Sadly, I know what it is like to file for bankruptcy. It is not fun. There were things I wish I’d known before I signed those papers.
In 2002, I hit the lowest point in my life (financially). I had to file for bankruptcy. It was not fun. I am not proud I did it. However, having survived it and come out better on the other side, I know that I had to go through that to become the person I am today.
Having done this doesn’t mean I am a terrible person. It doesn’t say anything negative. It just means I handled money poorly as I never learned about credit cards and finances. As a result, I took a path that I could not get out of, and it was my last result. Trust me; I tried a lot of things before visiting with an attorney.
The good that came from this is that I no longer live that same way. I am very smart with my money and rather than allowing it to control me – I manage it! That is a fantastic feeling. No financial stress keeping me awake at night. No fights over money with my spouse. It truly is a beautiful thing.
Even though I’ve personally been down this path before myself, I do not wish anyone to have to go to through this. However, sometimes, you have no other choice. I recently contacted a bankruptcy attorney to get some information regarding what you should know before you file.
HOW DO YOU FILE FOR BANKRUPTCY
Before you file, make sure you do some research and understand everything that will happen. You will not instantly get out from under paying off your debt, so this is not a quick fix to get out any monthly payments. It is severe and can have lasting effects.
KNOW HOW MUCH DEBT YOU HAVE
First, get a copy of your credit report and be in the know about how much debt you actually have. You want to make sure you have all of the debt listed so you can make the best possible choice regarding a bankruptcy.
WHAT DOES IT COST TO FILE?
The cost will vary from attorney to attorney, but in most cases, you will pay upwards of $1,000 for your filing. You will also pay filing fees of $200 or more. And, then you will still have to repay the debts that may not have been discharged by the courts.
DO I NEED A BANKRUPTCY ATTORNEY?
You need to hire an attorney who understands bankruptcy law. You can find attorneys near you by asking friends and family members for referrals. It is not recommended to randomly select an attorney from a quick search. Make sure you conduct your research before hiring someone to represent you.
WILL I FILE FOR CHAPTER 7 or CHAPTER 13
You also need to know which type you can qualify for be it Chapter 7 or Chapter 13. You should consult with your attorney to determine which is the best option for you, but here are general things to know about each:
CHAPTER 7
- To qualify, you must have little to no income (if you do not, you will have to file Chapter 13)
- It will take anywhere from three to five months from beginning to end
- Your non-exempt property is sold to pay back your creditors
- Will wipe out your general unsecured debts such as credit cards and medical bills
CHAPTER 13
- To qualify, your unsecured debt can’t be more than $394,755 and secured debt of $1,184,200.
- It will take three to five years to finalize the process
- You get to keep all of your property but have to pay creditors the balance of your nonexempt assets
- Allows you to get caught on missed payments
WHAT HAPPENS WHEN YOU FILE BANKRUPTCY
Once you file, you will have to show up to court. You will have to answer the judge’s question under oath. Your bankruptcy will be declared when you are through.
Then, you have to repay some of your debts, which will be determined by the court. While some of your debts may be discharged, others will not. You could end up paying much less than you currently owe or be required repay a portion of the balance. That is up to the court to determine.
You will have a bankruptcy trustee assigned to your case, to whom you will make your monthly payments. The payments will be a percentage of the debt you owe. The amount will vary and may be less than you currently pay for your debts.
You will continue with your court-mandated payments for a period of up to five years. You will need to make all payments on time or face potential issues with the court.
One question most people have is “how long will the bankruptcy be on my credit report.” Your bankruptcy filing will appear on your credit report for up to ten years. After that time, it will automatically fall off (but I recommend you run a credit report to make sure it is removed).
Your life after bankruptcy will not end just at the payments. You will need to report your bankruptcy filing on employment applications, medical forms, and government reports.
Lenders can deny credit or require you pay higher interest rates as a result of this negative mark. It follows you for years to come, which is why you need to fully understand the consequences before you even consider filing.
CONSIDER BANKRUPTCY AS A LAST RESORT
Most attorneys would prefer you file bankruptcy when there are no other options available. Research other alternatives such as negotiated repayment terms or selling your property to pay off debt. Do not bow to harassing creditors or collectors, as you have rights. Reach out to credit counselors for help and advice to find ways to avoid bankruptcy.
