Have bankruptcy hitting on your mind? The thing with bankruptcy is that not only should you know how to go about it; you need to ask yourself yet another toughie — “When to file bankruptcy?”
A standard yardstick that could help you fill in certain answers would be to ask yourself the following — “Have I exhausted all other available options?” If the answer is in the affirmative, it’s time to plan your bankruptcy moves. Here are a few sketched out guidelines to help you answer that niggling question — “When to file for bankruptcy?”
1. Debts outweigh your income – Think of bankruptcy as one of the alternatives if you have huge debts piled up over your income, and you are short of any alternate resource to shoot up your monthly income. It sometimes makes sense to file for bankruptcy in lieu of paying massive interests on debts, especially when resources run thin.
2. Tried everything in the book but to no avail – Your options could further thin down to bankruptcy in case all your efforts to negotiate with your creditors, restructure your debts, or resurrect your finances have not worked. Under such circumstances, bankruptcy may be the only way forward.
3. Want to safeguard your retirement account – Under the most recent laws, you can hold on to your Retirement Accounts if you have filed for bankruptcy. When nothing is working out, the fact that your Retirement Accounts remain shielded from creditors even as you file for bankruptcy may egg you on to file for bankruptcy, get rid of your debts, and work your way out of the situation.
4. Pre-bankruptcy requisites – The latest bankruptcy law calls for mandatory credit counseling and debt education programs to be undertaken, when seeking bankruptcy. The credit counseling needs to be held under a govt. approved organization and must take place within 180 days to filing bankruptcy. So if you plan to file a bankruptcy petition, make sure you have been through the mandatory credit counseling session.
The debt education program must be adhered to after filing, but before release of debts. Credit counseling and debt education programs cannot be held simultaneously.
How to file bankruptcy when my home is in foreclosure?
If foreclosure is just the round the corner, you may consider turning over to bankruptcy for reprieve. This is a real difficult decision to make, for it is not necessary that filing bankruptcy would save your home. But you may be able to buy time on foreclosure, or if you luck it, defer foreclosure outright. To get the best out of the situation, hire a legal expert. It may cost you a sum, but expert advice shall prove a handful under the circumstances.
In general though, Chapter 7 bankruptcy offers little relief in foreclosure cases, except you can buy some time to foreclosure, which, shall be delayed, but not overturned. You can occupy your home during the bankruptcy process and all your mortgage debts, home loans, unsecured debts and second mortgages get wiped away. Chapter 7 bankruptcy will be useful if you want to rid yourself of all debts but it comes at a price — your home. A silver lining though is you do not need to pay a penny till the time you are dwelling in your home.
If you plan to save your home, Chapter 13 is the best of all options. However, you need to have a steady income flow to qualify for filing under Chapter 13. Chapter 13 provides an opportunity to repay your creditors by way of a court-approved repayment plan. The amount to be paid back depends on a number of factors — your income, debts, and the value of your assets etc. The payment plan will take into account your missed payments as well as the current payments due. So, make sure you have the resources at hand; any missed payment during the repayment tenure can prompt your creditors to challenge your bankruptcy petition and move ahead with the foreclosure process. Besides, Chapter 13 has relatively mild impacts on your credit rating as you pay your creditors over time.
The above pointers are just a road map to filing bankruptcy. It makes a lot of sense to rope in professional help and lay your course from thereon. Professionals can surely help you tackle the question “When to file bankruptcy?”