When you’re overwhelmed by credit card bills, collection agencies, and financial stress you may be considering bankruptcy – but you’re worried that bankruptcy will ruin your credit forever and keep you from fulfilling your dreams of owning a home or car. However, there are positive effects of bankruptcy. Here are the top five reasons why bankruptcy isn’t always a bad idea:
1. Delay Foreclosure
Filing for bankruptcy will delay a foreclosure which will keep you in your house longer. When you file, the court issues an automatic stay. The stay prevents creditor actions including foreclosures. Even if your home is scheduled for sale, bankruptcy may delay this action depending on your state and how fast you declare. Delaying foreclosure gives you time to look for an affordable rental and save money for moving costs.
2. Halt Garnishments
An automatic stay doesn’t just stop foreclosure, but it also stops garnishments. The only types of wage garnishments that aren’t stopped by the automatic stay are child support and alimony payments.
If the debt that led to the garnishment is discharged by the bankruptcy, the garnishments will not resume once your bankruptcy is granted. However, if the garnishment is due to student loans, the garnishment will resume once the stay is lifted.
3. Build Credit
With bankruptcy, you have the opportunity to recover and rebuild good credit faster. Even if you’re making payments, if your debt keeps building and you live paycheck to paycheck, your credit takes a hit. It will take you longer to get caught up and rebuild good credit. By declaring bankruptcy, you’re clearing debt and getting rid of monthly payments which will give you the breathing room that you need to use credit responsibly.
4. Catch Up
When your bankruptcy clears your debt you get a financial fresh start. You can use the money that would go to creditors to pay for other bills like student loans and utilities. You will finally have the ability to catch up and even get ahead. Use the opportunity to save money for an emergency fund so you won’t have to go into debt in the future to pay for expenses such as car repairs.
5. Keep Assets
Declaring bankruptcy allows you to keep assets such as your home, car, and retirement accounts. If you don’t declare bankruptcy creditors may seize these assets in a lawsuit depending on the state that you live in. You may also need to sell some assets to make payments or prevent garnishment.
Bankruptcy can have negative effects but not all the effects are bad. For more information, contact a professional like Jeffrey S Arnold Attorney At Law P.C.
You graduated college, started a great career and got married. Unfortunately, you were faced with circumstances beyond your control and now you’re deeply in debt. Your creditors are harassing you at home and at work. You’ve got no way to pay your bills and it looks like bankruptcy will be your only option. Before you file for bankruptcy protection, here are a few things you should know.
Some Debts Can’t Be Discharged
If a good portion of your debt is comprised of student loans or back taxes, you may not benefit from bankruptcy protection. Bankruptcy laws preclude those types of bills from being discharged.
Although there are some student loans that can be discharged, there are strict rules regarding their discharge. If you have questions about your student loans, you should speak to an attorney before filing for bankruptcy. Your attorney will also be able to explain other debts that can’t be discharged.
Family Bail-Out May Help
If your debt is not substantial, you may want to consider asking family for assistance. Family bail-out can help you pay off your debt so that you can avoid bankruptcy. This is particularly beneficial if you still have a reliable source of income.
If your debt is substantial, a family bail-out may still help you reduce your debt so that you don’t have as much to declare on your bankruptcy.
You Shouldn’t Take On New Debt
Not all debt can be discharged. If you’ve decided that bankruptcy is the only way to clear your debt, you shouldn’t take on new debt right before you file. In most cases, your newly acquired debt will not be eligible for inclusion on your bankruptcy, which means you’ll still have debt you’re responsible for after your bankruptcy is discharged.
You Can’t Give Assets Away
If you have assets that you want to keep, don’t transfer or give them away to family or friends. Once the courts discover your hidden assets, they can demand recovery. Not only that, you can be charged with bankruptcy fraud.
Liquidate Your Own Assets
If you’re going to file for chapter 7 bankruptcy protection, you may be required to liquidate your assets to pay off debt. Selling them yourself may allow you to get more money for your assets. Once you’ve sold them, use the proceeds to pay down some of your debt. Be sure to keep copies of receipts. You’ll need them to prove the sale of assets and payment of debt.
If you’re in debt, bankruptcy may be the only way to get out from under the debt you’ve acquired. This list will help you get through the process. For more help with understanding bankruptcy, contact a law firm like Wiesner & Frackowiak, LC.
With the U.S. economy still struggling to climb out of debt, many Americans are looking to catch a break financially by filing for bankruptcy. The final count for 2014 U.S. bankruptcy filings was approximately 910,090. And during hard times, most people turn to family members and friends to help them out, and many people have asked family members and friends for a loan. However, problems can and will happen when you attempt to pay your relatives and friends back before you file for bankruptcy.
Understanding What Is Considered as Preference Payments to Insiders
Once you have filed for bankruptcy, you are responsible for listing all of your lenders as creditors in the bankruptcy schedule. Loans given to you by family members and friends count, as long as you have both signed a promissory note detailing the terms of the loan. The bankruptcy courts will then distribute all of your assets evenly to your creditors in a fair manner.
Fair means that everyone is paid accordingly. This means that the bankruptcy courts will review all of your financial transactions prior to filing for bankruptcy in detail. If you have attempted to repay family members and friends prior to filing for bankruptcy, these payments are called preference payments. Preference payments are prohibited by law because it shows favoritism because all creditors are not treated evenly.
Legal Repercussions of Making Preference Payments to Insiders
If you have shown preference in paying back a single creditor amounting to over $600 within 90 days of filing for bankruptcy, the courts will consider whether the preference payments were made to an insider or to a non-insider. If you had a reason for making the payments, the payment may not be considered as a preference payment. For example, you may have paid a lump sum on your car loan to avoid getting your car repossessed. This is considered as reasonable.
If there is not a valid reason for making the payments, the bankruptcy trustee or attorney may argue that the payment was made in preference. This means the attorney or trustee will have every right to request for a reversal of payment. Once the payment has been recovered, it will be distributed accordingly to all of your creditors.
The moral of the story is to never pay back family members or friends before filing for bankruptcy because it is illegal. You could be penalized for trying and your bankruptcy case could be dismissed as a result. More often than not, the preference payments will be reversed and recovered and redistributed to the rightful creditors. If you have already paid back on loans from relatives or need any more advice, consider speaking with a bankruptcy attorney as soon as possible.
Filing for bankruptcy is not a decision that should be taken lightly. Even when it feels like times are tough, you may still be deciding if bankruptcy is right for you. Bankruptcy should be used as a last resort, which is why you should evaluate your financial situation carefully before officially filing
Negotiate Your Debts
If you have debts that will be wiped away by filing for bankruptcy, some of your creditors will be left with nothing. You should always try to negotiate with creditors to see if you can make changes to the debts that you owe, because there options for not negotiating could leave them with nothing.
For example, a hospital bill is an unsecured debt, and the hospital would not receive any payment if you filed for bankruptcy. You may be able to negotiate a lower amount that you owe them, or establish a payment plan that can be slowly paid off over time.
Work With A Counseling Agency
It can be tough to wrap your mind around the amount of debt that you owe, especially if you feel like you are in over your head with bills. Thankfully, there are credit counseling agencies out there designed to help people out in that kind of situation. As long as you are honest about the debts that you have, they can help you create a plan for repaying your debts.
Credit counseling agencies can even negotiate with creditors on your behalf, using their experience to help lower your debts. A credit counseling agency can even help come up with a debt management plan, where you would pay a single entity that disperses the payment amongst your creditors.
Stop Paying Your Bills
It may seem strange, but you could be in a situation where it is advantageous to just stop paying your bills. If all your debts are unsecured, or you don’t have any assets that can be used to secure your debts, you are considered judgment proof. Even if you are sued an ordered to pay your debts, there is no way for your creditors to collect.
Not paying a debt (with the exception of taxes or child support) is an offense that cannot be punished with jail time. You cannot have clothing, furnishings, food, social security income, unemployment income, or any benefits from public assistance taken away from you.
If you’re unable to negotiate with your creditors or have enough assets where you are not judgment proof, it may be time to file for bankruptcy. Work with a bankruptcy attorney in your area, such as Curtis H. Hatfield Attorney At Law, to determine which method of bankruptcy is right for you depending on your financial situation.