Prior to filing for bankruptcy, you need to participate in court-approved credit counseling. Then you need to file your bankruptcy petition, which consists of dozens of pages of forms. The court recommends that you consult a bankruptcy attorney to help you through the process.
If you are considering filing bankruptcy, there are three initial steps you should take prior to beginning the process.
- Decide if bankruptcy is right for you.
- Consider alternatives to bankruptcy.
- Figure out if you’re eligible for bankruptcy.
Is bankruptcy right for me?
Deciding whether or not bankruptcy is right for you involves carefully weighing the advantages and disadvantages. For Chapter 7 bankruptcy, the primary advantage is that most or all of your consumer debt will be wiped out. The disadvantages are that your assets will be sold off to pay your creditors and that your credit report will take a hit for up to ten years.
For Chapter 13 bankruptcy, the advantages are that creditors and debt collectors will stop hounding you, that you’ll be able to keep some of your property, and that at the end of the three-year or five-year repayment period, the remaining balances on your eligible accounts will be erased. The disadvantages are that you must make the payments outlined in your bankruptcy plan and that your credit report is impacted.
Chapter 7 bankruptcy differs from Chapter 13 bankruptcy in two important ways. First, Chapter 7 bankruptcy is only available to those whose incomes are at or below the median income of their state of residence. Second, Chapter 7 is the type of bankruptcy that truly gives you a fresh start by wiping out eligible debts. In contrast, Chapter 13 keeps creditors at bay by developing a repayment plan that lasts three or five years.
Do I have a choice other than bankruptcy?
There are a variety of reasons why you might not want to pursue bankruptcy. Even if you ultimately decide that bankruptcy is the best fit for you, it’s worth considering other options. For example, if you have no assets or money, then having a creditor sue you might not impact you. Similarly, if your debts are very old and past the statute of limitations, then creditors can’t use the courts to make you pay. Both of these are examples of being judgment proof.
In addition to considering legal judgments, if you have the ability to repay a portion of your debts, you may wish to consider negotiating settlements with your creditors. They may agree to take a relatively small percentage of the face value of the debt. While this approach may still impact your credit history, the impact will be less than that of a bankruptcy.
Am I eligible for bankruptcy?
Generally speaking, you are eligible to file for Chapter 7 bankruptcy if your income in the previous six months is equal to or less than your state’s median income. If your income is higher, you may be eligible for Chapter 13 bankruptcy if your secured debts total less than $1,184,200 and your unsecured debts total less than $394,725.
What do I need to do to file bankruptcy?
If you decide that bankruptcy is the right path for you, then your first step is to participate in court-approved credit counseling. The Department of Justice website offers a list of approved credit counseling programs. When you complete the program, you will receive a certificate. That certificate gives you a six-month window to file for bankruptcy.
The next step you need to take is to find a bankruptcy lawyer. While you’re allowed to file without the assistance of a lawyer, the courts recommend that you consult with and are represented by an attorney. Your attorney will ensure that your bankruptcy petition is complete and has the best chance of success. They can also offer advice on how to deal with creditors, which debts are eligible for discharge, and what property you may be able to keep. They will also take the lead in completing the dozens of pages of forms that comprise a bankruptcy petition.
Filing for bankruptcy is not a DIY project. Relying on the skill of an experienced bankruptcy attorney will help ensure that the process goes smoothly and is as painless as possible. Lemberg Law has a team devoted to representing clients who pursue bankruptcy as a way to resolve their debts. Call 844-685-9200 and receive a free consultation, or submit our online request form.
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