Is your debt load more than you can handle? Have you tried working with your creditors to lower your monthly payments and haven't made much head way? Even though there is no such thing as debtor prison, losing a lawsuit for a delinquent account legally exposes you to painful creditor remedies. Judgment creditors can place a lien on your real property, including your home, and may be able to garnish up to 25% of your weekly pay. Not only can judgment creditors garnish your wages, but they can also attach your bank accounts! Actions like these can make you feel like you're in prison. If you are looking for a way out of this imprisonment, you might want to consider filing bankruptcy.
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One of the first questions people ask about bankruptcy is, "Won't that look bad on my credit score." Let's be real! If you are even considering bankruptcy, your credit score probably is already horrible. The truth is that you will eventually be able to get credit even after being discharged in bankruptcy. Yes, credit will be harder to get, and you may have to pay higher interest rates for a while until you establish better credit. But remember, the last thing you want to do is end up in the same mess that got you considering bankruptcy in the first place. So think of it as the high cost of education!
While you can file bankruptcy without hiring legal counsel, I would never recommend it. Bankruptcy laws are complex, and you should look for an attorney who is experienced in this area of law. For instance, even though the bankruptcy statutes are federal law and the petition is filed in federal court, there are certain state laws that may come into play. Also, if you have recently moved from one state to another you may actually have to file bankruptcy as if you were still a resident of your former state. It will also be important to retain as much of your assets as you can, so if you're thinking about filing bankruptcy talk to an attorney as soon as possible.
The bankruptcy statutes are divided into chapters. Chapters 13 and 7 are for filing personal bankruptcy. Under chapter 13, you will establish a plan to pay back your creditors over no more than 5 years, whereas under chapter 7 you will take a means test to prove you do not have the available assets to repay your creditors.
There are two credit counseling/training sessions you must complete when filing bankruptcy. These sessions can be done over the phone or via computer, but only certain organizations are approved to provide this training. You will be given a certificate of completion for the first course that must accompany your bankruptcy petition. You will also need a certificate of completion for the second session that must be completed before you will be discharged.
Once your petition for bankruptcy is filed, the court will set a time for the 341 hearing. At this hearing you will meet the bankruptcy trustee who will question you, under oath, about your assets and the statements you made in your petition. Your creditors may also attend the hearing and ask you questions under oath. It is the duty of the trustee to marshal as many of your assets as possible to pay off your creditors, therefore it is important to be represented by legal counsel.
In spite of the fact that there are some debts you may not be able to discharge in bankruptcy, like certain taxes and student loans, bankruptcy does allow you to get out from under the vast majority of your debt. Reaffirmation agreements may also be available to you. By reaffirming a debt, promising to continue paying on the loan after the discharge in bankruptcy, you can keep the collateral for that loan. Many people choose to reaffirm their auto loans and home mortgages. However, the reaffirmation must be approved by the court and the loan must not be a hardship. Also, depending upon on your home state you may be able to retain a certain amount of equity in your home, or even the entire home! So if your debt load is imprisoned, you might want to talk to an attorney about the option of filing bankruptcy. Filing bankruptcy may just be the keys to your freedom.
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