How to Avoid the Bankruptcy Blues

Is the thought of having to file bankruptcy getting you down? Don’t let it! There are benefits to filing bankruptcy that could really help you and/or your family get out of debt quickly, and achieve a financial fresh start. Filing bankruptcy happens for dozens of reasons from filing a Chapter 7 bankruptcy to get rid of recent payday loans to filing a Chapter 13 bankruptcy to halt a foreclosure. Not all the negative news you hear about bankruptcy is true, and I’m here to give you the inside scoop on how to avoid the bankruptcy blues.

1. Don’t believe everything you hear

Sure, bankruptcy gets a bad reputation from time to time, but put simply it is a process that helps thousands of Americans get out of debt and get their finances back on track. You may hear that bankruptcy is a “credit score killer,” but in reality it can help you rebuild your credit score to higher than it has ever been before. Once you file bankruptcy and wipe away unsecured debts like credit cards and medical bills you can rebuild your credit by making timely payments on secured items like your home or vehicle.

2. Do your own research

A sure fire way to avoid getting worried about filing bankruptcy is to go into the process with knowledge. There are hundreds of resources on the internet nowadays that do a great job of explaining bankruptcy in ways that anyone, not just attorneys, can understand. Be sure to look into bankruptcy rules called “exemptions” that are specific to your state and outline the value of certain items that can be protected from liquidation. If you aren’t comfortable researching on the internet try asking friends or family who have filed before or contacting local bankruptcy attorneys for free initial consultations.

3. Remember that your situation is unique

No two bankruptcies are the same, so if you hear negative things about someone else’s bankruptcy remember that your situation is unique and can turn out drastically different. To give yourself some confidence about the process sit down with several bankruptcy attorneys to discuss your specific situation and which Chapter of bankruptcy will help you the most. You will ultimately decide whether or not filing bankruptcy is best for you and/or your family – that’s really all that matters.

Deciding to file bankruptcy is a difficult decision and may not feel like your proudest moment, but if you are facing an overwhelming amount of debt that you cannot see yourself paying off in 1-2 years then it may be a decision you need to consider making. Remember that you aren’t alone and thousands of people file bankruptcy each year to gain a fresh start financially. Don’t let the bankruptcy blues get you down; go ahead and find the best bankruptcy attorney for you, get your paperwork filed with the court, and before you know it your case will be over and you will be debt free!

Chapter 7 Bankruptcy Fast Facts

Interested in learning more about how Chapter 7 bankruptcy can help you get out of debt? Let us help with that by giving you some Chapter 7 bankruptcy fast facts that should point you in the right direction:

1. Chapter 7 bankruptcy is the most common type of personal bankruptcy filed today.

Thousands of individuals and married couples use Chapter 7 bankruptcy protection every month. It is one of two types of personal bankruptcy and is more common because it caters to individuals with low incomes, high debt levels, and little to no assets.

2. Chapter 7 bankruptcy is the quickest form of personal bankruptcy.

Filing Chapter 7 bankruptcy can be done in as quick as 30 days if the debtor is in dire need, but typically the entire Chapter 7 process takes between 4-6 months. After you hire a bankruptcy lawyer they will gather financial information from you, create the official court documents, and file the bankruptcy paperwork (petition) with the court. Soon after your paperwork is filed you will attend a short hearing and 30-45 days following your hearing you will receive paperwork stating that your bankruptcy has been completed.

3. Chapter 7 bankruptcy is typically the cheapest form of personal bankruptcy.

The cost of filing a Chapter 7 bankruptcy will depend on several different variables such as the state you live in and the amount of debt you are filing on. In most cases the bankruptcy attorney you choose will estimate how much work will need to be done on your case before quoting you a fee that will need to be paid before your case is filed. In most cases a Chapter 7 bankruptcy filing will range between $1000-$2000 dollars.

4. Chapter 7 bankruptcy can erase most types of unsecured debt.

One of the reasons that Chapter 7 bankruptcy is so common in America is due to the types of debt that it erases. Credit card debt, medical bills, payday loans and personal loans are all types of debt that can typically be wiped away by filing a Chapter 7 bankruptcy. These types of debt all fall into the category of “unsecured” debt which is debt that is not tied to a particular loan or object like a home or vehicle.

5. Chapter 7 bankruptcy can be filed every 8 years.

In 2005, new bankruptcy laws named the Bankruptcy Abuse Prevention and Consumer Protection Act stated that an individual must wait 8 years between filing separate Chapter 7 bankruptcy cases. This was one year longer than the waiting period was before 2005. The 2005 laws were put in place in order to avoid abuse of the bankruptcy system.

These 5 facts are just the tip of the iceberg when it comes to filing Chapter 7 bankruptcy, but they are still valuable pieces of information for anyone looking into how it would help their financial situation. Filing Chapter 7 bankruptcy is a right that Americans are given to help them overcome debt that is too overwhelming for them to come out of alone.

When Creditors Sue You

I truly enjoyed my time as a bankruptcy paralegal; and one of the reasons is that I was able to tell clients that by the time their bankruptcy was over they would be starting a new life not only financially, but emotionally as well. When debt starts to pile up it typically leads to other issues like creditor phone calls, letters, and sometimes civil lawsuits. These civil lawsuits originate when a creditor (like a credit card company) decides to summon you to court in order to ask the judge for a judgement against you that would ultimately require you to pay the debt. So how does filing bankruptcy work when creditors sue you? Here’s an outline of what a typical timeline would look like if your creditor sues you in the midst of your bankruptcy:

1. You receive a summons

In most cases lawsuits start with a summons delivered to the defendant stating that the date and time they are to appear in court. A summons will also list who is suing your and for what reason.

2. You contact your attorney

If you have already hired a bankruptcy lawyer then you should contact them immediately and let them that you have received the summons. Be sure to tell them who the summons is from because their response will differ depending on if it is a secured or unsecured creditor.

3. You appear in court

Unless your bankruptcy case is filed before the court date listed on the summons you should make plans to appear. Because this is a civil lawsuit and separate from your personal bankruptcy, your attorney may or may not appear with you, but that is nothing to worry about. If you miss this court appearance it is typical for the judge to award a judgement to the creditor who is suing you.

4. Your request more time

In most cases you can ask the judge for a continuance when you appear at the hearing. It is typical but not guaranteed for you to be granted a single continuance. A continuance will give you and your bankruptcy attorney more time to get your case filed and avoid the next hearing altogether.

5. You finalize your bankruptcy

Whether or not a judgement is put against you after the hearing you and your attorney will want to file your Chapter 7 or Chapter 13 bankruptcy as soon as possible to avoid possible garnishments or other civil lawsuits. Keeping your financial paperwork organized and keeping in contact with your bankruptcy lawyer is key to a speedy filing.

It is extremely common for debtors to be sued by their creditors during the preliminary bankruptcy process. Creditors have a right to take you to court for debt and they take that right seriously. Just remember that by choosing to file bankruptcy you are already one step ahead of your creditors and the law is on your side. And again, by the time your bankruptcy is over you will be debt free and the creditor stress will be over.

Bankruptcy vs. Debt Settlement

It seems like there are always new debt “solution” trends every day. Just in the last several years we have seen the emergence of products like credit counseling and debt settlement that promise to reduce your debt within a certain amount of time without having to ever file bankruptcy. These services are typically provided by financial companies that require you to put an amount of money into a new account every month and when the time is right they will negotiate with your creditors to hopefully pay them off. So is debt settlement a better solution to filing bankruptcy? Here’s my take on why I think the answer is NO.

1. No legal requirements for creditors to comply

A debt settlement is ultimately when a debtor pays a company to negotiate with their creditors on their behalf with the hope of reducing their overall balance. The key is the negotiators can only “hope” that the creditors agree to reduce the debt, there is no requirement for them to do so. On the other hand, if a debtor files a Chapter 7 bankruptcy or a Chapter 13 bankruptcy and it is approved by the court the creditors are required to comply with the courts orders, whether it be to completely erase the debt, or accept a decreased payment.

2. Debt settlement typically takes longer

As I mentioned earlier typical debt settlement programs will set up a bank account for its customers and tell them a certain amount of money to put into it every month. Once the account reaches a specific amount the debt settlement company will then begin negotiations with creditors. What many customers do not realize at the beginning of this process is how long it will take to reach the specific amount that is required for negotiations to start. In some cases it can take anywhere from 6 months to 2 years for the account to be large enough to meet the requirements. A quick chapter 7 bankruptcy can be done in 5-9 months.

3. No protection from creditor harassment

In the weeks and months that a debtor spends depositing money into their debt settlement account they will most likely still be receiving creditor phone calls, letters, and general demands for payment. In most cases there is no protection that debt settlement companies can give for this. That means that creditors can take a debtor to court even though they are involved in a debt settlement program. That is not the case with bankruptcy. The day your bankruptcy is filed with the court is the last time a creditor can legally contact you.

Ultimately the only person that knows what’s right for your situation is you. Consult with friends, family, bankruptcy attorneys, and even debt settlement companies before making a final decision. Just remember that there are options everywhere and you are not alone in this struggle: people just like you are having to decide what to do about their debt problem.

Bankruptcy Defined

According to the official United States courts online glossary, (that you can view here) bankruptcy is defined as: “a legal procedure for dealing with debt problems of individuals and businesses; specifically, a case filed under one of the chapters of title 11 of the United States Code (the Bankruptcy Code).” What does that mean in layman’s terms? Let’s go through it here together:

A Legal Procedure

This means that the process of filing bankruptcy is required to be done in a United States court of law and overseen by an appointed US bankruptcy trustee. Anyone who tells you that a bankruptcy can be filed outside of a US courtroom is incorrect. This does not, however, mean that all bankruptcies require the aid of a licensed attorney; it is possible to file a bankruptcy “pro se” or on your own. Nevertheless, the hiring of a bankruptcy lawyer is highly recommended due to the amount of law involved, the many forms required, and the complex calculations involved with larger cases.

For Dealing with Debt Problems

This is without a doubt the main object of any bankruptcy, no matter which chapter it is. All bankruptcies have the same common goal: to eliminate or reduce problem debt. Note that the definition doesn’t define what types of debt are allowed to be eliminated by a bankruptcy – the actual law does this.

Of Individuals and Businesses

This part of the definition outlines who is allowed to be involved in the filing of a bankruptcy. There are different Chapters associated with personal and business bankruptcies. The most common types of personal bankruptcy are Chapter 7 and Chapter 13 while the most common business bankruptcy is Chapter 11. The type of personal bankruptcy filed by most Americans each year is Chapter 7.

Specifically, a case filed under one of the chapters of title 11 of the United States Code (the Bankruptcy Code) – This part of the definition lists the exact law that governs bankruptcy: title 11 of the US Code. This part of the US code is commonly referred to as the “bankruptcy code” and has been revised several times since its initial creation. The most recent revision to the bankruptcy code was in 2005 with the implementation of the Bankruptcy Abuse Prevention and Consumer Protection Act which was put in place to make the abuse of bankruptcy less likely.

This may seem like an extremely simple way to describe an incredibly complex system of rules and laws, but starting with a simple definition will help put the ultimate goal of the bankruptcy process in perspective for you. Yes, there is a lot to learn and that can be done, but it’s important to know that the option of bankruptcy exists when you are faced with an overwhelming amount of debt and do not know where to turn. Talk to a bankruptcy attorney in your area if you think this legal process could be of benefit to you.

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