You may be struggling to make ends meet each week and wonder what your bankruptcy options are to eliminate the debt that is crippling. The purpose of this article is to provide information about bankruptcy to help you make an informed decision about what's best for you.
What is bankruptcy? Bankruptcy is legally binding where a debtor can no longer pay their monthly loans anymore that was once obligated to. It is a way to seek relief from debt so the debtor files bankruptcy for a discharge form. It will then eliminate and forgive all debts that were supposed to be owed.
There are different types of bankruptcy you should know and understand. So what are the different types of bankruptcy?
These are 5 different types of bankruptcy that an individual may file for. Each one is different based on the individual financial situation. The two that we will be discussing are Chapter 7 and Chapter 13 bankruptcy.
So Chapter 7 bankruptcy is also considered liquidation bankruptcy. Though don’t worry, most of the time you get to keep your house and your car. Chapter 7 bankruptcy is meant to help eliminate a huge portion of your unsecured debt. Chapter 7 bankruptcy is also often much less expensive than a Chapter 13 bankruptcy. A Chapter 7 means test calculator can help you estimate Chapter 7 qualification and cost.
You may receive a discharge within 120 days. One thing to remember is that it will stay on your credit report for 10 years. That said, you are often able to get access to credit much sooner. You can potentially get a secured credit card within 6 months of receiving your bankruptcy discharge.
Chapter 13 bankruptcy is also known as wage-earner bankruptcy. Chapter 13 bankruptcy is a voluntary reorganization of debt. A Chapter 13 calculator can help you estimate a Chapter 13 repayment plan example.
In Chapter 13 bankruptcy, the individual has debt that they can no longer manage and may own assets that exceed state and/or federal relief. Some people file for Chapter 13 bankruptcy because they fail to qualify for Chapter 7 bankruptcy.
For Chapter 13, most individuals qualify to file as long as they are below the debt limits. Compared to Chapter 7, there is no liquidation in Chapter 13 Bankruptcy. That said, the Chapter 13 payment plan is often 3 or 5 years (unless you pay 100% of your debt back), and it will stay on your credit report for 7 years.
Many elements of bankruptcy are the same across the United States. That said, states and districts often have unique local rules, bankruptcy exemptions, attorney fees, means testing, etc., so it’s important to read about the bankruptcy process in your state. You can check the unique articles for rules for filing bankruptcy in your state below.
Let’s go over the process of Chapter 7 bankruptcy. First off you have to make sure you understand if you qualify for it. You can do this by either using a bankruptcy calculator or a free evaluation from an attorney. You should always want to work with the best so it is good to consider the referrals, reviews, and rates from others’ experiences. Once through with that, it is time to look over the payment of having an attorney. Good thing is that many attorneys understand what you are going through and have created a payment plan. Then once you are prepared for everything it is time to go through with the process. It can be a difficult road ahead but something that may need to be done for the better.
Now let’s get into the process of Chapter 13 bankruptcy. It is a bit more complex when going through the process of Chapter 13 bankruptcy. You start off by having to file a bankruptcy petition with the local bankruptcy court. Afterward, you have to state your assets/liabilities. As well as submit a schedule of your income and expenditures. Then show a statement of financial affairs. The filing must have all requirements for credit counseling and payments from the employer. Providing as well your tax returns to your trustee. Then from there the process continues through court and begins payments to the trustee after 30 days of filing.
Estimate bankruptcy qualification based on your zip code. Understand the pros and cons of Chapter 7 and Chapter 13 bankruptcy. It is a good idea to always do all your research to have the best step forward when choosing which bankruptcy best fits you.
You can decide to file bankruptcy with or without an attorney.
When deciding to find the right bankruptcy attorney for you and your case, it's important to evaluate them and their reviews. What you should be looking for, for instance, 1) Referral 2) Reviews 3) Relevancy 4) Rates 5) Reliability. You can also contact your local attorney and most will have a free consultation.
Also, when looking into the fees, fear not! Attorneys understand your situation and have a payment plan for you to help you through the process.
To start the process to file for bankruptcy, there are many bankruptcy forms that you have to fill out. In these required forms that frame the petition are the financial affairs/schedules as:
The meeting of creditors is a mandatory meeting for the debtors. The meeting may take place on the phone or over video conference or in person. In the meeting, you will be asked by a trustee a couple of questions with your attorney (if you have one). Usually, the meeting is about 15 minutes or less. After the meeting, the trustee will review the information and confirm whether you qualify for Chapter 7 bankruptcy (if applicable).
Well, how much does it cost to go bankrupt? Luckily, most bankruptcy attorneys have a payment plan that you can use throughout the process. Though the cost can still vary depending on the situation. For example, the type of bankruptcy case, the complexity of the case, location, attorney’s involvement, and their given expertise. In bankruptcy, there is a fixed and variable cost. With fixed costs, they are the filling/administrative fees. While the variable cost is for the attorney fees.
if your debt becomes too hard to pay off you can use debt settlement. Debt settlement is when someone is able to negotiate to lower your debt less than what you owe. So, a portion of what you were supposed to pay back will be lifted. For instance, if you owe in debt $50,000, debt settlement will be able to negotiate the amount down to $25,000. So then how does the process of debt settlement work?
In the process of debt settlement, you use a debt settlement company to help you through the journey. So the debt settlement companies are the link you need for what you owe in debt and to the creditor. The debt settlement company will create for you an escrow bank account. That’s where all the funds will be collected. Afterward, they will combine all the payments into one for the creditors. They will negotiate for you and help to lower your debt. Then you will accept your settlement and start your new monthly payment plan. Finally, you will start sending payments to the creditors until you are done paying off your debt.
Though we also have to consider some of the disadvantages. For instance, how debt settlement can have a negative effect on your credit score depending on your situation. Most of the time it will impact negatively on your credit score throughout the duration. There are also extra costs and fees when using debt settlement.
Another alternative is called debt management. Debt management is when you work with a company, for instance, credit counseling or debt consolidation to help manage your debts. Don’t get confused though! It is supposed to lower your interest rates when you pay through the company. Also, be able to waive certain fees you might owe. From there, you can use that money instead towards the monthly payment that you are paying off. Which your debts will then be paid off faster than it was before. The process starts off with meeting a debt management counselor. Then they will look at all your debts. From there they will conclude how long it will take to pay off your debts. Most of the time it will take around three to five years. Then a new monthly payment is made for you.
Credit counseling companies and non/profit debt management agencies make it seem so easy Though there are service and maintenance fees you will have to pay for. This means you will be paying your debts and also the extra fees that come with it. In reality, you might not be saving when paying off your debts. You also have to close your credit cards because they want to make sure you don’t owe any more debt over time.
You can also consider using a debt payoff planner. For instance, the Savvy Debt Payoff Planner is another alternative. It is an app on iOS and Android where it will help you get out of debt quicker. The Savvy debt payoff planner has a zero-based budget that motivates you throughout the journey of getting out of debt. It shows how your debt freedom date moves closer and your debt decreases. It is also super easy and simple to figure out how to use. You can add your bank accounts, credit cards accounts, and loans that you still owe. As well as automate a budget and a payoff planner that fits just right for you and your expenses.
It also has its own payoff method called the savvy method. What it does is uses both snowball and avalanche methods. So when using the savvy method, it will help fire you up as you see yourself paying off your debts. As well as earn some of the interest savings because of the avalanche method.
