoothly. Sometimes you may want to wait to file and in other situations you may find it better to do it as soon as you can. Speak with a bankruptcy lawyer to discuss the proper timing for you to file bankruptcy.
If you plan on filing bankruptcy, never wait too long. The judge reviewing your petition will consider your recent behavior, purchases, income and payments when making a decision. If debts are not dealt with quickly, things can quickly get out of control. Not only will you be faced with late fees and interest, but you may also be faced with a wage garnishment or foreclosure if you ignore your financial woes. As soon as you know that you are too far over your head, make the move to call an attorney skilled in bankruptcy court, to weigh your options.
Do some research about bankruptcy laws before filing for bankruptcy. There are many pitfalls you can easily fall into, such as transferring away assets to prevent them from being included in the filing. It is also illegal for someone who files for bankruptcy to drastically increase their debts on credit cards immediately before filing.
Financial Information
When filing for bankruptcy, list all of your financial information. Failing to disclose all of your financial information can cause your bankruptcy petition to be dismissed, or, at the very least, delayed. It does not matter what you think of your financial situation, put the sum amount either way. Include all jobs, assets and loans.
Bankruptcy will erase debts. Don’t create any new debts before filing for it. This could be considered as fraud, and you may even be forced in paying all of it back to credit card companies.
Typically, people who have faced bankruptcy swear off credit cards. In reality, though, credit cards can be a useful tool for people who are looking to rebuild their credit score after bankruptcy. Credit cards are necessary for proving that you have gained financial stability and for garnering mortgage and auto loan approvals. To start, use one credit card sparingly and pay it off in full each month.
In conclusion, the option of bankruptcy is always there. However, it must not be your first choice due to it causing complications on your credit. Knowing the ins and outs of bankruptcy can make the filing process easier and make it less likely that you’ll have to forfeit your property.
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