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Are There Any Drawbacks to Filing for Personal Bankruptcy?
The benefits of filing for personal bankruptcy are undeniable. The automatic stay can help you to avoid repossession, foreclosure, and other creditor action for as long as your bankruptcy case remains active. The time that the automatic stay affords you can allow you to renegotiate secured debt to make repayment more manageable. You can also fine-tune your finances over this period of time so that you are primed to meet new goals once your bankruptcy case is complete.
However, there are also some potential drawbacks to filing for personal bankruptcy. Although these challenges are temporary, they are worth considering if you are thinking about filing for bankruptcy but you still have some questions that are holding you back from moving forward just yet. Bankruptcy is an excellent debt relief and debt management opportunity, but you will want to make sure that it is the best option for your unique situation before committing to the process.
Tips for a Successful Chapter 13 Repayment Period
If you are thinking about filing for Chapter 13 bankruptcy, you are likely already aware that you will need to adhere to the terms of a repayment plan that you and an attorney will create and that your creditors will – hopefully – sign off on. Only after you have successfully completed your 3-to-5-year repayment plan, will the court discharge your remaining eligible debts and close your Chapter 13 bankruptcy case favorably.
Laying Groundwork for the Future
Although your single debt payment each month will be designed to be manageable, the terms of your repayment period will leave you with very little disposable income. Without some careful planning on your part, this repayment period could become stressful. Thankfully, thinking ahead and monitoring your situation carefully as it evolves can help to ensure that your repayment period is truly workable for you and your family.
Why the Uptick in Corporate Bankruptcy Filings Matters for Families
According to S&P Global, more U.S. corporations filed for bankruptcy during the first four months of 2023 than any other year’s first quarter dating back to 2010. Evidence suggests that a combination of high interest rates, significant debt burdens, and consistently high inflation are all affecting corporate America’s ability to remain afloat without assistance. According to S&P, companies that specialize in consumer discretionary goods and services are being hit hardest. Although many businesses laid off workers within the last year to stave off financial challenges, their efforts did not make enough of a difference for those that have opted to file for bankruptcy.
Are Personal Bankruptcy Rates Going to Spike Next?
Generally speaking, when companies are laying workers off and filing for bankruptcy en masse, this indicates that many families across the country are also struggling financially. As a result, many individuals and married couples may discover that they too cannot regain their financial footing adequately without seeking the benefits that bankruptcy protection provides.
Why Do People File for Bankruptcy?
The 2008 financial crisis did result in a silver lining, as challenging as the situation was for corporations, families, individuals, governments, and communities alike. It allowed the public a greater understanding of the reality that even the most hard-working and financially-conscious individuals are often only a few rough-pay cycles away from the risk of financial devastation. It has been this widespread realization that people can fall on hard times through no fault of their own that has largely eliminated the stigma associated with taking advantage of the opportunity to file for bankruptcy.
Most Bankruptcy Filers Are Responsible
The most common reasons that individuals file for bankruptcy have nothing to do with financial irresponsibility. Instead, challenges such as medical emergencies or significant medical developments that require extensive treatment, unexpected job loss, economic conditions outside of an individual’s control, the death of a wage-earning loved one, and other challenging circumstances lead most filers to seek bankruptcy protection.
Can I File for Bankruptcy Without a Lawyer?
If you are struggling to repay your debts, you may be thinking about filing for bankruptcy. Understandably, as you likely have no money to spare, the thought of hiring a lawyer to represent your interests may feel counterintuitive. As a result, you may be wondering whether you can successfully navigate the bankruptcy process without a lawyer’s assistance.
Maybe, But Probably Not
There are two primary kinds of personal bankruptcy available to individual filers and married couples filing jointly throughout the United States. Chapter 7 bankruptcy is available to low-income filers and Chapter 13 bankruptcy is available to those who can make manageable monthly repayments to their creditors for 3-to-5 years.
There are some Chapter 7 filers who are able to file for bankruptcy without a lawyer. These individuals tend to have unusually straightforward financial circumstances and debt-related accounts. With this notable exception, bankruptcy filers generally cannot file for bankruptcy successfully without legal guidance.
What Are the Differences Between Chapter 7 and Chapter 13 Bankruptcies?
Bankruptcy is a legal situation that allows a person or company to get rid of or reorganize their debts and obtain a fresh start. There are several types of bankruptcy available, with two of the most common forms being Chapter 7 and Chapter 13. Today, we will discuss the differences between Chapter 7 and Chapter 13 bankruptcy to help you better understand which option may be right for you. The bankruptcy process can be daunting and complex, which is why it is critical to hire an experienced bankruptcy attorney to guide you through the process from beginning to end.
What to Know About Chapter 7 Bankruptcy
Chapter 7 bankruptcy, or liquidation bankruptcy, involves liquidating the debtor's non-exempt assets to pay off debts. This process typically takes four to six months to complete and offers the opportunity for a discharge of most unsecured debt, such as credit card debt, medical debt, and personal loans. However, not all debts, such as student loans, child support or alimony payments, and certain taxes, can be discharged.
What Is a Short Sale?
Making any kind of investment comes with a certain degree of risk. Unfortunately, home ownership is not an exception to this rule. When an individual makes a decision to take out a mortgage, they do so knowing that if they cannot keep up with their payment schedule, their lender may foreclose upon the home. As even the most hardworking and financially responsible individuals can find themselves falling on hard times through no fault of their own, foreclosure is a real risk for virtually anyone who has not yet paid off their mortgage in full. When this risk becomes a reality, pursuing a short sale may be the best way forward.
A Way Out When a Home Is Underwater
Generally speaking, foreclosure is a situation that should be avoided. When a lender forecloses on a homeowner, that homeowner simultaneously loses all of the equity that they have invested in their home and sustains a major hit to their credit score. It is, ultimately, very difficult for those who have been foreclosed upon to purchase new real property for years after a foreclosure.
Preparing for a Free Bankruptcy Case Evaluation
Your time and energy are valuable. Therefore, even if you do not have to pay to attend a bankruptcy consultation at a law firm, it is important that you take a little time to prepare for the opportunity so that you get the most out of the time and energy that you are investing in this experience. Additionally, taking a few steps in advance will help to ensure that you are in a strong position to make informed decisions about filing for bankruptcy once your questions have been answered and a member of a firm’s legal team has explained the firm’s approach to bankruptcy representation.
Gather Relevant Information
It is not always easy to know whether bankruptcy or a debt management or relief alternative will best suit someone’s individual circumstances. As a result, it is a good idea to have information about your income, debts, assets, and financial goals at the ready during a bankruptcy case evaluation. That way, if the individual with whom you are meeting has questions about your situation, you can provide detailed information that will allow them to consider your challenges in a personalized way.
When Are Bankruptcy Debts Discharged?
When individuals choose to file for bankruptcy, their financial situation has usually reached a tipping point. They are so stressed out by the reality of their circumstances that they are – understandably – very concerned about how quickly they can get their eligible debts discharged. When they hear that the bankruptcy process, especially Chapter 13 bankruptcy, takes time, they may panic because they need solutions to their challenges immediately.
Yet, it is important to understand that while eligible bankruptcy debt is not discharged until the bankruptcy process is nearly complete – which can take months or years, depending upon the type of bankruptcy in question – the benefits of the automatic stay go into effect as soon as a filer’s bankruptcy petition has been submitted to the court.
Benefitting from “Immediate” Relief
As soon as the court receives a filer’s bankruptcy petition, it notifies all of the creditors listed in that petition of the filer’s case. Included in that notice is a reminder that the automatic stay – which remains in effect for the duration of a filer’s bankruptcy case – is now in effect. This means that nearly all collection actions and requests for repayment must cease immediately.
Should Texas Filers Choose State or Federal Bankruptcy Exemptions?
Many individuals shy away from filing for bankruptcy because they may have heard they will lose everything they own if they take this course of action. This is a myth. While it is true that those who opt to file for Chapter 7 bankruptcy are at risk of having some of their non-exempt assets sold by the trustee assigned to their case, assets are only sold in a tiny fraction of cases.
With that said, it is vitally important to utilize all bankruptcy exemptions available to you, if you choose to file for Chapter 7 bankruptcy. Bankruptcy exemptions allow you to safeguard certain kinds of property – and certain values of property – from any chance that they will be sold by a trustee in order to repay your creditors. If you file for Chapter 7 bankruptcy in Texas, you are permitted to choose Texas exemptions or you are permitted to use federal exemptions. You cannot mix and match exemptions from both schemes, so making an informed choice about these binary options is important.
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