Tuesday, September 4, 2018

Bankruptcy--Chapter 7 or 13?

Once the decision is made that you believe you need to file for bankruptcy, there are a lot of things to think about.

Firstly, is to contact a lawyer. Be careful to not go through a 3rd party online who you have to pay a fee and then they will contact or find an attorney for you, who will then charge you a fee as well. Cut out the middle man and go looking for a good lawyer yourself if you don't have one already.
A lawyer who specializes or does handle bankruptcies is the one you want. Check and read over their reviews and references so you know what you are getting into with that person because they are going to be the key person to help you through this.

Second, stop charging your cards or accounts. You definitely do not want to be charging up your cards willy-nilly like you hear of other people doing just before they file. Only charge what you normally would. The reason for this is so that if you charge up a bunch of debt, knowing that you were going to file bankruptcy, the creditors can actually file a suit against you for doing that and it would turn into a nasty mess where you could be fined and/or do jail time for fraud. Because that's what it is, fraud. Big no-no. You can't and don't want to take advantage here as it will come back to bite you in the butt.

Hopefully at this point, you have kept a good record of all the credit cards and debt you have, including account numbers, amount you owe, the monthly payments, interest rates, balances, etc. This is all good info that you really do need to have set up on a nice Excel sheet so that you can see what you have. It would also be a good idea to write the company name of who the debtor is as well.
Plus, you should also keep track of your monthly utility bills and monthly expenses, food and rent/mortgage loan payments and how much your paycheck is month to month, both gross and net.

I always get those two confused, gross and net. The way to keep it straight is to think of it as gross amount being before anything is taken out, where as the net is after everything is filtered through the net, all your taxes and deductions are removed, this is your take home pay or what you have left in the net when you fish. :) So that should help to remember the difference between those two.

You will need to keep your back statements for everything from the past couple of months as well as tax returns from the past 2 years. Set up a meeting with your lawyer and they will go over all that you provide, earnings, debt, etc and what you are wanting to accomplish and they should be able to advise you as to whether you are better off filing chapter 7 or chapter 13 bankruptcy.

The difference between those two?
Chapter 13 is when all your debt is taken together and a new lower payment plan is set up over the course of 5 years. You keep all of the debt etc, but then after the 5 years are up of making those lower payments, whatever debt is leftover, goes away and you no longer have to pay anything on them. Your credit is not really hurt by this too much.

Chapter 7 is usually when you lose it all and not make any payments at all whatsoever. EXCEPT! You can reaffirm some of the debt such as your car or house. What that means is that your lawyer lets the mortgage lender and car loan people know that you wish to keep their debt as you can still afford to pay it and you want to keep your house and car. All the rest of your debt, usually credit cards and project loans etc, are all discharged. The credit card companies will write it off as you could not pay your debt that you owed and your credit score drops significantly and it will become harder for you to apply for new credit cards or a car for a while or if you are offered them or approved, the interest rate is very high as you now have become a huge risk for them to lend money to. You can recover from this, but it takes a few years to do so.

Once your lawyer tells you to, you stop making payments on your credit cards if you were still doing so. All of them must stop at the same time thereabouts. Make note of who you paid last and how much as this will be asked of you later.

Also be prepared to fill out a mountain load of paperwork. It will serve you well if you keep a good accounting as I mentioned earlier in this post and keep everything scanned in and put in an organized file on your computer so that you can pull up anything you need instantly and you know exactly where it is located at. I could not stress this enough as to how much this really helped a lot to know.

Once your lawyer and you decide on a plan of action and choose which chapter best suits you, they will begin to prepare the paperwork needed in order to file.
Sometimes, you may have to wait if you have lost your job and that is the main reason for the bankruptcy, for your paycheck to fall off your job history by around 6 months. This was the case with myself. So we needed to struggle for a few months before we could file.

Stopping payments from being made for bills was difficult for me to do. I detest being late and will always be early and usually more than the minimum. The very moment these bills were not paid, the phone calls began. Followed by the emails and regular statements and letters in the regular mail. The calls became incessant. Some people suggest changing your number but as I like my number, I just let the answering machine get it and did not pick up unless I recognized the number.
This was a very difficult time period.

Once the bankruptcy is filed with the court however, all your debtors are informed that you have done this. The calls and emails and mail then begins to peter down and slack off until they finally stop for the most part.

 (continued)

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