Photo by Melinda Gimpel
With the rise of Covid-19, this year has unequivocally held the highest percentage of unemployment on record. And where there’s unemployment, bankruptcy is usually soon to follow. With mounting debt at stake and no means of a steady income, bankruptcy might be right for you. While there’s a case to be said for filing for bankruptcy, here’s what you should know before you jump the gun and file.
- Lists Are Everything
Before consulting with an attorney, we recommend that you make a list of all of your debts and obligations, including addresses, account numbers and amount owed. This will help paint a better picture of whether or not it’s worth filing.
- Bargain With the Big, Bad Creditors
Majority of people in trouble with debt, have their “trusty” credit cards to thank for. Therefore, negotiating your interest rates and principal amounts down is key. This will ease your stress, at least by a percentage.
- As Your Interest Rates Fall, So Too Should Your Mortgage
Slashing the interest rates and payments of your credit cards will help big time with your situation; therefore, speak to your landlord or mortgage company to see if you can work out some type of forbearance agreement if your crummy financial situation is temporary. One should note that the CARES ACT offers alternatives which keep you from filing bankruptcy; it also places a moratorium on some evictions and foreclosure actions.
- Consolidate, Consolidate, Consolidate.
If applicable, getting a loan to consolidate all of your debts, making only one lower payment instead of several payments will help tremendously. Not only will you mitigate the number of headaches, but you’ll be cutting back on the monthly payments you would be otherwise stressing about.
Some of the loans that are eligible for consolidation are:
- Home equity line of credit (HELOC)
- Refinancing you home
- Loans against you whole-life insurance policy
- Personal loan from credit union or bank
And whatever you do, refrain from the temptation of those phony “debt consolidation” firms that will only burn a hole throw your pocket and, more times than not, fail to deliver the goods.
- Lawyers are Your Friends
Seeking out a reputable lawyer who specializes in bankruptcy will serve as your most valuable tool. Not only will they save you from an overwhelming amount of grief trying to figure things yourself, they will also prevent you from making costly mistakes.
Attorneys will help you decipher whether or not all your debts may be discharged. Debts like taxes, child support, and student loans, for example, are unqualified to file for bankruptcy.
Many are petrified of losing every prized possession they hold dear. But fear not! Certain assets are actually exempt from repossession and will not lose an ounce of their equity. Some of your equity in your home, retirement accounts, and personal items are good examples of assets that are exempt.
Beating around the bush is typically not lawyers’ style; thus, they will be honest with you if you do not qualify for bankruptcy for a multitude of reasons. You may make too much money or have too many assets that are “non-exempt” – which can be sold in order to potentially lessen the blow of your debt – in order to file for Chapter 7. And Chapter 13 may be far too restrictive, long, and expensive for you.
- Legal Actions will come to a Screeching Halt
Foreclosure sales, pending lawsuits, garnishments, or any levy of bank accounts weighing on your shoulders will be temporarily paused. Rejoice!...For now.
- Put the Card Down and Nobody Gets Hurt.
Whatever you do, for the love of God, don’t use spending sprees as a form of stress management. Go take a yoga class, meditate silently in your room, or slap the crap out of a punching bag, just don’t take out your frustration on the credit cards. Besides, in the morning you’ll feel lousy. Impulse buying right before filing for bankruptcy is a huge no-no, especially within the 90-day period before filing for bankruptcy, which may be deemed as non-dischargeable or even fraudulent. And when it comes to shelling out the fees for your lawyers or anything related to bankruptcy, you can forget your little plastic, square friends – the use of credit cards is prohibited.
- Transferring Your Assets Will Land You in Time Out
Federal offense are peculiar things. In fact, many things can fall under the umbrella of federal offenses. By trying to conceal and transferring assets like cars and boats, real estate, jewelry, among other things will only land you in the hot seat and slap you with a nice and shiny felony.
- Nothing But the Truth
You must declare truthfully. I repeat, you must declare truthfully. All of your income; your assets; your mind-numbing debts; and yes, all of sales and transfer of assets within the past three years MUST be declared – truthfully. Did I mention you must be truthful? YOU MUST BE TRUTHFUL.
- Bankruptcy Will Forgive, But Not Forget
Well, at least not for 10 years. That’s right – though bankruptcy will help alleviate your fiscal sorrows and give your credit score a boost up, it will still appear on your credit report for a whopping ten years. But the good news, however, is while bankruptcy might not eliminate the entirety of your debts, it will wipe out the majority, causing your credit score to shoot up. That’s right. After the final discharge, you’ll see a dramatic increase of 100 to about 150 points applied to your FICO score.
Though the promise of a rocking credit score is inevitable, there are slight caveats of which you should be aware. One hopes that one need only file for bankruptcy only once in his or her lifetime, but for some it takes falling on their sword more than once to learn from their mistakes. In this case, it’s important to note that you may only file for bankruptcy once every eight years. On top of limited lifelines, bankruptcy may also impact the purchase of a home and the interest rate you pay on it. So, take caution before you fumble and file.
- There’s a Price to Pay on Your (Long) Journey to Redemption
Depending on the type of chapter you qualify for, filing for bankruptcy can often times be costly and arduous. For example, filing for chapter 7 bankruptcy can set you back between $750-$2000 in attorney fees alone and take up to one year to finally be discharged. And chapter 13? Between $2,500 to $3,500 with a waiting period of 3-5 years! After the attorney fees, of course come the general filing fees which will range anywhere between $310 to $335. And let’s not forget about credit counseling fees; these small, yet mighty fees will cost you between $60-$100. Other fees may apply on a case per case basis.
- Peace is Priceless.
Though the pros and cons of filing for bankruptcy is much to consider, the peace that comes with it is well-worth the blood, sweat, and tears. Gone will be the days of creditors blowing up your phone like a clingy ex-loved one and finally, you can sleep soundly at the thought of your NEW, FRESH FINANCIAL LIFE!
- Reputable Professional Help is Key.
Your best bet is to do your homework and speak to a reputable Lawyer or Law Firm that not only has the experience, the integrity and longevity, but that has your best interest (not theirs) in mind.
At Sariol Legal we meet all those qualifications and your initial consultation is completely without cost. Call us for an appointment to discuss your particular situation!