Bankruptcy
How Will You Be Affected?
You may be wondering how filing for bankruptcy is going to affect you. You may be wondering if you will ever obtain credit or financing again. You may be wondering if you are going to be scarred for life and if everyone will eventually find out about your bankruptcy filing. The truth of the matter is that you must analyze your current financial situation and determine if anything is going to change for the better. If you are continuing to struggle month after month with no hope of relief in sight, then the thought of filing will not be as difficult to digest. On the other hand, if there is hope on your horizon, then it may pay to wait to see if filing is absolutely necessary.
Fact Pattern:
Take this particular fact pattern as an example. Let’s call him Joseph. He has credit card debt that exceeds $40,000.00 although he is able to make his monthly minimum payments on time. On the surface, it appears that he is handling this particular line of debts without a problem. However, if you look at what is actually spent over the course of the year in relation to how small a drop in total debt takes place, it only makes sense from the credit card lenders point of view. Now throw on top of that an assortment of medical bills, payday loans, utility payments and an old auto repossession and the scenario turns quite differently. I have not even talked about housing expense, food expense, clothing expenses and transportation expenses which highly add to the debt situation. When all of this is taken in its totality, Chapter 7, fresh start bankruptcy filing makes more sense.
Real Relief:
The relief that can be had is something that needs to be explored. Most unsecured debt can be eliminated in a fresh start filing. There are some debts that are not going to be eliminated. These include student loans, recent taxes, parking tickets, child support and debts incurred via fraud. If your debt is primarily of that nature, then filing a Chapter 7 will be ineffective. If, on the other hand, your debt is the type that can be eliminated, then filing is a better option. Your attorney will advise you as to which debt is likely to be eliminated.
Required Items:
Now if you decide to go forward, there are some items that you must provide to your attorney. First, you will need to provide a complete and accurate listing of all of your creditors. Creditors are people or businesses that you owe a debt to for some product or service. It may be a simple credit card or it can be an elaborate business or partnership debt. You may owe family and friends for personal loans or you may owe your electric company or gas company for past due charges. In most cases, the creditor listing is a variety of secured and unsecured debts.
Secondly, you will have to take a credit counseling session prior to being eligible to file for bankruptcy. The credit counseling session can last about an hour or more and the cost is roughly $15.00. The purpose of the credit counseling is somewhat ambiguous. I believe that Congress had hoped that those taking the credit counseling session would shy away from bankruptcy filing in lieu of a debt management plan. Much to their dismay, those taking credit counseling are being directed by their bankruptcy attorneys. It was always unlikely that someone engaged in the bankruptcy filing process would change to a repayment plan. There is simply not a huge downside to filing as opposed to debt management. In fact, many bankruptcy filings are a result of a prior, debt management plan that had failed.
Thirdly, the person filing must provide the most recent year’s federal tax filing as well as sixty days’ worth of pay advices. Pay advices can be payroll checks, unemployment checks, social security checks or other form of proof of income.
Once all of those items are provided, you technically are in a position to have your case filed. Your attorney may want payment in full prior to filing or the attorney may work out a post-petition payment plan approved by the bankruptcy court. In any event, you will be far along on your way to filing if you have all of these items forwarded to your attorney.
