Filing for bankruptcy is typically a final resort for people. When all other possibilities have been exhausted, filing bankruptcy is frequently the best choice that is still available.
A person may declare bankruptcy for a variety of reasons. Among the most popular explanations are:
- Their financial issues are ongoing;
- Having been long-term unemployed, they have lost a reliable source of income;
- Their residence is going to go into foreclosure;
- There have been significant medical expenses accrued;
- Garnishments are made on their salary;
- Using a second credit card to pay for a first;
- Using credit cards for necessities;
- Utilizing retirement funds to pay bills; or
- Having many jobs but remaining financially stretched.
An adverse social stigma could be connected to declaring bankruptcy. However, bankruptcy has the beneficial goal of giving a person a new financial start.
Many people who declare bankruptcy discover that the benefits far outweigh the drawbacks.
But it’s crucial to keep in mind that bankruptcy is not a quick and painless way to get out of debt. In many circumstances, people will have to give up their possessions and may have trouble getting credit or loans for years after filing for bankruptcy.
How Do I Know When to File Bankruptcy?
For many people, consumer bankruptcy is a way to get a fresh start and relieve financial burdens.
A bankruptcy filing can often wipe out a person’s debt to some extent, thus relieving them from having to repay some debts.
Generally, people file for bankruptcy as a last resort to resolve their financial problems.
Keep these ideas in mind when considering bankruptcy:
- There may be other options available to you, such as refinancing your home or renegotiating your loan repayment terms.
- Not everyone can file for bankruptcy (for instance, if you’ve filed for bankruptcy recently).
- Work with a professional advisor or lawyer since bankruptcy can be a complex process.
What Should You Consider Before Filing for Bankruptcy?
In bankruptcy, a person or entity can have certain debts against them reduced or discharged. Bankruptcy is a very serious matter. A bankruptcy filing can have significant consequences, and it can stay on your credit report for seven to ten years. Therefore, it should only be used as a last resort.
Before filing for bankruptcy, someone should consider a number of factors, including:
- What other options they have for paying off their debts;
- Their proposed bankruptcy type;
- The ability of bankruptcy to resolve their problem since some debts cannot be discharged;
- Loss of property;
- Costs associated with the entire process;
- The duration of the entire process;
- Their ability to accept the fact that their financial situation will be made public; and
- The ability to live with the fact that bankruptcy may negatively affect their credit and ability to obtain loans for the next ten years.
In light of the above information, it is important that you carefully consider the effects of bankruptcy before filing. You should learn as much as possible about the process to make an informed decision.
If you are unsure whether bankruptcy is the right option or if you need assistance, you should speak with a local bankruptcy attorney.
How Much Does it Cost to File for Personal Bankruptcy?
Bankruptcy is intended to provide relief to overwhelmed debtors, but it is not without considerable consequences. Knowing how much bankruptcy attorneys charge in your area is important before filing for bankruptcy.
In addition to other factors, the cost of filing for bankruptcy largely depends on the type of bankruptcy filed.
Filing fees vary depending on the type of bankruptcy. Generally, bankruptcy filing fees are as follows:
- Chapter 7: $335;
- Chapter 11: $1,717; and
- Chapter 13: $310.
A trustee manages the debtor’s accidents during bankruptcy proceedings. A trustee may charge the following fees in a bankruptcy:
- 25% on the first $5,000 or less;
- 10% on any amount in excess of $5,000, but no more than $50,000;
- 5% on any amount in excess of $50,000 but no more than $1,000,000; and
- 3% in excess of $1,000,000 total.
As bankruptcy is a complex and large topic, attorney’s fees associated with bankruptcy vary widely and are determined by several factors. Attorney’s fees are primarily determined by the jurisdiction in which the bankruptcy is filed and the attorney’s personal fee structure.
It is important to understand all of the potential costs associated with bankruptcy before you file. Even if all other debts are discharged, these obligations will remain.
Bankruptcies involving individuals are covered by the examples above.
Examples of general fee estimations for public entity bankruptcies include, but are not limited to:
- Chapter 9: $1,213;
- Chapter 11 (non-railroad): $1,213;
- Chapter 11 (railroad): $1,046; and
- Chapter 15: $1,213
How Do I File for Personal Bankruptcy?
Filing for bankruptcy can be a challenging process. The process reduces, eliminates, or restructures a person’s debt. You may be wondering what happens when you file for bankruptcy.
Bankruptcy is initiated by filing a bankruptcy petition with a federal bankruptcy court. The bankruptcy petition contains a list of assets, property, finances, debts, liabilities, and any other information a court requires to determine bankruptcy eligibility.
Upon filing for bankruptcy, a judge will review the petition and decide whether the person or entity is eligible for bankruptcy. If additional forms or documents are necessary, they must be submitted to the court no later than 14 days after filing the petition. If the court grants the petition, a court trustee will hold a “meeting of creditors.”
Debtors must attend this meeting, also known as a “341 meeting,” to discuss their property and debts with the court trustee. Creditors, however, are not required to attend. Debtors should also file any objections or motions against their creditors’ claims at this stage. Before a court closes a case, such issues must be addressed.
A repayment plan will also need to be completed by the debtor. The plan covers how they intend to manage their debts and liabilities. A second debtor education course must also be completed before the debtor can receive a discharge. It is mandatory to complete this course, and failure to do so can result in a case closing without a discharge and expensive filing fees to reopen it.
The court will determine whether to issue a discharge order once all of the above steps have been completed. The debtor will no longer be obligated to pay their pending debts after receiving a discharge order. In addition to providing protection against creditors, the order also prevents them from collecting.
Finally, it is highly recommended that individuals or entities hire a bankruptcy lawyer. It is not possible to get advice from a bankruptcy judge, and there are many complicated forms to fill out and laws to follow.
The types of bankruptcy filings differ as well, and non-compliance with the proper rules can have serious consequences. It is possible to prevent these consequences by hiring a bankruptcy lawyer.
Do I Need an Attorney For the Personal Bankruptcy Process?
Bankruptcy is a major undertaking. A person’s finances, property, and assets must be evaluated. A thorough understanding of the applicable laws and following a strict legal process is also essential. For further guidance, it is strongly recommended that you hire a local bankruptcy lawyer if you plan to file for bankruptcy.
A bankruptcy lawyer with experience will already be familiar with the filing process and relevant laws. You can ask your lawyer to assess your options, explain the potential risks and benefits, and prepare and file all necessary paperwork. As well as knowing what type of bankruptcy you should file for, your lawyer can also represent you at any bankruptcy hearing.