You are getting calls from debtors on a daily basis and the expenses far outweigh the income. You are examining the source of these expenses and much of this is unsecured credit card debt. The other category of debt, secured, would include your house, cars, maybe a boat. You don’t really want to lose any of this, but you are unsure of the best approach to get the red ink to stop. As a last resort you call a bankruptcy attorney that you saw on a billboard as you are driving to work. This is the introduction to open an investigation into the bankruptcy process and the personal decisions and changes that go along with the choice to enter into bankruptcy proceedings. There will be at least two more parts to follow with some detail on the thought modifications involved during the life-changing experience of personal bankruptcy.
Which type? You know that there are different types of bankruptcy and you want to do some investigation before contacting the lawyer.
You have heard of chapter 13 and want to know if that is right for you. This has been described as “the preferred” type of bankruptcy because it is actually a debt repayment plan. The unsecured debt will likely be decreased somewhat but will not be forgiven while the secured debt will be grouped in to come up with a single, manageable payment to cover all of the obligations. Keep in mind that you will probably come out of this bankruptcy with a house payment, but at least you will still have your house.
Maybe a chapter 7 is the correct choice for you. This is a more complex bankruptcy and it will definitely require an attorney experienced with this type of bankruptcy. The general opinion is that chapter 7 bankruptcy wipes out the debt and provides a fresh start. You can reaffirm a debt on such things as your car and house although this means 100% repayment of the loan value.
Which should I choose? This depends on your specific situation. If you are working in a solid job and have just fallen behind on your payments then chapter 13 may be the best for you. It is also possible to file a chapter 13 without the aid of a lawyer although that is not recommended. Those presiding over bankruptcy become familiar with the lawyers who are most capable and will tend to accept their filings and clients with less arguing and troubles. It is likely that they have become quite leery and highly critical of those who choose to undertake this process without legal help. Know that if you choose chapter 7 you will generally not be able to accomplish this without an attorney. Yes, the attorneys charge a set fee. That fee is well worth it due to the hassles and indiscretions that can be avoided.
What considerations are to be included? If you have decided that it is now time to file bankruptcy you should bring some things with you. You should know the source and amount of every debt that you have. You may have quite a few credit cards, home, vehicles, boat, and store credit. Additionally you may have hospital, dental, or medical bills that are owed. All of this will need to be considered during an interview or paperwork filing. You should also know the source of all income. Your job will be the main source, of course. If alimony or gambling winnings come in these should be considered. Any income from any source will be included.
What are your plans to be able to make this payment every month? You will likely be asked this question. Maybe it is your habit to eat out for three meals per day and you can decide to save money by making your own meals. Maybe you can cut back on the cable bill or the cell phone extras. Another option could be to shop at a cheaper grocery store and use coupons. Maybe you want to have yard sales and sell off your extra stuff. This is the type of changes that will be detailed in the next articles.
Will I be required to attend counseling? In North Carolina, that would be a definite “yes.” The counseling sessions will involve suggestions such as setting aside the payment amount before any potential discretionary spending. You may hear stories about other bankruptcy participants who chose to spend the bankruptcy payment on a “want” such as a television or home theater system. You will then learn of the negative effects of such a decision. Learning from these classes and applying the principles and suggestions presented will be the best decision that you can make in the beginning of your bankruptcy proceedings.
How will it affect my credit history? Now we get to a truly important question. We have all heard that bankruptcy has a very negative effect on an individual’s credit history. That is correct, although research and proper decisions can help the situation quite a bit. Of these two types of personal bankruptcy, chapter 13 will have the least effect on your credit history by remaining on your credit report for seven years. Chapter 7 remains for ten years. As you see from the included link, the credit accounts that have been included in bankruptcy will also remain for seven years.
You have decided that it is time to file. The decision has been made to contact an attorney because you don’t want to take any chances on missing important details or being denied due to lack of details. You have even researched bankruptcy lawyers within 100 miles of your home to find the best person to handle your case. Yes, I said 100 miles. You are not restricted to your own county although I would not recommend going outside of your state to find a bankruptcy lawyer. There will be at least two articles following this which will detail spending changes and choices that can be made to assist in cutting expenses and ensuring that a regular chapter 13 bankruptcy payment can be made in addition to the necessary regular living expenses.