Managing your finances and avoiding debt is quite a difficult task nowadays, especially given the fact that most of us have to repay mortgages or cover their student loans. And if you end up unexpectedly falling sick or losing your job the situation may come out of control. At this point you might consider filing for bankruptcy as a way of resolving some of your financial troubles and probably keeping your home, while working to get back on track.
When bankruptcy can help?
There are several cases when filing for bankruptcy can help you regain your life back and turn out as the right decision to make. Below we will review three main cases when this is the right option:
- You want to save your home from foreclosure
If you have defaulted on your mortgage you might be faced with a foreclosure and losing your home. If you want to save it, filing for bankruptcy may be your last option, especially if you didn’t manage to renegotiate the payment plan with your lender. A Chapter 13 bankruptcy will allow you to save your home and strip a second mortgage if it has no equity. As a result of your petition you can get a 3 to 5 year repayment plan that will allow you to catch up on your payments. This kind of filing is suitable if you believe that your situation is temporary and you will be able to get back on track after the period is over.
- You want to discharge unpaid debts
If you are faced with a lot of unpaid medical or other debts and you have no property or sufficient cash flow to repay them, even if you renegotiate your payment plan, then your option is filing for bankruptcy. You will strip off the debt and after a certain period of time you will be able to resume your life.
- You want to eliminate your student loans
As student loans do not fall into the same category as other debt when it comes to bankruptcy, the procedure for discharging them is a bit more complicated. Some attorneys refuse to deal with that, however there are many who will do it and will lead you to a successful end. One of the essential requirements in order to bankrupt your student loans is to pass the Brunner test to prove that they are undue hardship. Basically you answer three questions that your current situation doesn’t allow you to maintain a minimum standard of living while repaying the loans, that this financial situation is likely to continue over a long period of time and that you have made a good faith effort to repay your loans. There are successful cases of attorneys and doctors who have managed to discharge their student loans through bankruptcy, so you could do it too. Make sure to find the right attorney and they will do the job for you.
The 7 steps of a bankruptcy process
The process of filing for bankruptcy is not that complicated and unmanageable but is far from too simple as well. There are certain steps that should be followed and stages to be completed without which the process cannot be successfully finalized. Bear in mind that there are specifications which differ from state to state, despite that the overall procedure is the same. Therefore you shall speak to a reliable local bankruptcy attorney who is aware of the precise details in your region.
Now, once you have made up your mind, here are the steps to follow:
- Attend credit counseling – you have to complete a course in credit counseling and debtor education before you file your bankruptcy petition. At the end of the course you receive a certificate, which has to be presented in the court alongside your other documents. The course is usually about 2 hours and costs round $50 but there might be discounts or no fee if you are financially challenged.
- Fill out an Intake form – every attorney office has an intake form that you need to fill out. It can be done either online or on the spot depending on the practice. It contains information on your property, budget and debts and used to prepare your petition.
- Prepare your documents – you need to gather and prepare all the necessary documents for the petition. The court requires to receive them in PDF format.
- Claim your additional benefits – when you file for bankruptcy there are some additional benefits, discharges or special tools that you can take advantage of. A good bankruptcy attorney knows about them and will request them specifically when submitting your claim. Filing on your own often means losing these benefits as they should be asked for and are not automatically added to the petition.
- Attend the 341 Meeting of Creditors hearing – after the petition is filed the court assigns a Trustee and a 341 Meeting of Creditors hearing is scheduled within 4-6 weeks afterwards. For a Chapter 13 Bankruptcy a Confirmation hearing is also scheduled. Both meetings can be on the same day or at different times, depending on the specific state regulations. On this meeting you will be asked certain questions in order for the Trustee to determine whether you have given accurate information and decide on your petition.
- Complete a financial management course – after your bankruptcy case is filed and you know the case number you should attend a financial management course. You are not going to receive the final court discharge without presenting a certificate for it. It also lasts about 2 hours and costs round $50.
- Look for credit record repair – after a bankruptcy case your credit score will suffer. Therefore it is good if you can look for some ways to remedy that. Some bankruptcy attorneys are offering help in this direction as well by giving advice on what to do or with whom to get in touch in order to achieve that. Simply ask your attorney if they can assist you with something like this at the end of your bankruptcy case.
At the end of the day bankruptcy is not a very pleasant but totally manageable process with the assistance of a competent attorney. Make sure to find the right one who is working in your area and who has sufficient time to spend on your personal case.