Filing Bankruptcy
Filing for bankruptcy is the first step in a legal process where a judge and a bankruptcy court trustee examine your assets and liabilities if you can’t pay your bills. They decide whether you can eliminate your debts so they no longer have to be paid.
Bankruptcy law was written to enable people to start their financial lives over, regardless of how or why they failed financially. Most individuals who actually file for bankruptcy, actually are able to eliminate their debt. For example in 2016, 95.5% of the 499,909 Chapter 7 bankruptcy cases which were ruled on, had their debts discharged—that is, those people were no longer legally required to repay their debts. The rest of the 22,388 cases that year were dismissed by the court--meaning the judge or trustee found those people had enough money or assets to repay their debts. Having an experienced bankruptcy lawyer representing you will increase your chances of success. For Chapter 13 bankruptcy cases filed that same year, about half had their debts discharged, and the other half were dismissed by the court. Who Declares Bankruptcy? People and businesses who file for bankruptcy usually have far more debt than ability to repay, and cannot see how that will realistically change in the near future. Surprisingly, more people seek bankruptcy help than businesses. In 2015, 97% of the bankruptcies filed were by individuals. The usual situation is that they accumulate more financial obligations, such as a mortgage, student loan, or a car loan–or even all three--and and simply can’t pay it all back. People who file for bankruptcy are usually not very wealthy. In 2015 their median income was about $34,000. And the amount of debt they discharged was just a little over $32,000. When Should I Declare Bankruptcy? There isn’t any specific point, event, or amount of debt. But here’s a rule of thumb you can use: if you have a combination of debts that is financially devastating; if it would take five years or longer for you to pay them all off; and you do not see how that situation can change, then filing for bankruptcy might now be your most viable solution. But consult with an attorney to help you make that decision. You should understand that the intention behind setting up the bankruptcy code was not to punish you for anything, but to give you another chance. But everything comes with a price. Even though bankruptcy can give you a chance to start over, it will affect your credit and your ability in the future to use money. Yes, it can delay or stop your home from being foreclosed on, or your car from being repossessed, or your wages from being garnished, and other collection actions by your creditors. But there is no free ride. Bankruptcy comes with significant long-term credit penalties, since it will stay on your credit history 7 to 10 years. On the other hand, the emotional relief you can get from being freed from overwhelming debts, may be what you need in order to get a new start. Why Declare Bankruptcy? The main reason for declaring bankruptcy is to be able to start over again financially without having an impossible debt burden preventing you from going forward. But, there’s another reason for filing bankruptcy: to relieve the often crushing weight of of financial stress on individuals and their families. After you file for bankruptcy, calls, letters and harassment from creditors will stop. This happens through the “the automatic stay.” The stay prohibits creditors from suing you, or getting liens on your property, or contacting you to try to get a payment from you. It stops eviction, utility disconnection, wage garnishments, and--at least temporarily--foreclosure. Remember that bankruptcy is a long-term proposition. Depending on which type of bankruptcy you file, it can take anywhere from 3 months to 5 years to complete. The process for filing your bankruptcy will depend on which type you file, what your needs are, your financial situation, and your time frame. We suggest you read each section listed below carefully before you meet with your attorney. A bankruptcy lawyer will help you to better understand what your bankruptcy options are. |
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