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Options for Avoiding Bankruptcy
Filing for bankruptcy is a fairly drastic step. While it can offer you a fresh start without the burden of debt, it can also have a lasting impact on your credit score and may make achieving goals like homeownership more challenging. There are several alternatives to bankruptcy available for some debtors, especially those who only have one major creditor. You should explore these alternatives with an experienced New Braunfels, TX bankruptcy attorney before making the decision to file. Bankruptcy can be wonderful for those who truly need it, but it should not be your first resort if there is an alternative path to debt relief.
Negotiating With a Single Creditor
Most people who are struggling with debt owe numerous different debts to a series of creditors. For example, a person might have several credit cards that are all maxed out in addition to some medical debt and a mortgage in arrears. If you only have one major source of debt, you might be able to negotiate with that creditor to lower your monthly payments, waive late fees to help you catch up on payments, or reduce your interest rate so you can start paying down the principal.
The Impact of Chapter 13 Repayment Plans
If you are considering filing for bankruptcy, you are likely already quite used to making large monthly payments toward your debts. You have probably been putting most of your disposable income toward credit card bills, payday loan debts, home equity loan debts, or other repayments. You may have been struggling to keep up with these payments for a long time. Restructuring your debts through Chapter 13 bankruptcy can help you establish a single monthly payment that is precisely calculated so that you can reliably make it, but will probably not have a lot of disposable income left over afterward. It is important to consider the impact this type of repayment plan will have on your lifestyle for the three to five years you will be on it before the remainder of your debt is cleared away. An experienced San Antonio, TX Chapter 13 bankruptcy lawyer can help you understand how restructuring your debts is likely to impact your life.
How Long Do I Have to Wait Before Filing for Bankruptcy Again?
If at all possible, you should try to plan out your bankruptcy so that you will only need to file once. This means timing your bankruptcy strategically so that you will not go straight back into debt after filing. For example, if you are considering filing over the credit card debt you took on during a period of unemployment and you have not found a job yet, it may be better to wait until your financial situation has stabilized. After a successful bankruptcy, there is a waiting period before you can file again. The waiting period may be four, six, or eight years, depending on whether you filed under Chapter 7 or Chapter 13 last time and which chapter you will be filing under this time. People experiencing a second bankruptcy should be represented by an experienced Schertz, TX bankruptcy lawyer. Repeat filings can affect whether the automatic stay and other bankruptcy benefits help you.
Can Filing for Bankruptcy Affect My Career?
If you have a good job now or are on a promising career trajectory, it makes sense to prioritize your future career prospects. Finding and keeping gainful employment is essential to staying out of debt and recovering your financial health after bankruptcy. It makes sense to take the time to understand how bankruptcy could or could not affect your current and future employment. For most people, filing for bankruptcy has no real impact on their job prospects. However, if you work in certain professional industries, you may encounter employers less willing to hire applicants who have been through bankruptcy. An experienced Kerrville, TX bankruptcy attorney can help you understand how a bankruptcy might affect your career plans.
Can I Get Fired for Filing for Bankruptcy?
Your current employer cannot legally fire you just for filing for bankruptcy. Firing an employee for needing debt relief would be considered a form of workplace discrimination. Even the best and most responsible employee could need to file for bankruptcy after experiencing setbacks that are beyond his or her control, like extraordinary medical bills or a house fire.
Timing Bankruptcy Around an Illness
Medical bills are an extremely common source of insurmountable debt. No matter how responsible or good with money, anyone can find himself in this situation. You may have had a good job, good health insurance, and reasonable savings before getting sick. However, the cost of healthcare can be astronomical. Insurance may not have covered all of the care you needed, especially if you had to rely on experimental or very new treatments or if you had to go out of network to find the right specialist. It is also normal for people who are struggling with a long illness to take on other types of debt, such as credit card debt, to keep paying for essentials while they are unable to work. Fortunately, medical debt and credit card debt are both dischargeable in bankruptcy. If you are considering bankruptcy as a solution to medical debt, an experienced New Braunfels, TX bankruptcy attorney can help make sure you are filing bankruptcy at the right time.
What Debts Are Not Dischargeable in Bankruptcy?
Most normal debts are wiped away when you successfully complete the bankruptcy process. Credit card, medical, and personal loan debt can all be discharged. However, there are a few types of debt that you cannot discharge through bankruptcy. You will likely still be responsible for your student loan debts, some tax debts, and family support obligations after filing for bankruptcy. When you are considering filing for bankruptcy, you should talk to your San Antonio, TX bankruptcy attorney about what debts you might still owe after your bankruptcy. If your main source of debt is something that cannot be discharged, you might want to consider a debt relief solution other than bankruptcy.
Student Loans Are Rarely Dischargeable
Student loans are a necessity for most people who are pursuing a college education. However, student loan debt can become insurmountable after graduation. Even college graduates who do find a good job after college can find it difficult to keep up with student loan payments. Unfortunately, under normal circumstances, you cannot discharge student loans through bankruptcy. In rare instances, students who have become permanently disabled can sometimes discharge student loan debt.
What to Know About Filing for Bankruptcy After the Holidays
Few people want to file bankruptcy right before or during the holidays. For one, it can be much harder to enjoy your holidays while you have bankruptcy proceedings looming. You might be worried about losing access to your lines of credit and not having the money you need to have your customary celebration. You might need to travel to see family if you live in separate parts of the country, spending money on flights, hotels, and food during travel. Parents are usually focused on making sure their children will have presents to open and are not worried about the family’s financial situation. While enjoying the holidays with your family is important, you might be left with even more debt, some of which you might not be able to discharge. You should consult an experienced San Antonio, TX bankruptcy lawyer about how to time your bankruptcy.
Debt From Purchasing Luxury Items May Not be Discharged
Bankruptcy courts treat luxury purchases from the last several months differently than other debt. This very much includes luxury goods purchased as gifts for others and many travel-related costs. If you know that you are likely to file for bankruptcy soon, it is best to avoid luxury purchases and consider celebrating at home this year.
What do Bankruptcy Courts Consider a Luxury Purchase?
Before you file for bankruptcy, it is important to avoid making any luxury purchases on credit for at least several months. If you use your credit cards to purchase luxury goods or services soon before filing, it might look as though you are deliberately trying to max out your credit cards knowing that your debt is about to be cleared. You may also not be able to discharge debt you acquired by making luxury purchases shortly before filing. Understanding what is and is not considered a luxury purchase is essential during the bankruptcy planning process. An experienced San Antonio, TX bankruptcy lawyer can help you determine if an expenditure you are considering making would be considered a luxury purchase.
Luxuries Are Goods and Services That Are Not Reasonably Necessary
When most people think of luxury purchases, they think of things like high-end spa treatments and designer handbags. While these things would certainly be considered luxury expenditures, the way luxuries are defined in bankruptcy law is much less restrictive. Luxury purchases are any purchases that are not reasonably necessary for your and your family’s support and maintenance. This can include recreational expenses like going to concerts or taking a vacation, buying high-end goods when a less costly item would have sufficed, and buying items that are not essential to daily living.
What Not to Do Before Filing for Bankruptcy
What you do shortly before filing for bankruptcy could make your case much easier or much harder. Appearances matter in a bankruptcy case, and you do not want it to look like you are abusing the bankruptcy process or attempting to avoid liquidation. It is usually best to avoid big financial moves in the months before filing for bankruptcy. You should begin speaking with a San Antonio, TX bankruptcy lawyer early on. A bankruptcy attorney can help you avoid making mistakes that could prove costly during your bankruptcy proceedings. You will need to time your bankruptcy around other financial events and may need to delay filing in some cases.
Common Mistakes Prior to Filing for Bankruptcy
A few things you generally should not do just before filing for bankruptcy include:
- Creating more debt - It can help if you have been trying to make payments on your debts instead of going further into debt before you file for bankruptcy. It is better not to willingly take on more debt knowing that you will not be able to repay it even if you are using a Chapter 13 bankruptcy. Other than unavoidable medical debt, it is best to avoid adding to your debt right before filing for bankruptcy.
Can I Be a Homeowner Again After Bankruptcy?
If you are serious about rebuilding credit after bankruptcy and have steady income, it is very possible to return to a position where buying a home is achievable. A lot of people who have been through a bankruptcy are able to secure a home loan as little as a few years later. There may be a waiting period before you can apply for certain types of home loans, but they are typically between two and four years. Bankruptcy exists to help people get out of insurmountable debt so that they can start again with a clean slate, not to make basic goals like home ownership impossible. A Boerne, TX bankruptcy attorney can help you plan for success after your bankruptcy.
The Waiting Period for Federally-Backed Loans
If you are planning on using a federal program to obtain a home loan, there may be a brief waiting period. If you are using a VA loan or an FHA loan, the waiting period after a bankruptcy before you can apply for a loan is two years if you had a Chapter 7 bankruptcy.
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