What it means to file for bankruptcy

When you’ve exhausted all your other options financially and you still can’t seem to shake your debt, bankruptcy is your last resort. Throughout the entire bankruptcy process, there’s only one thing you need to remember: ‘I have tried every other possible solution and nothing has worked, so bankruptcy is my last option.’

Essentially, filing for bankruptcy is a process that involves you admitting that you can no longer afford to pay off any debt that exists on your credit report. Recent bankruptcy laws force you to seek credit counseling prior to filing, but once you have filed, you will then work with a lawyer who will work with your creditors to “discharge” any outstanding debt you have. You will have to pay a fee to this lawyer in order to file, unless your city offers free bankruptcy filing. It’s important for you to remember that you will be harming your credit score dramatically and make it increasingly difficult—if not impossible—to obtain any sort of loan or credit for at least seven years (when the bankruptcy is eligible to be removed from your credit report). In order to find out more about the actual bankruptcy process, continue reading.

How personal bankruptcy could help you

Experts are predicting that over 1 million Americans will file for bankruptcy this year. See how one woman used it to her advantage during the country’s struggling economy.

When consumers can and should avoid it

Far too many people opt to try bankruptcy long before they absolutely need to utilize it. It’s one reason the United States government has stepped in and made it harder for Americans to file for bankruptcy. Bankruptcy is not something you should file for if you’ve simply fallen behind on a few bills or racked up credit card debt that seems unmanageable. Rather, think about the situation you are in: Are you feeling helpless as you try to keep up with your bills every month? Have you lost interest in trying to recover from falling into debt? If so, there are other options. Because bankruptcy can and will destroy your credit, find out what other options could be right for you before you apply.

Alternatives to bankruptcy and how to avoid it

Bankruptcy is a last resort. Here are some other options that might suit you better.

1. Loan consolidation: For those who have fallen behind on their credit card debt or those struggling to keep up with student loan repayments, consolidation is one way to get your debt back under control. Consolidation allows borrowers to take all their debt and pile it into one easy-to-manage account. You’ll only need to make one payment every month on a large portion of your debt and, in most all cases, you’ll receive a much better interest rate on your debt, thus saving you money and keeping your finances in check.
2. Loan settlement: Have you struggled for years with a large debt and made almost no progress in paying it down? If so, debt settlement is an option that will allow you to pay off large sums of debt for just a fraction of the price. Typically, creditors are willing to settle your debt in order to protect their investment. This can be very helpful if you’re not too badly in debt otherwise and can afford to throw a large sum of money at your debt.
3. Mortgage modification: If a financial hardship has left you struggling to pay your mortgage, write a letter to your mortgage company requesting some help with your situation. They are usually willing to accommodate those suffering from a real hardship. This could help you prevent having to file for bankruptcy later.

How to withdraw from a bankruptcy

If you’re reading this and have already filed for bankruptcy but are having second thoughts now that you’ve seen the options above, it’s not too late to change your mind! You can withdraw your petition to file for bankruptcy. Talk to the lawyer handling your bankruptcy first and make sure you understand the pros and cons of taking on a large amount of debt again. It’s also important to make sure that some of your larger assets, like your cars or homes, are not going to be foreclosed because you’ve decided to withdraw. Then, your lawyer will schedule a court hearing to legally withdraw your desire to declare bankruptcy. Once this has been done, you’ll go back to paying your debt as normal and can try some of the options listed above in order to combat your debt.

How bankruptcy affects your spouse, co-signers (past, present and future)

Another thing to consider when filing for bankruptcy is how the process will affect your spouse and any cosigners attached to loans you may have taken out. In many cases, your spouse probably is your cosigner as well, so it’s important to know how your life together may change as the result of your decision. While this depends on what state you live in, it’s also fairly certain that your choice to file for bankruptcy could affect your cosigner. In some cases, if you’ve obtained a loan for, say, a car and have a cosigner, there is a chance the indebted company could come after your cosigner if you declare bankruptcy and no longer make payments to the creditor. However, this does vary in different states and there are ways to block the creditor from doing so, so it’s important that you speak with your lawyer before proceeding with your filing

Don’t think bankruptcy can happen to you?

Medical bills account for a large portion of the people who file for bankruptcy. Understand that anyone can get into trouble with their finances and learn what you need to know about bankruptcy now so you know what to do later.

Prerequisites for each chapter plus pros and cons

In the United States, there are two main chapters of personal bankruptcy that can be filed:

1.Chapter 7 bankruptcy: This chapter calls for the liquidation of individuals and businesses and is probably the most popular form of bankruptcy in the United States. In essence, once you declare for Chapter 7 bankruptcy, all of your assets are liquidated and sold off by your creditors in order to repay your debts. The obvious downfall to this chapter of bankruptcy is that you will be losing many of your possessions. However, for those struggling to make payments on a car or a big-screen TV or any other type of material possession, it can bring about a certain sense of freedom, as you are able to regain some financial freedom without physically handing over your income. This form of bankruptcy remains on your credit report for up to seven years after you file for it.
2. Chapter 13 bankruptcy: By filing chapter 13 bankruptcy, you will avoid the liquidation of your personal items. Instead, you will need to devote a portion of your future income to repaying your debt. While this allows you to keep your material items, it also means you’ll be repaying your debt over the course of the next three to five years. This can be a better option if you have a well-paying job and can afford payments without selling off items you already own. It can stay on your credit report for up to ten years.

Regardless of which option you choose to use, the total amount of money you will need to repay your creditors will vary. In certain cases under chapter 7 bankruptcy, you will be discharged of your debt and not need to pay it back. But you may still have items repossessed despite the discharge. Under chapter 13 bankruptcy, you will be forced to work out a payment plan with your creditors through the courts that is suitable for both of you. It’s important to speak with your lawyer to see which option will work best for you.

How often you can file bankruptcy

* A Chapter 7 bankruptcy can be filed eight years after you’ve previously filed for a chapter 7 bankruptcy or six years after you’ve filed for a chapter 13 bankruptcy.
* A Chapter 13 bankruptcy can be filed four years after filing a chapter 7 bankruptcy or two years after filing a chapter 13 bankruptcy.

Bankruptcy attorneys in 15 U.S. cities

As you can tell by now, filing for bankruptcy can be a confusing process—and there’s a reason for that. You should not file for bankruptcy unless you absolutely have to do it. That said, if you’re interested in learning more about bankruptcy, here is a list of bankruptcy attorneys from around the country. Contact one today and see if bankruptcy could be an option that is beneficial to you.

Duffy & Atkins, LLP, New York, NY
212-268-2685

Patricia Depew, Los Angeles, CA
310-421-2919

Bankruptcy Law Clinic, Miami, FL
305-663-3281

P.J. Franklin, Attorney at Law, Houston, TX
888-304-7303

Meurer Law Offices, PC, Denver, CO
303-731-1293

Black & Associates, PC, Philadelphia, PA
610-624-1190

Dorothy A. Bartholomew, Seattle, WA
253-922-2016

Tommy L. Fullen, Memphis, TN
901-386-1647

Sandberg Law Firm, Atlanta, GA
678-608-2037

Larry K. Hercules, Dallas, TX
972-964-9757

Moniz & Mendes, PC, Boston, MA
781-780-3675

Keith Burton & Associates, PC, Salt Lake City, UT
801-858-3770

Law Offices of John T. Orcutt, Raleigh, NC
888-610-2442

Law Office of Paul L. Urich, PA, Orlando, FL
407-896-3077

Jeffrey A. Koons, Attorney at Law, Kansas City, MO
913-652-3377