Considering Debt Relief Options before Bankruptcy
Anyone dealing with creditors and the stress and the burden of overwhelming debt understands the pressing need for relief. While it may be tempting to rush into a bankruptcy filing, there is a greater benefit in taking due consideration. Here is why:
Consider your debt relief options
Bankruptcy isn’t your only option for debt relief. It is important that you work with a professional attorney to review your financial situation to ensure that your situation is best served by the benefits bankruptcy has to offer.
Stop your spending/payments prior to filing
Accumulating more debt or paying off large sums of debt prior to filing can influence your eligibility to file. It is important that you do not make unnecessary credit purchases, purposely reduce your income or make large payments within the 90-180 days leading up to your filing. If you do and the bankruptcy court finds out, you have violated bankruptcy law and could be held financially responsible for this violation.
Don’t hide/sell your assets prior to filing
Similar to making uncharacteristic purchases or payment transactions prior to filing, giving or selling assets within the months leading up to your filing can negatively impact your case. More specifically, the court could view these actions as fraudulent and dismiss your case. Not only could they dismiss your case, but you could be fined for your actions.
Consider your prior filing history
If you have filed for bankruptcy in the past, you will be required to wait a specified period of time before filing again. If your prior case was dismissed, your average wait time is 180 days before filing again. If your debts were discharged in a prior case, you could be required to wait anywhere from 2 to 8 years before becoming eligible to file again.
Why You Shouldn’t Rush into Bankruptcy
Although you may be concerned about your mounting debts, threats of collections or under the fear of losing your home to foreclosure, consulting with a St. Petersburg bankruptcy attorney as soon as possible can help ensure your filing is perfectly timed. Your attorney can review your situation and possibly identify alternatives to bankruptcy that will work for you.
Perhaps you can negotiate loan modification with your mortgage lender or utilize another method of reworking your home loan so that you can keep your home. You may even be able to work out new terms on an auto loan. Even if you have tried before, your attorney may be able to help you with negotiations.
When you can find another alternative to bankruptcy, you can keep bankruptcy off of your credit report and get your finances back in order. If a Chapter 7 bankruptcy is placed on your credit report, it remains there for 10 years. If Chapter 13 is on your credit report, it remains for 7 years. If you find an alternative method to being able to make on-time payments, your credit can recover without having a bankruptcy on your credit report.
When Bankruptcy is the Only Option
If you explore your other options and you find that they don’t work for you, bankruptcy may be your only option. If so, that’s okay because that’s what bankruptcy is for. It is the opportunity for you to start again financially so that you can have a healthier financial future. There is no shame in it.
Once it is determined that bankruptcy is the only option, your attorney will perform a Means Test that identifies what your financial situation is, what assets you have, and what debts you have. The test determines if you have the income to enter into a Chapter 13 repayment plan or if you need to file Chapter 7 bankruptcy.
If Chapter 13 is the solution, then you will enter into a payment plan that lasts for up to 5 years. This plan repays debt in a way that is comfortable for you so that you don’t continue to suffer financially during the repayment period.
If Chapter 7 is the solution, any non-exempt assets that you have will be liquidated and the proceeds used to pay off as much debt as possible. If you have no assets or they fall within the exempt dollar amounts for their categories under state or federal exemption rules, then the bankruptcy will be discharged and you can move toward re-establishing yourself financially.