If you are considering bankruptcy as a way to handle a seemingly impossible financial situation, your first order of business should be to set up consultations with some local bankruptcy attorneys. You probably have a lot of questions about the process, the cost, and how it will affect your future if you decide to file. Here are some key questions to ask when you meet with legal representation for the first time.
1. Will all of you debts be addressed in the process?
Consumer debts, some business debts, and personal debts (including medical bills) can all be resolved during bankruptcy, but there are some debts that are not affected by bankruptcy. For example, student loans, especially those that are from the federal government (Stafford loans acquired through FAFSA) will normally not be discharged. With the help of a lawyer, you can still get your student loans discharged, but it takes more legal legwork, and you have to prove that the loans themselves are causing you undue hardship. You will have to show a history of trying to make payments, and prove that your standard of living would be drastically affected for a long-term period of time by paying the loan amounts. Even then, income-based repayment and other payment plans make student loans a challenging beast to slay in bankruptcy.
2. Which type of bankruptcy is right for you?
There are two types of bankruptcy available to basic consumers: chapter 7 and chapter 13.
Chapter 7 is preferable to many because most debts are simply discharged. However, chapter 7 is not available to all, and it can have some consequences. For example, you'll have a harder time holding on to significant assets, like your home or cars. Generally, your house would be sold to help settle debts, and you might be forced to sell other possessions as well. Also, there are income restrictions for chapter 7 bankruptcy. Your income might be too high to allow for full discharge of debts.
Chapter 13 bankruptcy can be the right choice for those who need to keep their homes. The court usually issues a repayment plan that creditors agree to, often consolidated into a certain amount. Your income and financial obligations, including children, are taken into account to find what amount would be fair for you to pay. Once you have completed the payments, you are debt-free.
Speak with more than one attorney about which type is right for you, because some may encourage one or the other. The ultimate choice should be what is best for your individual situation.
3. How will your financial future be affected?
Many people are concerned about filing for bankruptcy because they feel like it will become a black mark that will affect them forever. However, not all people who file for bankruptcy do so because they are irresponsible or bad with money. They simply fall on hard times with medical conditions that carry huge expenses, job loss, or disability. Your credit will take a hit from filing, but it likely already has gone down because of missed payments and outstanding bills. You can rebuild your finances with dedication and some new, secured lines of credit. Your lawyer can speak with you about a financial rebuilding plan to help you get back on your feet.
4. How much does it cost to file?
Every lawyer charges different fees. You'll want to know how much you will end up owing when the process is over. Some may charge a flat rate, but for cases with more debt and financial complexity, the charges might be more by the hour. You'll want to work out a payment plan for the course of the filing.
Contact a law firm like Downard & Associates for additional information.