If you are facing a financial situation in which your debt load is unsustainable and your creditors are unwilling to negotiate, then filing for bankruptcy may be both viable and advisable. This is fundamentally because, despite the fact that the word “bankruptcy” is emotionally-loaded (and rather terrifying), it is not a moral judgement: it is a legal protection.
Furthermore, while it is certainly not a step that anyone wishes to take or a decision that should be taken lightly, the fact is that filing for bankruptcy is fairly common. For example, in 2016 nearly 800,000 individuals and businesses filed for bankruptcy.
If bankruptcy is something that you are considering — or may have decided to do based on your research and analysis — then here are 3 tips to head in the right direction:
1. Confirm that bankruptcy is a step in the right financial direction.
There are many reasons why people face unsustainable debt, such as a prolonged and acrimonious divorce, overwhelming medical bills, extensive repairs after a natural disaster, or simply losing control of income vs. expenses. Indeed, it does not take long for a “cash flow problem” to turn into a crisis, and some of the most intelligent and educated people are those who find themselves mired in debt. It can and does happen every day.
Yet with this being said, is very important for you to understand the root causes of your debt situation. Otherwise, you may find that the road ahead is longer, more stressful, and costlier than you expect. Also keep in mind that after filing (if you choose to do so), you will need to enroll in a credit counseling course within six months. This will also help you understand how to make safer and better financial choices in the future.
2. Do not under any circumstances “fudge the numbers” to qualify for chapter 7 bankruptcy.
Most people prefer to file for chapter 7 bankruptcy, because doing so wipes out most debts. However, to pursue this option you must pass the means test in your state. This is an evaluation of your income minus expenses. If you fail to qualify (i.e. if you have too much disposal income), then you will not be allowed to file for chapter 7, and instead will need to file for chapter 13. While this may not be (and likely is not) optimal, under no circumstances should you “fudge the numbers” in your favor.
Keep in mind that your financial history will be an open book to the court, and if you are found to have committed forgery or fraud, then in addition to potentially facing criminal prosecution, you can be barred from ever filing for bankruptcy again on the debts in question.
3. Get help from an experienced bankruptcy attorney.
The web can be an excellent source of information. But it can also be full of myths, misunderstandings and outright falsehoods — and unfortunately, a great deal of so-called “advice” regarding bankruptcy falls into the latter category.
What’s more, the process of filing for bankruptcy is complex, and includes submitting specific documents by certain dates. Getting help from an experienced bankruptcy attorney is both wise and safe; especially since your bankruptcy attorney will aggressively protect your rights, and assure that no creditors contact you (creditors are not allowed to contact a petitioner directly, but some still do in the hopes of getting a payment). In addition, if your wages have been garnished by your employer per a court order, your bankruptcy attorney may be able to recover some or all of that income.
To learn more about filing for bankruptcy, and for a confidential consultation on whether this may be a viable decision that is in your best current and long-term financial interest, contact the Law Office of Charles H. Huber today.