A lot of people see bankruptcy in a negative way, but it is really a good solution in certain situations. Major life changes, including divorce and job loss can quickly cause a financially stable person to become insolvent, forcing him to file for bankruptcy. If you are in this situation, the advice listed here can help you.
Credit Card
If you are considering using credit cards to pay your taxes and then file for bankruptcy, you may want to rethink that. Credit card debt is handled charge by charge during bankruptcy, and in most states, tax debt cannot be discharged through bankruptcy. The main thing to remember is that dischargeable taxes are the equivalent of dischargeable debts. So, there is no reason to use your credit card if it will be discharged in the bankruptcy.
Think through your decision to file for bankruptcy carefully before going ahead with it. Look into credit counseling to see if it could help you work out of your debt without bankruptcy. Bankruptcy is a permanent part of your credit, so before you make such a big decision, you might want to explore all other choices so that your credit history is affected as minimally as possible.
If you are truly faced with bankruptcy, avoid blowing your savings or retirement money, trying to pay off debts. Leave your retirement accounts untouched unless there is absolutely no other alternative. You may need to use some of your savings; however, you should not use all of your savings. Remember that you must safeguard your future financial security.
You might find it difficult to obtain an unsecured credit card or line after emerging from bankruptcy. If this is so, apply for a secured card or two. This will prove that you want to improve your credit score. Once you’ve built up a history of on-time payments, you may start getting unsecured credit again.
Chapter 13
Consider filing a Chapter 13 bankruptcy. You are probably eligible for Chapter 13 if your income is consistent and your unsecured debt is under $250,000. You can keep personal possessions, as well as real estate, while paying into a debt consolidation system. The window for Chapter 13 repayments is typically 3-5 years. At the end of this time, any unsecured debt is discharged. Stay mindful that should you for any reason miss even one plan payment, your whole case is going to get thrown out by the court system.
Talk to an attorney about reducing your car payments so that you can keep your vehicle. Many times, payments can be lowered through Chapter 7 bankruptcy. The vehicle must have been obtained more than 90 days before filing and be a loan with high interest. You must also have consistent work history.
Before you choose Chapter 7 bankruptcy, think about what effect that is going to have on any co-signers you have, which are usually close relatives and friends. Speak to an attorney or read the bankruptcy laws in your state to find out if certain loans can be excluded from your filing. This does not dissolve any co-signers of the debt, and your creditors will continue to try and collect from them.
If you are in the midst of a Chapter 13 bankruptcy, it is possible to apply for certain loans. It is more difficult. Your trustee must approve any new loans. Create a budget and prove that you will be able to afford it. You also need to be prepared to answer questions about your need for the new item.
Make sure you act at an appropriate time. Timing is important, and that is especially true when filing for bankruptcy. While there are times that it is ideal to file soon, there are other times in which you should wait. Discuss your particular situation with your bankruptcy attorney to determine the best time to file.
Forget about detrimental terms, such as shame, when you are filing for personal bankruptcy. The bankruptcy process can make many people feel ashamed, guilty and unworthy. Continuing to let yourself feel that way can damage your emotional health and does not benefit you in your endeavors to deal with your financial situation. Having the right outlook during a tough financial upheaval is a great attitude in coping with bankruptcy.
Because bankruptcy is such a challenging time that a great deal of stress, both mental and emotional, may be involved. Be certain that you hire a competent lawyer to minimize the stress and anxiety you are under. Make your hiring decision based on several criteria, not just on price. It may be not be necessary to hire a costly attorney; just make sure he or she is qualified to handle your case. Talk to friends who have been through a similar situation and ask them for referrals. If you want to know more about a specific lawyer, attend a court proceeding and see how the attorney handles herself.
Be careful how you pay off any debts prior to filing for personal bankruptcy. Bankruptcy law may actually prevent you from repaying your credits for three months. Worse, if you’ve taken out a loan from your family, you can’t repay them for a whole year before filing. Before making important decisions in regards to your finances, be sure you understand the laws.
If you have attempted every option open to you to bring your finances under control, but have been unsuccessful, bankruptcy may be the final option. Don’t be overly stressed, because there are many things that you don’t have control over. Although the bankruptcy process can last several months, you will be less stressed out if you understand everything that is happening.
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