Deciding to file for bankruptcy is a hard decision, considering the impact it could have on your credit score. You can decide to file for bankruptcy to enable you to have a fresh financial start. Other ways of dealing with debt include debt consolidation and negotiating with creditors for a more affordable repayment plan. Bankruptcy is the last resort that comes in handy if you have insufficient disposable income to clear your debts.
Any person, whether unemployed, employed, or in business, can file for bankruptcy. Celebrities, too, file bankruptcy. Most people assume celebrities rake in cash. However, even if they have money, most have people to support.
You should speak with an experienced bankruptcy attorney if you are struggling with substantial debt and are considering bankruptcy. There are some obvious signs that you are headed towards bankruptcy. A competent attorney will evaluate your situation and determine your eligibility for bankruptcy.
Signs You Are On The Path To Bankruptcy
Bankruptcy gives people who have no means of paying back their debt a chance to discharge their debt or reorganize their debt using a debt settlement program. Bankruptcy allows you to experience a fresh financial start, but it is often at the expense of your credit rating.
You can discharge part of your debt, establish a repayment program, and remove the negative credit report from your credit history. Depending on your financial situation and the types of debts involved, you can file for Chapter 7 or Chapter 13 bankruptcy. Your bankruptcy attorney will help you choose the right chapter to settle your debt and financial situation.
You could be eligible for bankruptcy relief if you receive a notice of lawsuit from one or several creditors. However, before you decide on bankruptcy, you should consider its impact on your debts, given that some debts cannot be discharged in bankruptcy. Here are the leading signs that you will likely file for bankruptcy:
You Are Not Eligible For Debt Settlement
You can consider bankruptcy if you are unable to keep up with your loan payments, even after trying to work out a debt settlement or loan modification program with your creditors. If you are not eligible for a debt settlement program, your lender can demand that the property be used as collateral. Creditors will not cooperate if you do not follow an established debt settlement program.
A debt settlement program allows you to enter into an agreement with your creditor on the most suitable debt repayment program. Creditors and debt collectors, in most cases, prefer a debt settlement program to bankruptcy. They are always willing to accept a debt settlement program.
A debt settlement program allows you to pay back the debt on your own terms. You could even negotiate with creditors to have some of the debt discharged. You can usually pay at least 40% of your debt. In other cases, your debt can be reduced further, especially if you pay a significant portion upfront. Unfortunately, not every debtor is eligible for a debt settlement program. Sometimes, your only option is to file for bankruptcy, mainly if your lender takes legal action against you.
A creditor can enforce a lien on your property or seek a wage garnishment order. In this case, your options are:
- File for bankruptcy, especially if you are unable to keep up with the agreed-upon debt settlement program.
- Find a common ground with your lender.
Losing Your Job
Investing in assets, applying for credit cards, and obtaining multiple loans when you are employed is easy. Problems come knocking if you are unable to meet your monthly loan installments. You can experience economic hardships if you lose your job, mainly if you rely solely on your 9 a.m. to 5 p.m. job as a source of income.
You can also fall behind on other essential payments if you are no longer employed and cannot get back on your feet. Even if you secure a new job, it would be hard to keep up with payments if your new job does not have the same earning potential as the previous job.
Even if you are out of work for a period that does not exceed one year, you can still fall behind on your payments if you do not have savings. You will start experiencing economic pressures immediately after you lose your job or your earning potential changes. This would be an excellent time to consider bankruptcy or a debt settlement program.
Most people often wonder if they can file for bankruptcy after losing their jobs. Yes. Applying for bankruptcy is not dependent on your job position. Many petitioners apply for debt relief after losing their jobs and having inadequate finances.
Too Much Financial Stress
You should not put yourself under constant financial stress. With a stable income, you should be capable of making ends meet while still having sufficient money to save for the future. You should consult an attorney about a debt settlement or bankruptcy if you discover that you cannot meet your financial demands. A debt relief program can give you much-needed peace of mind.
You Have No Concrete Plan Of Repayment
You could be heading towards bankruptcy if you cannot pay off the debt you have incurred over the years. You should be realistic about your economic situation and consider bankruptcy if you cannot pay off your debt. It is time to consider bankruptcy if you are living paycheck to paycheck.
You Are Using Credit To Pay Off Another Credit Facility
Sometimes, you can apply for a credit line with a lower annual percentage rate (APR) and use it to pay off a credit line with a high APR. After all, credit lines with lower APRs will make you pay less interest. When you obtain a loan to pay off another credit facility, you should ensure that you use the funds for the intended purpose. If you divert the funds, you will end up with two loans, which will only worsen the financial burden. Obtaining a credit facility to pay another debt once or twice is okay. However, if you are constantly applying for new loans to pay the installments for the loans that have fallen due, it could be time to apply for bankruptcy.
You Are Paying The Minimum Amount On Your Debt
If you pay the bare minimum amount on your outstanding debt, you will find it hard to pay off the total debt. The longer the loan repayment period, the more interest the loan accumulates. For example, you could pay $40 instead of the required $80 monthly obligation. You could be heading towards bankruptcy because your debt issues will persist for much longer.
You Have Taken Out A Secured Loan To Pay Off Unsecured Credit
You can take out a secured facility, like a second mortgage, to pay off unsecured credit. Paying off unsecured debt like a credit card or medical bills with a home mortgage loan is not recommended. If you do this, you will be allowing your lender to have a claim on your property. This means that if you fail to pay back your debt, the lender can seize the property used as collateral, in this case, your home.
Perhaps you pay off your credit card debt and later fail to repay the second mortgage. Your lender can enforce a lien on your property if you fail to pay off your second mortgage. The lender can also repossess your property to pay off the debt.
You should consult an attorney to protect your assets if you applied for a secured facility to pay off unsecured debt and are facing foreclosure for failure to pay the secured debt. In most cases, you should file for Chapter 13 bankruptcy if you are a homeowner wishing to keep your property. Chapter 13 bankruptcy allows you to keep your property by agreeing to a debt repayment program that suits your financial situation and earning potential.
Businesses and individuals who owe money to creditors face all sorts of collection tactics, including:
- Repossessions.
- Evictions.
- Wage garnishments.
- Utility and service shut-offs.
- Aggressive debt collection letters and
- Lawsuits.
The automatic stay law will protect you if you are a homeowner and file for bankruptcy. An automatic stay is a way of removing the above tactics and activities. These laws prevent any creditor or debt collector from pursuing a debt or taking any debt collection action against the borrower.
You Have Undergone A Divorce
Filing for divorce is among the leading reasons for filing for bankruptcy. You could be struggling with debt accumulated when you were married. Sometimes, the debt can be too much, particularly for the spouse who is not earning. You can file for bankruptcy if you are responsible for a large amount of marital debt.
Debts that married people incur consist of debts that can be discharged, like credit card debts or other types of loans. You can discharge these debts using a Chapter 7 bankruptcy. You can also pay them back via a debt resettlement program after filing a Chapter 13 bankruptcy.
You Have A Hefty Medical Bill
You could be struggling with a hefty medical bill beyond your earning potential, especially if you or your loved one falls ill and you do not have proper insurance. You can file for bankruptcy if you cannot pay the medical and other bills. Your medical bills can accumulate if you sustain injuries in an accident or experience a health condition that requires medical attention. Medical bills are also among the primary reasons for filing for bankruptcy.
Your Phone Is Ringing Off The Hook
Perhaps your creditors keep calling you every day of the week, reminding you of late payments. This can be a clear sign that you should file for bankruptcy. A lender will only contact you if you delay paying your debt. You should explain your economic situation to creditors instead of dodging their calls. The creditor will usually be willing to negotiate a debt settlement program to avoid bankruptcy.
If you fail to address your debts, creditors will likely hand you over to debt collectors, who will pursue lawsuits or seize your property to pay the outstanding debts. A debt collection agency can follow up on a debt for years from the last date you made a payment. Depending on the lender and the outstanding debt, you will encounter debt collection calls daily. Collection agencies pursue debtors until a debt is discharged, paid off, or becomes a stale debt that cannot be legally pursued.
You Are Unable To Save
You cannot save money for tough times if you do not have disposable income at the end of the month. If you live from paycheck to paycheck and cannot save for the future, you could be on your path to bankruptcy. You should consult a bankruptcy attorney if you are working full time and are drowning in debt, making it impossible to set aside some money for savings.
A bankruptcy attorney will guide you on strategies to get back on your feet, including a debt discharge or a debt settlement program.
The Process Of Bankruptcy
You must follow a specific process once you have decided to pursue and declare bankruptcy. The process will give you the best chance for an actual bankruptcy declaration. The following are the steps:
Compile Your Financial Information
This is also called ''financial inventory''. In this case, you should gather all the details regarding your finances. You should include your spouse's financial information if you are married but filing bankruptcy as a single person. The records you should provide could consist of:
- Debts — List all your creditors, interest rates, outstanding loan balances, and outdated or current payments.
- Monthly expenses, including food, utilities, child support, spousal support, transportation, taxes, clothing, rent, mortgage, and medication.
- Property and assets include anything you possess that has value, including collectibles, art, cars, savings accounts and stocks, and home and business property.
- Income — Any amount of money you have received or earned in the last six months, as well as future income like investment dividends, side jobs, retirement or pension, unemployment compensation, and salaries.
Seek Credit Counseling
Credit agencies offer credit counseling, which usually takes several hours by phone or online. The fee is generally less than $100 per session. You should seek credit counseling with an approved agency six months before your bankruptcy petition.
Attend Your 341 Creditors’ Meeting
This meeting can be intimidating. Working with your bankruptcy attorney to help you prepare for the meeting is essential. Your case could be dismissed if you miss or fail to attend the 341 creditor's meeting.
Seek Post-Bankruptcy Credit Counseling
If you are filing for Chapter 7 bankruptcy, you must complete another session of credit counseling within 45 days of your creditors' meeting. If you are filing for Chapter 13 bankruptcy, you will be required to complete another session of credit counseling 45 days before the day of your last payment. Your bankruptcy process will not be completed if you don't send proof of attending counseling to your bankruptcy trustee.
The Role of a Bankruptcy Attorney
The process of filing for bankruptcy can be confusing and overwhelming. This is where a bankruptcy attorney comes in. A bankruptcy attorney is familiar with the legal system, which increases your chances of success in a bankruptcy case.
With a reputable lawyer, you can have your questions addressed, obtain guidance, and leave the bankruptcy process in the hands of an experienced professional. Your lawyer can also assist you in setting up credit counseling to avoid prospective financial challenges.
A bankruptcy attorney specializes in bankruptcy statutes, including local and federal laws that affect assets included and not included in bankruptcy. Generally, a bankruptcy attorney can guide you on the following:
- The assets you could keep or put to the side of your bankruptcy petition.
- The debts you can discharge in bankruptcy.
- The debts that cannot be discharged in bankruptcy.
- Whether to file a bankruptcy petition or opt for another option, alternative debt relief options are particularly suitable if you are a high-income earner.
A bankruptcy attorney can also help you:
- Understand how an automatic stay will apply to debt collection activity.
- Understand whether you should continue repaying some debts and which lenders to continue paying.
Find a Reliable Bankruptcy Attorney Near Me
Filing for bankruptcy can help you eliminate many consumer debts, like medical bills and credit card debts, especially when you file for Chapter 7 bankruptcy. You can also protect some of your property from being liquidated. If you are struggling with debt and you want to put an end to the growing debt, you should contact an experienced bankruptcy attorney. Bankruptcy will turn things around and give you a fresh start. Contact the Los Angeles Bankruptcy Attorney if you need a reliable bankruptcy attorney. Our experienced lawyers will evaluate your situation to help you determine if bankruptcy is the right option for you. We will also advise you on the suitable bankruptcy chapter. Contact us at 424-285-5525 to speak to one of our attorneys.
