Chapter 13 Is Likely To Worsen Your Finances
As stated above, about two-thirds of Chapter 13 cases nationally result in dismissal.
When your Chapter 13 case is dismissed, you are often in a far worse financial position. Thatâs because the interest on your unpaid debts has continued to mount as youâve struggled to make payments. And once youâre out of bankruptcy protection, you have more debt than ever.
Since you now have paid the costs of bankruptcy – attorney fees and filing fees, a seven year flag on your â without receiving the main benefit of bankruptcy, a fresh start.
Is Your Situation Temporary
Realistically consider whether or not your financial problems are temporary. For instance, if youve lost your job, will you qualify for unemployment benefits? How good are your prospects for getting another job?
When you file for bankruptcy, the court looks not only at your current income but also at your income over the past six months or more. If youre currently having a financial problem, but youve historically paid your bills on time, consider waiting a few months to see if you can improve your situation.
Disadvantages Of Chapter 13 Bankruptcy For Small Business Owners
The first and foremost disadvantage to Chapter 13 is that business entities cannot file Chapter 13. Also, Chapter 13 takes much longer than Chapter 7 because you have to make monthly payments to a trustee for three to five years.
If you have nonexempt assetsproperty that you can’t protect with an exemptionyou can keep the property, but you must pay an amount equal to its value to unsecured creditors which can increase your plan payments significantly. You might not have sufficient income to pay the required plan amount.
Further, your discharge wipes out only your personal liability for business debts. The business itself will remain responsible for paying back its debts.
Read Also: How Many Bankruptcies Has Donald Trump Filed
Medical Bill Collections Are Even Easier To Get Removed
Medical collections are one of the easiest items to get removed from your credit report. This is because of the HIPA act. HIPAA protects most of your information, so the collection companies dont have much information about your account. When the Credit Bureau sends a creditor a request for information to validate the account, they may not have it. Or, they may ignore the request.
If they do ignore it, the Credit Bureau will remove the collection account. In my experience, about 50%-60% of all medical collections can be removed by disputing them.
When Is It A Good Idea To File Bankruptcy
Many people feel like filing bankruptcy is somehow a failure, but the reality is that filing at the right time is a smart financial move. If you are buried under debt, it does you no good to avoid taking care of the situation. Sometimes, bankruptcy can be the best thing for your situation, but when do you know when it is the right time to file bankruptcy in Louisiana?
Money Crashers explains that knowing when to file is important to ensure that you get the most out of your bankruptcy. If you have exhausted other options, then it is time to file. When you can no longer figure out how to handle your debt, it is best to file because you can then move on from the debt and begin rebuilding.
You also need to make sure bankruptcy makes sense for your situation. Consider the debts you have and make sure they are dischargeable through bankruptcy. Certain debts, such as student loans and child support, will not go away once you file, so if these types of debt make up most of your debts, then it will not help to file. You may need to look into alternative options.
Planning ahead and really making sure bankruptcy will work for you is the best way to know when it is the right time to file. This information is for education and is not legal advice.
You May Like: Epiq Bankruptcy Solutions
What Happens When You Declare Bankruptcy
When you declare bankruptcy, you will be released from most of your debts and your creditors will no longer be knocking on your door.
You will still be required to make your repayments on your secured debts such as your car or home loan. If you cannot make these payments, your house or car will most likely be repossessed by the bank.
You will still have to pay your child support alimony payments, as your bankruptcy status will not affect these.
Is Filing Bankruptcy Twice Bad
Filing multiple bankruptcies is certainly not ideal, lets put it that way. Anyone who got into such serious debt problems that bankruptcy was necessary once may have repeated the same mistakes and chose to file a second time.
However, there are times when a second filing is necessary, and important. Those who have worked out a plan and approach with their attorney, financial adviser or credit counselor may find bankruptcy the best option for dealing with a bad financial situation.
Its important to know the consequences of bankruptcy when considering whether you should file bankruptcy a second time. There will be ramifications on your credit score and credit report, but leaving debt unpaid also will hurt the financial status.
If the approach is well thought out, the second filing may turn out to be a good thing because it will allow for a fresh start and the ability to move forward from the crushing burden of debt.
Youve Done Your Research Spoken To A Bankruptcy Attorney And Completely Understand The Implications Of Filing For Chapter 7 Bankruptcy
Filing for bankruptcy can have its benefits, such as erasing much of your debt. Still, there are certain conditions that come with filing for bankruptcy. Prior to filing for bankruptcy, you must complete a counseling course. This courses can provide you with insight as to what you can expect in your bankruptcy. The course serves as an additional resource for debtors looking to make an informed decision about filing for Chapter 7 or Chapter 13 bankruptcy. It is also important to note that once a bankruptcy filing is complete, there may be a bankruptcy notation on all your credit report. Bankruptcy can stay on your credit report for up to ten years.
Do you accept all the conditions that come with filing for bankruptcy? Perhaps Chapter 7 bankruptcy or Chapter 13 bankruptcy may be a good option for you.
Its important that you talk to an experienced bankruptcy lawyer to ensure that you meet all requirements. A simple search for bankruptcy lawyer San Diego will lead you to bankruptcy attorney Tristan Brown of T.L. Brown Law. Contact T.L. Brown Law for a free consultation.
Can You Apply For Bankruptcy Without A Lawyer
Yes, you can file for bankruptcy without a lawyer. Simply follow the steps for filing for bankruptcy in Australia .
Once you have been declared bankrupt, you will be assigned a trustee, who will manage your assets and finances until your bankruptcy is discharged.
You may, however, find it worthwhile to get professional advice and support with your bankruptcy application.
Read Also: How Many Bankruptcies Has Donald Trump
Filing For Chapter 7 Bankruptcy
There are lots of reasons people file for Chapter 7 bankruptcy. You’re probably not the only one, whatever your reason is. Some common reasons for filing for bankruptcy are unemployment, large medical expenses, seriously overextended credit, and marital problems. Chapter 7 is sometimes referred to as a “straight bankruptcy.” A Chapter 7 bankruptcy liquidates your assets to pay off as much of your debt as possible. The cash from your assets is distributed to creditors like banks and credit card companies.
Within four months, you will receive a notice of discharge. The record of your bankruptcy will stay on your credit report for ten years. But even that doesn’t have to mean doom. Lots of Chapter 7 filers have bought homes with recent bankruptcies on their record. For many people, Chapter 7 offers a quick, fresh start.
But Chapter 7 bankruptcies aren’t right for everyone. Almost all assets are taken and sold to repay creditors. If a debtor owns a company, a family home, or any other personal assets which he or she wants to keep, Chapter 7 may not be the best option.
You May Make Surplus Income Payments
When you file for bankruptcy, you must do the following:
- disclose to the LIT information about all of your assets and liabilities
- advise the LIT of any property that was sold or transferred in the past few years
- surrender all your credit cards to the LIT
- attend the first meeting of creditors
- attend two counselling sessions
- advise the LIT in writing of any address changes
- if required, attend an examination at the Office of the Superintendent of Bankruptcy and
- assist the LIT as needed in administering your estate.
You may be required to make additional payments to your LIT for distribution to your creditors.
In addition to paying the LIT’s fees, you may be required to make additional payments to your LIT for distribution to your creditors. These are called surplus income payments.
Each month during the bankruptcy process, you must submit a copy of your pay stubs and proof of other income to the LIT. The LIT then calculates your surplus income.
Surplus income is the part of your earnings that exceeds the amount of income a family needs to maintain a reasonable standard of living. This amount is set by the OSB annually. The larger your family, the more you are allowed to keep the more you earn, the more you are required to contribute.
In other words, if your household income exceeds the level set by the OSB, then you must make additional payments to your LIT during your bankruptcy.
You May Like: What Does Dave Ramsey Say About Bankruptcy
You Are Unemployed Laid
So many people worry a great deal about not having enough money to pay off debts. However, there is a slight difference between being worried about not having money in the future and actually being broke. When you do not have the money to pay off your debts and are considering filing for bankruptcy, ask yourself some questions. Do you foresee having the money in the near future? You may have a low paying job that doesnt allow you to make debt payments. Do you foresee yourself getting a raise that will better enable you to pay your debts? Are you able to get a second job to help pay the debts? Is there a promotion in your future? Are your debt obligations going to lessen soon? If so, then you may be able to avoid bankruptcy.
You may ultimately decide you are comfortable skimming by until you get the additional income. All of these factors and more are important to consider when making your choice. A good bankruptcy attorney can help guide you.
Do you foresee yourself getting a raise in the near future? Do you have the mental and physical capacity to take on another job? Then perhaps you would be better off not filing for bankruptcy. Perhaps waiting for an increase in income is your best option. You can avoid bankruptcy if youre expecting a promotion. Working a second job helps too, says San Diego bankruptcy attorney Tristan Brown. When none of these apply to you, you may want to consider bankruptcy as an option.
When Is Filing Bankruptcy Not A Good Idea
For many individuals in debt, bankruptcy can be a tremendous help. Bankruptcy can discharge credit cards, give you time to pay off the IRS, and even reduce the amount you owe on your car. Essentially, bankruptcy restructures your finances and gives you a financial fresh start.
Sometimes bankruptcy is not a good idea. Sometimes bankruptcy can make a bad situation worse, and those times are not always clear to the untrained eye. Below are three situations when bankruptcy may not be the best option:
Bad Situation #1: filing bankruptcy when you dont need it.
Bankruptcy is strong medicine. In some cases bankruptcy medicine is more than is required to solve a financial problem. Take, for instance, the case of Amy. Amy is a health, 24 year old grocery clerk who got into some trouble with credit cards. She only owes $4,000 in total debt, but her grocery clerk income is not enough to pay down her debt. Instead of filing bankruptcy, Amy should consider get a second job, a roommate to help with expenses, or other non-bankruptcy options.
Bad Situation #2: filing bankruptcy when you expect more debt.
Bankruptcy is generally not a good idea if you are facing a large debt in the future. The general rule is that a debt that is incurred after your bankruptcy filing date is not included in your bankruptcy case. For instance, if you file bankruptcy, then have a $10,000 medical procedure, your medical bills are not included in your bankruptcy discharge.
Recommended Reading: Which Of The Following Phrases Best Summarizes Chapter 7 Bankruptcy
Reasons To Consider Filing For Bankruptcy
Surveys agree that job loss and medical debt are the two biggest reasons for considering bankruptcy. Many times, the two team up and light a torch to a familys financial plans.
Health problems can make it difficult or even impossible to do your job. The result is you either quit or are let go by the company. That is a toxic combination because you lose your source of income at precisely the same time expenses go up.
There are some other, less imposing situations that could cause you to consider bankruptcy. You might be headed down that road if:
- You are getting a divorce
- The home you own is under water and in danger of foreclosure
- The only way you can pay for things is using a credit card
- You use one credit card to pay off another
- You are considering withdrawing money from a 401 account to pay bills
A Quick History Of Bankruptcy
The term bankruptcy probably came from the Italian phrase banca rottawhich literally means broken benchbecause in medieval days, if a merchant couldnt pay their creditors, they could come break the merchants market stall .1
What about bankruptcy in America, specifically? Well, several different bankruptcy acts popped up during times of economic crisis before the Bankruptcy Act of 1898. This one said bankruptcy didnt require the creditors approval and stuck around until the Bankruptcy Reform Act of 1978which set the laws we follow today.
Now when you file for bankruptcy, no ones coming to smash your bench , but its still a painful experience.
Read Also: How Many Bankruptcies Has Donald Trump Filed
What Is The Downside Of Filing For Bankruptcy
Home » What Is the Downside of Filing For Bankruptcy?
Filing for bankruptcy protection is considered a statement on your ability to repay your debt to your creditors. The fact that you sought and received bankruptcy protection will remain on your credit record for as long as 10 years. Additional factors regarding what is the downside of filing for bankruptcy can include:
- Filing for bankruptcy can negatively impact your immediate financial future.
- Obtaining credit after filing for bankruptcy could mean increased interest rates.
- Obtaining credit after filing for bankruptcy might require security deposits.
Filing for bankruptcy can give you the opportunity to start over and create a new financial reality for you and your family. It can also come with many downsides that you should be aware of in order to make a fully informed decision.
In addition to these credit issues, certain bankruptcy filings will leave you with nondischargeable debt that must still be paid back. Nondischargeable debt can include property debt, tax debt, student loans, spousal support, child support, and criminal debt. While some bankruptcy chapters will allow you to manage many of these nondischargeable debts more readily, they will not be dismissed or discharged.
Youre Already Working A Second Or Third Job
For many people, earning an extra income is enough to diminish their debt but not always. If taking on a second or third job helps pay your monthly bills, thats a great start. But if your debt is already so large that an extra 10 hours of work per week isnt denting it, you may need to consider more extreme measures, such as bankruptcy.
Also Check: How Many Bankruptcies Has Donald Trump Filed
Filing For Bankruptcy Doesnt Help Your Credit At All
When you file for bankruptcy, youre giving your credit the death penalty. The bankruptcy and all of the accounts included in the bankruptcy will appear on your credit report for the next 7 years. Even a few years down the road, creditors will see you as high risk.
Youll have a hard time getting new lines of credit or loans for many years. Most people understand this. However, theyre told they have no other options and have to file bankruptcy if they cant pay their debts. False!