So, is a bankruptcy filing necessary for your situation? And which type of bankruptcy should you pursue? You will want to do a little research and some serious thinking before getting an attorney.
What to Consider Before Filing for Bankruptcy
If you feel like your debt is insurmountable, bankruptcy may be the answer, or there might be a better solution. There are several important things to consider before determining your course of action.
What are Your Alternatives?
Now is the time to take a long and objective look at your situation. How much debt do you really have? Would it be possible to dig yourself out with counseling, a strict budget and a payment plan? Or, if your income is low enough (or nonexistent), you may be considered “judgment proof,” making a bankruptcy filing unnecessary.
Will Bankruptcy Actually Help?
Bankruptcy will eliminate (Chapter 7) or reduce (Chapter 13) certain types of debt, but not others. For example, if you are struggling with child support, alimony, or a student loan, bankruptcy won’t help. Make sure that your primary debts can be dealt with in a bankruptcy filing before proceeding.
Will your Home be Protected if You File?
Obviously, you will want to do everything possible to avoid losing your house. So, if you are filing a Chapter 7, there is reason to be concerned about what will happen to your property. This is because during a Chapter 7 bankruptcy, any property that is not considered “exempt” will be sold and the revenue goes to your creditors.
Only a certain amount of the equity that you have in your home will be considered “exempt.” So, if you own a large home with a significant amount of equity in it, this property may be sold. However, if your income is large enough, you can file a Chapter 13 bankruptcy and include your mortgage payments in your repayment plan.
Is your Pension Plan Completely Protected?
There is a very good chance that it will be. In a bankruptcy proceeding, most pension plans and life insurance policies are protected by state laws. However, if you have a 401 (k), an IRA or a life insurance policy, you should double check in order to be sure that your investment will be protected.
Will Your Co-Signers be Stuck with Your Debt?
If you have co-signers, go through all of your debt agreements and make sure that a bankruptcy will not financially obligate any of these individuals. If you are filing a Chapter 13 bankruptcy, this should not be an issue. But with a Chapter 7 filing, it is possible for your co-signed debt to fall on the shoulders of the friends and/or family members who tried to help.
Do You Have an Exit Strategy?
If you successfully complete a bankruptcy filing, you will have a fresh start with your finances. However, your credit can be affected for up to ten years. Just how low your credit score will drop varies from person to person. But you can expect to lose at least 100 points. You will need to figure out how to rebuild your credit and not go back to any old habits that may have led to your bankruptcy.
Something else that you should keep in mind, especially if you are a private person, is that bankruptcy will invade your personal life. Every aspect of your finances will be revealed to the court. And because the filing will be a public record, you may not be able to keep your situation a secret from friends and coworkers. Also, with a Chapter 13 bankruptcy, you will have to ask permission to spend your own money for the next three or five years.
Again, opting to file for bankruptcy isn’t the easiest solution to debt, but it may be the best solution. If it looks like there are no realistic alternatives to bankruptcy, make sure that you hire a reputable attorney. And once you have made the decision, resolve to stick to the bankruptcy plan and see it through until the end.
Auto Financing After Bankruptcy
If you have just been discharged from a Chapter 7 or Chapter 13 bankruptcy, you may be wondering how you are going to finance your next car. Sometimes the need to buy a vehicle just won’t wait until your credit situation improves, and Auto Credit Express understands this. We help thousands of car buyers who are dealing with all types of credit issues every day. And we can connect you with a dealer in your area who is qualified to work with bankruptcies.
For more information Contact Galler Law Now 770-671-8830 or go to our contact page