Are you overwhelmed with bills that you can’t pay? Are collectors hassling you for money at work and at home? Are creditors threatening to garnish your wages? Is the majority of your debt unsecured (e.g., credit card debt, medical bills, etc.)? If so, you may be a good candidate for personal bankruptcy.
Like most people, you are probably aware of the new bankruptcy law of 2005. You may even think that this law will prevent you from filing for bankruptcy. However, if you are truly devastated by debt, chances are you can still obtain bankruptcy protection from the courts. You will just need to go through a few more steps than you would have before the new law was enacted.
First, you will need to go through credit counseling with a government approved agency. For some people, this is truly a futile exercise. Others, however, are surprised to find ways that they can pay off their debt without having to file for bankruptcy. Once an approved financial counselor has agreed that the best solution for you is bankruptcy, you will need to hire a bankruptcy attorney. For filling the lawsuit, a person should hire bankruptcy attorney san diego for excellent results. A comparison can be made in the services of different lawyers available at the place.
The attorney will review your finances and determine whether you should file for Chapter 7 or Chapter 13 bankruptcy. Once you have filed for either kind of bankruptcy protection, your creditors must immediately stop all collection efforts. Any creditor who does continue to contact you should be given the name and telephone number of your attorney.
Under Chapter 7 your assets are liquidated (i.e., sold) for cash and that cash is used to pay your creditors as much as possible. Realistically, however, most assets such as your home, your car, and a certain amount of personal possessions are exempt. Most people filing for Chapter 7 do not have to turn over any assets. The unsecured debt (with the exception of student loans, court judgments, etc.) is forgiven, and you are given the chance to start fresh with your finances.
Chapter 13 bankruptcy is most appropriate for applicants with a steady job and a good income. Under the new bankruptcy law, anyone filing for bankruptcy that makes more than the average income in their state must file Chapter 13. Under Chapter 13, you pay off a portion of your unsecured debts over a period of three to five years. If you fail to make these payments, you will lose the bankruptcy protection of the courts and end up right back where you started.
Whether you are filing for Chapter 7 or Chapter 13 bankruptcy, it’s vitally important that you continue to make payments on secured debts, such as your home or your car. Failure to make payments on secured items can lead to repossession, even if you are under bankruptcy protection.
Before your bankruptcy is discharged, you will have to participate in a government approved financial management education course. If your debt was a result of financial mismanagement, this course can help you avoid making the same mistakes and ending up in debt all over again.
Obviously, there are many benefits to filing for bankruptcy protection. But there are some drawbacks as well. Bankruptcy can wreak havoc with your credit score. No matter how excellent your financial management might be in the future, the fact that you once filed for bankruptcy may remain on your credit report for as long as ten years (though it is usually removed after seven).
A poor credit rating may make it difficult for you to rent an apartment, buy a car or a house, or get optimal rates on credit cards or other types of loans. Much as you may want to, you can’t make the bankruptcy go away, but you can improve your credit score if you handle your finances wisely after the bankruptcy. Most creditors are more interested in the timely payments you made during the past year than they are in the bankruptcy you filed five years ago.
Bankruptcy can make good financial sense if you are overwhelmed by unsecured debt; however, it is only one of many options. Use the mandatory financial counseling as an opportunity to review all the choices available to you.
Finally, remember that anyone can be thrown into debt due to unforeseen expenses, poor financial management, or a combination of the two. Even luminaries such as Mark Twain and Walt Disney took bankruptcies when they were financially strapped. So, don’t waste time beating yourself up if you decide to file for bankruptcy. Instead, accept the chance for a fresh start that the court offers and make something of your new beginning. Before long, you’ll have established a financial record to be proud of.
