Most individuals shudder away from the topic of bankruptcy. However, sometimes the expense can provide some much-needed relief for those who are not able to climb out of debt. Especially after finding credit card offers in our mailboxes everyday, it can be difficult to manage different accounts over time. Fortunately, there are different routes to take when it comes to ridding yourself from stressful calls from debt collectors and denied transactions. Check out these tips when deciding if filing for bankruptcy is the best option for you.
What to Consider When Filing for Bankruptcy
1. Research your available options
Although there are many unique situations, there are 2 types of bankruptcy that are most commonly used by Americans. Although they will produce significantly different results, they will both have a major impact on the future of your credit. But it is imperative to know the types and conditions of each so you can make the best legal and financial decisions when filing.
- Chapter 7 – When there is low or no source of income to satisfy all debt. This type can include relief from medical bills, credit card debt, car repossession, or home foreclosure judgements. However, it can also result in the loss of personal property.
- Chapter 13 – When there is a sufficient source of income, however, the amount of debt is overwhelming. In this type, a repayment plan is created to show how you will satisfy the debt over a period of time, based on your income.
2. Research all other options
While filing for bankruptcy can feel like the only way out, there are many ways to address your situation. You can do this by reviewing your expenses. Find out what changes you can make in order to lower them enough and start paying off your debt.
It is also a good idea to look at the available options when it comes to increasing your income; picking up a second job on the weekends can significantly help your situation, without hurting your credit.
No matter your situation, it is essential to review all options before choosing to file for bankruptcy.
3. Find out if you qualify for your desired type of bankruptcy
Because each type of bankruptcy is unique, there are different requirements and conditions in which you must meet before filing. For example, your income must be low enough to meet the requirements of Chapter 7 while it must be high enough to meet the requirements of Chapter 13. Make sure to do your research for the conditions of each before taking the first step in filing.
4. Research what will happen to your home after filing
While your debts (including your mortgage payment) may be wiped clean when filing for Chapter 7 bankruptcy, you may lose your home. Financing a new one can then be very frustrating afterwards. On the other hand, you will get to keep your home when filing for Chapter 13 as long as your mortgage payments are included on your plan. It is up to you to find out what you can and can’t afford for each situation.
4. Research the outcome of your assets (car, boat, motorcycle, etc.)
Your local property exemption laws and what you have done with your personal property will ultimately determine if you are able to keep the items or not. If the loan is secured and the property is noted as collateral on the loan, the creditor will still have the right to reclaim them. However, some exemption laws will protect these items, disallowing them to be taken after bankruptcies.
5. Research the outcome of your credit card debts
While Chapter 7 aims to wipe clean all debt taken on by credit cards, substantial amounts may not be covered. This will also be the case if you had lied on your credit card application.
6. Research the outcome of your pension plans and insurance policies
While many state laws will protect life insurance policies and pensions during bankruptcies, there are always exceptions. It is always best to do your research now before discovering surprises after filing.
7. Find out if your debt agreements involve co-signers
When filing for bankruptcy, the debt of any loan or mortgage agreements can be pushed onto a co-signer, possibly even causing them a financial crisis. That is why it is always best to review the terms and conditions of each debt agreement and ensure that were no co-signers involved.
Keep in mind that co-signers involved in Chapter 13 will not be affected while those in Chapter 7 will.
8. Talk with a professional bankruptcy attorney
An experienced bankruptcy attorney will know all details and conditions of each type of bankruptcy; they will be able to provide the best suggestion for you based on your unique situation. They will also help guide you through the process, asserting your rights and needs to establish an effective solution.
The bankruptcy attorneys at Berry K. Tucker & Associates, Ltd. have years of experience and will help you climb out of your economic crisis. In addition, they will establish a partnership with you, getting to know the details of your situation so they are well-informed when arguing on your behalf. They are always available for a case evaluation in the Oak Lawn, IL area.
9. Be ready for an invasion of privacy
When the bankruptcy courts are looking into your case, they will look into and analyze all details of your financial situation. Others may also discover your bankruptcy as they have the right to reclaim some of your personal items if you had filed for Chapter 7. In Chapter 13, you may need permission to spend some of your personal money throughout the duration of your repayment plan. Finally, it is important to be ready for the conditions of each type as it can have a significant impact on your personal life.
Making the Decision
As you can see, there are many aspects involved when filing for bankruptcy; however, the conditions of each are only briefly highlighted as the reality of the situation involves many more details. This is why it is highly encouraged to speak with a professional bankruptcy attorney as this is a life-changing decision. But when speaking with a lawyer, they will guide you through the legal processes as well as help you determine if it is in your best interest to file or not.
