Any individuals and businesses who owe much more money than the income and assets to pay them off with no hope of the situation changing anytime soon, can resort to bankruptcy. Are you unsure if this is the right path for you? You can rely on the advice of an expert lawyer to guide you in the right direction. If you choose to use this option to resolve your financial situation as an individual, you can file either Chapter 7 or Chapter 13. Businesses must file Chapter 11 to remain operational while initiating the process of restructuring their debts and assets.
How Bankruptcy Helps You Get Out of Debt
Close to 418,400 individuals and 16,140 businesses filed for bankruptcy in the year ended September 21st, 2021, as estimated by the Administrative Office of the U.S. Courts. Bankruptcy laws are designed to give people an opportunity to recover from a financial collapse. During this process, the judge and court trustees evaluate the assets and liabilities of the applicant and determine if they have adequate sources of income for paying off the debts they owe. If they lack the resources, the debt may be written off, but the court may dismiss the application for bankruptcy if they have the assets. Read ahead for some tips on how to ensure that the process proceeds seamlessly.
1. Retain an Experienced Attorney to Assist You
You can work with a reputable Orlando criminal defense attorney
specializing in bankruptcy cases to help you with the various nuances of filing. To begin with, you must determine whether to file Chapter 7 or 13. Further, you’ll figure out the kind of debt you owe and how Chapter 7 laws govern them. For instance, you’ll need assistance with managing secured or unsecured loans and voluntary or involuntary debt. The lawyer will read through the terms and conditions of the contract and direct you on how to work out payments. They’ll also negotiate new terms with your creditors and arrive at a solution that works for both parties.
2. Educate Yourself on Filing the Paperwork
Although relying on the services of an attorney is the way to go, you must also research bankruptcy laws to understand how the procedure works. You might want to start by downloading the instruction booklet made available by the U.S. Bankruptcy Court. Not only will you get detailed information about the different forms you’re required to complete and submit, but you’ll also learn more about the many consequences of declaring bankruptcy and how to choose credit counseling options before making the final decision. This booklet also has directions about the assets that can be liquidated to clear away the debt and the exempt assets.
3. List the Debts You Have
Go through your financial documents and create a detailed list of your debts, including the regular payments you’ve been falling behind. It is crucial to understand which debts can be set aside and the ones that the bankruptcy cannot waive. For instance, domestic dues like child support and alimony cannot be discharged. If your wages are being garnished for making payments automatically, initiating a bankruptcy process will not stop the garnishment. Similarly, if you have student loans, you’ll continue payments as before despite filing for bankruptcy. However, by filing for Chapter 13, you can consolidate your credit and pay previous installments.
4. Collect Your Financial Statements
Whether you’ve retained an attorney or are filing for a DIY bankruptcy online, one of the first steps is to organize all your financial statements. These documents include bank statements, credit card bills, credit reports, and details of the bill payments you haven’t covered. If you’ve been receiving notices from collection agencies, save the paperwork in a separate file. And, if you’ve been sued for a debt, have the case documents ready at hand. Also, get previous years’ income tax returns, pay stubs, and information about all your sources of income and expenses. The court will want to see all these documents, and having them ready will speed up the process.
5. Explore Alternatives to Bankruptcy
Filing for bankruptcy should be the last option after you have exhausted all other avenues of resolving your debts. You can try contacting your creditors and negotiating with them for the possibility of paying a more affordable amount to discharge the debt. Every individual’s financial situation is unique, and you could develop satisfactory solutions. You can also consult a credit consolidation entity for assistance with your loans and debt. Do keep in mind that the court will want to see that you’ve tried your best to pay off your debt. Once you’ve initiated the process, you must also go for court-mandated credit counseling courses.
6. Keep Up with Bill Payments
Having filed for bankruptcy, make sure to keep up with all the bill payments you can manage. Make regular payments like child maintenance, alimony, insurance premiums, taxes, car loan installments, home mortgage, and any other dues not covered by Chapter 13. Plan your expenses to stretch every dollar and use it to pay off your debts. Creating and following a budget early on improves the case in court because you’ll demonstrate good intentions to remain solvent hereon. Most importantly, make sure not to incur new debt. If that’s not avoidable, inform your attorney right away.
7. Be Responsive to Court Notifications
You may receive notifications from the court during the bankruptcy process. Stay responsive with the assistance of your law firm and provide all the paperwork you’re required to file. You may also receive statements from the court trustee with information about creditors’ claims. Check the reports carefully and tally the numbers at your end for any discrepancies you may have to challenge.
8. Create a Budget and Cut Back on Expenses
While you’re working through bankruptcy, create a budget to establish healthy financial habits. Adopting a more frugal lifestyle will help you avoid a similar situation in the future. Carefully balance your income and expenses, making sure to set aside enough funds to pay off debts that bankruptcy will not waive. If needed, take on a second job and cut back on wasteful expenses by cooking and eating at home instead of getting takeout. Carpool or use public transportation and restrict shopping to basic living staples. With the guidance of your lawyer, downsize and move to a smaller place that is more economical to maintain. You could use the accumulated equity to cover some of your debt.
9. Open a Savings Account
Open a savings account and commit to setting aside a percentage of your income. Deposit these funds into the account each month to build a safety net. Many banks and credit unions have recurring deposit schemes where a portion of your income is automatically diverted to a savings account. You might also get incentives by earning interest on the balances you add up. Also, check with your employer for any automatic deposit programs they may have for the workforce.
Filing for bankruptcy is a complicated process that is best avoided by making careful financial decisions. But, if you’re in a situation where you need help with discharging your debt, follow these tips and the advice of an experienced attorney to resolve the situation.