4 Steps To Determine If You Should Declare Bankruptcy
In A Nutshell
1) Free Consultation With A Bankruptcy Attorney
2) Gather All Documents/Information
3) Consider Your Options
4) Plan
Determine If You Should Declare Bankruptcy – In More Detail
1) Free Consultation With A Bankruptcy Attorney
You absolutely should discuss your situation with a bankruptcy attorney prior to your case being filed. Bankruptcy is a complicated area of law. Ask an attorney who does not practice bankruptcy about bankruptcy and he/she will act as if you asked them to kiss a snake. They will defer the question to a bankruptcy attorney due to the complexity of the Bankruptcy Code. Because of the financial distress most potential bankruptcy clients are in, I offer free consultations to those looking to find out more about bankruptcy. If you are considering bankruptcy, then you should take advantage of this free resource.
If you meet with me as a potential bankruptcy client, we will discuss the ins and outs of bankruptcy, how bankruptcy will affect your situation, and whether or not bankruptcy is a good idea for you. You will leave the consult with a better understanding of bankruptcy applied to your situation. Likely, bankruptcy will be an option you have to dealing with your debt, and I will be an honest resource in assisting you in making the decision of whether or not to file.
It would be unwise to assess your situation through the complex prism of the Bankruptcy Code alone. As an experienced bankruptcy attorney, I have filed hundreds of cases and seen many of the possible issues that may arise. Fill out our online intake form or give me a call (336-431-9155) to schedule a free consultation. By the way, not only will I meet with you in a FREE consultation, I will also analyze your situation and come up with a detailed synopsis of what bankruptcy will look like for your…for free. You will only pay me anything if you actually file a bankruptcy.
2) Gather All Documents/Information
When filing a bankruptcy, you are required to disclose seemingly everything about yourself and your situation. All of your information is relevant in your case. The debts you owe, property you own, your household income, household expenses, household size, transfers of property you recently made, recent addresses where you have lived, and certain gifts you have recently given are just some of the things that have to be disclosed in your bankruptcy petition.
All of the information requested is vital for me to determine what options you have regarding bankruptcy. It may be that you situation allows you to file either a Chapter 7 or Chapter 13, that Chapter 13 is necessary, or that bankruptcy altogether is not the best option to achieve the goals you have.
Compiling all of the required information can seem like a daunting task and is sometimes a deterrent to individuals who need to file a bankruptcy. Prior to iBankruptcy, to get all of the necessary information to an attorney would require you to make multiple trips to his office (i.e. initial consult, return of paperwork, file bankruptcy) and complete a large, time consuming packet of information.
One of my goals in creating iBankruptcy.com was to create an easier way for you to provide me with the information I need to determine if bankruptcy is right for you. iBankruptcy brings the bankruptcy consultation process into the 21st Century. If done most efficiently, then you may only have to come into my office one time before the bankruptcy case is filed. After completing the online intake form there will be some documents you have to provide to me (i.e. paystubs, tax returns). These documents can be emailed or faxed to me at your convenience.
3) Consider Your Options
After reviewing your information it may be that you will have multiple options to deal with your current debt situation. Depending on your goals and your situation, your options may be limited. As the attorney who has reviewed all of your relevant information, I will be able to assist you in determining which option to choose.
Chapter 7 Bankruptcy. In a Chapter 7 Bankruptcy, your liability for most unsecured debts (i.e. credit cards, medical bills) is wiped away. Unsecured debts are things like credit cards, medical bills, and personal loans. As long as you qualify for Chapter 7 Bankruptcy and are able to exempt all of your property, then you will not have to pay anything to your unsecured creditors. Your unsecured creditors will be forever barred from attempting to collect these debts from you in any way. No more phone calls, letters, lawsuits, etc. Secured debts (i.e. house mortgage, car loan) that you keep are unchanged by a Chapter 7. You continue to pay on these debts until they are paid in full.
Chapter 13 Bankruptcy. In a Chapter 13 Bankruptcy, you enter into a payment plan where your bankruptcy payment becomes your one debt payment each month. The bankruptcy lasts for 3 to 5 years, and during this time you pay nothing to any creditor except what is being paid through your bankruptcy payment. The amount of your payment depends on several factors including the amount of income you have, the type of debt (secured vs. unsecured) you have, and the value of property you own. If you desire to stop a foreclosure on your home, then Chapter 13 will do this by allowing you to pay the amount you are behind on your mortgage through your bankruptcy payment. By the end of the bankruptcy your mortgage will be current. Chapter 13 can also stop your car from being repossessed by allowing you to pay for your car through your bankruptcy payment. By the end of the bankruptcy, your car will be paid in full and you will receive its title. Your unsecured debt (i.e. credit cards, personal loans, medical bills, etc.) may receive a percentage of what is owed. Whether they receive anything or not, any remaining balance is wiped away at the end of the bankruptcy.
No Bankruptcy. It may be that bankruptcy is not the best option for you. I like to treat bankruptcy as an option of last resort. You should only file bankruptcy if you have explored all other options and none of those will allow you to achieve your desired goals. Obviously whether to file a bankruptcy or not depends entirely on your situation, and making this decision should be assisted by the counsel of an honest attorney. One example: an individual has low income (possibly social security) but assets that fall above the exemptable limits. If the individual files a Chapter 7, then he will lose his unexempt property. If he files a Chapter 13, then his payment will be too large to afford because of the unexempt property. This individual will likely have to explore options other than bankruptcy to solve his debt problem.
4) Plan
After you have learned about the ins and outs of bankruptcy through a free consultation with your attorney, after the attorney has reviewed your situation, and after you have decided what type of bankruptcy you will file, then the next step is to plan when the case will be filed. Timing can be important when it comes to your case being filed. If your car is about to be repossessed, then you need to file your case NOW. If your house is being foreclosed upon, then you need to file your case before the upset period on the foreclosure sale ends. The longer you delay, the further behind you become on your mortgage, resulting in a higher monthly bankruptcy payment. If you do not have these pressing issues, then you may be able to file the bankruptcy when you are ready.
When planning for a Chapter 13, I always advise my clients to keep in mind that to file the Chapter 13 they have to pay a filing fee (currently $310) and then make their first monthly bankruptcy payment within 30 days of the case being filed. You must make sure you are able to make your first bankruptcy payment or your case will be dismissed.
There are certainly many more issues that could cause you to delay the filing of your bankruptcy. A few examples include the following:
- If you have previously filed a bankruptcy and received a discharge, then there are limitations on when your next bankruptcy can be filed.
- If you have made transfers of property, then you may need to wait a certain amount of time before filing so that the transfer cannot be undone.
- If your car is worth less than what you owe and you have owned the car for more than 910 days, then you can pay back the value of the car rather than what you owe. This can be a great benefit to your bankruptcy payment and may require that you wait until the appropriate date to file your bankruptcy.