It may not be an easy decision to come to; however, bankruptcies are often necessary. This situation is handled best when you know what to expect and have information about what to do. Continue on for some helpful information from people who have dealt with the bankruptcy process themselves.
When people owe more than what can pay, they have the option of filing for bankruptcy. If this describes your situation, it makes sense to become familiar with relevant laws. Laws differ from one state to the other. For instance, in some states, you can’t lose your home to bankruptcy, while in other states, you can. Be sure to have some familiarity with the law in your jurisdiction.
Do not even think about paying your taxes with credit and petitioning for bankruptcy right after. Most of the time, you won’t be able to discharge this debt, and you could make things worse with the IRS. Remember that if you can discharge the tax you can discharge the debt. Therefore, you should not pull your credit card out for purchases if it is just going to be discharged during the bankruptcy.
When you realize that you probably will file for bankruptcy, do not pay your creditors or try to avoid bankruptcy by spending all of your regular or retirement savings. Unless there are no other options, your retirement funds should never be touched. Although you may need to tap into your savings, you should not use up all of it right now and jeopardize the financial security of your future.
Do some research to find out which assets you could lose by filing for personal bankruptcy. The Bankruptcy Code provides a list of all the different kinds of assets that you can exclude. Be well prepared for bankruptcy by reviewing this list. It will tell you whether are not the things you value most are subject to seizure. If you aren’t aware of this, you could lose some assets that you value.
You need to educate yourself on the differences between Chapter 7 and Chapter 13. In Chapter 7 most of your outstanding accounts will essentially be erased. This type of bankruptcy ends any relationship you might have with creditors. Bankruptcy under the rules of Chapter 13, on the other hand, require you to work out a payment arrangement to pay back the agreed upon amounts. You need to be aware of the pros and cons of each type of bankruptcy so you can correctly select the best choice for your situation.
Spend time with loved ones. The whole process of filing for bankruptcy is hard. It takes a long time, it can be stressful, and people feel unworthy, guilty and ashamed. Lots of people decide they should hide from everyone else until it is all over. However, you will only feel worse about what has happened, which may lead you into depression. So, it is critical that you keep spending time with the ones you love, regardless of the current financial situation.
Make sure bankruptcy is truely your only option before filing. There are many recouses available to help you lower your payments and get back on track. If you are facing foreclosure, consider a loan modification plan. The lender is able to help you in a number of ways, such as reducing interest rates, eliminating late charges, and even lengthening the loan, giving you more time to pay. Above all else, what creditors want is to get their money. Sometimes they would rather settle for a repayment plan instead of a debtor who is bankrupt.
Before filing for bankruptcy, you must be educated on the specifics of all bankruptcy laws. For instance, it’s prohibited for an individual to transfer assets to someone else a year before filing for bankruptcy. Other laws you need to know include debt-based regulations. You cannot increase debt via credit cards prior to filing a claim. Your finances basically have to remain frozen.
Think about other options before you file for bankruptcy. Consider credit counseling. You can easily find non-profits that can assist you in your debt struggles. They’ll talk to creditors and strive to get both your payments and interest rates lowered. You make your monthly payments to the credit counselors, and they pay the money to each creditor.
Never take big cash advances from the credit cards that you own prior to filing for bankruptcy, even though you know that the debt will be erased. This is illegal. It’s fraud, and you can still be responsible for paying it back even after declaring bankruptcy.
Nobody enjoys filing for bankruptcy, but at times, you can’t avoid it. Having read the thoughts presented here, you can rest assured that you have received information from someone who has faced the very difficulties you face today. Spending some time learning for others who have gone through the same thing reduce some of your stress.