We all know that attorneys charge by the hour, and when anyone is sitting in an attorney's office, they are constantly thinking about the clock. Even though in a bankruptcy filing, it is understood that you don't have much money, this is still the case. But if you find yourself leaning towards filing bankruptcy, there are some things you need to know before going on the clock, and knowing these things will keep the hours to a minimum.
Know the Chapters
For an individual, there are only two chapters you really need to know. Those are chapter 7 and chapter 13. Chapter 7 is essentially if you really cannot get out from under your debt and don't have decent flow of income. Chapter 7 is often referred to as a "fresh start".
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Chapter 13 is basically consolidation. This is your best choice if you still earn a decent wage, and could benefit from consolidating your debt into one payment.
In either scenario, you will get relief from creditors, as they will not be able to lawfully contact you, and they must go through your trustee. If you own a home, it will be held exempt, as will numerous other items and segments of your possessions. The idea here is that you won't be able to pay anyone back if they take your house, clothes, furniture, car, etc. So under your bankruptcy filing, some things will be exempt.
Figure Out Your Goal
Your attorney can help you figure this out, so it's not like you need to come in knowing this solid. But it is important to think through it so that if you discover that there is something you are absolutely not interested in, figuring this out ahead of time will keep you from paying to figure this out in front of an attorney. Here are some thoughts to consider.
Bankruptcy will crush your credit for 7-10 years. Getting a loan will be very tough, credit cards, too. So if you do file for protection, you are taking homes, cars, boats, school loans, etc off the table. That or you will be paying horrendous rates. In addition, insurance rates will go up, and it will just be tougher to get covered. If you are in serious need of debt relief, this might not matter to you, but it's something to consider.
You will need to make some sacrifices either way. So get ready for a few tough years. The quicker you can get out of this mess, the quicker you can build up some capital.
Don't Default on Your Credit Cards
We hear this time and again, like it's some urban legend that you can just default on your payments and it's the same as filing for bankruptcy. It's not. Not even close. If you don't pay your credit cards, they will hound you to pay, charge you tons of extra fees (which drives up the amount you owe), and if they still can't get payment, they will take you to court. If you file for bankruptcy protection, you are protected from more fees, more phone calls, and you are appointed someone who will stand between you and those companies.
Bankruptcy is a Privilege, Not a Right
The only right you have is the option to file for bankruptcy. You have to qualify first, and you can still be turned down. Keep this in mind as you go through the process. Whether you are in this position because of medical bills or something that is no fault of your own, or you have made some bad decisions, either way you need to be professional during this process. File your papers on time, be respectful, show up on time, make your payments on time, etc. You are in trouble and need some help. Be polite about it.
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