When the IRS comes knocking at the door, it’s hard to tell what they’re going to take. Unfortunately, you may not have enough to give. This is where bankruptcy can help you out. Bankruptcy can have a major effect on credit; but, at times, is the only choice. Read this guide in order to know more when it comes to filing bankruptcy as well as the consequences of doing so.
The primary catalyst for filing personal bankruptcy is having a large amount of debt that can’t be readily repaid. If this is the case for you, you should begin to investigate the legislation in your state. The laws governing bankruptcy vary from state to state. For instance, in some states you can keep your home and car, while other states prohibit this. Familiarize yourself with the bankruptcy laws of your state prior to filing.
Don’t use credit cards to pay your taxes if you’re going to file bankruptcy. Most places will not consider the debt dischargeable, meaning you will have to pay the IRS a lot of money. Keep in mind that if the tax debt is eligible to be discharged, then the credit card debt is also dischargeable. This makes using a credit care irrelevant, since bankruptcy will discharge it.
As bankruptcy appears on the horizon, don’t take your savings or retirement accounts to try to pay off all your bills. Leave your retirement accounts untouched unless there is absolutely no other alternative. You may need to withdraw some funds from your savings account, but don’t take everything that is there as you will be bereft of any financial backup if you do.
Don’t pay for the consultation with a lawyer who practices bankruptcy law; ask a lot of questions. You can meet with a few lawyers before deciding on one. Most lawyers provide a free initial consultation. Do not make any final decisions until every question you have has been answered. You can think about your decision before making a commitment. You have lots of time for consulting with other lawyers.
Chapter 13
Avoid exhausting your savings or emptying your retirement accounts to pay off creditors if you are considering filing for bankruptcy. Unless there is no other choice a retirement account should not be used. You may need to tap your savings, but don’t empty your savings account, as this could leave you in a difficult situation down the road.
Do some research to find out more about Chapter 13 and Chapter 7. Under Chapter 7 type bankruptcy, all debts are forgiven. Any ties that you have with creditors will be dissolved. Chapter 13 bankruptcy allows for a five year repayment plan to eliminate all your debts. You need to be aware of the pros and cons of each type of bankruptcy so you can correctly select the best choice for your situation.
If you make more money than what you owe, filing for bankruptcy is not a good option. Sure, bankruptcy can get rid of that debt, but it comes at the price of poor credit for 7-10 years.
Take some time after filing for bankruptcy to enjoy life. After filing, many people find themselves stressing over their situation and how to fix it. Depression can ensue from the stress if action isn’t taken. Life will get better; you just need to make it through the bankruptcy process.
Be sure to remind your lawyer if it seems that some details of your situation are forgotten. It is wrong to assume that your lawyer will remember every word you ever utter! Remember that you’re the boss. You’re paying your lawyer, so you should not be afraid to have your say. After all, the quality of your life hangs in the balance.
Know your rights when filing for bankruptcy. It is not unusual for creditors to claim that their debt is not able to be discharged. Most states allow for the majority of debt to be included on a bankruptcy. If these are not the categories in which your debts fall, double check to see if the type of debt can be bankrupted. If it can, be sure to file a complaint about the debt collector with the office of the state attorney general.
Don’t wait until it is too late to file for bankruptcy. Some people just ignore the trouble they are in financially and think it will go away later. This is not a good decision. Personal debts can spiral out of control very quickly, and if you don’t take care of them, you may find yourself facing foreclosure or wage garnishment. As soon as you’ve decided that you no longer have a handle on your debts, consult a bankruptcy lawyer to see if bankruptcy is right for you.
Consider other options prior to filing for personal bankruptcy. Credit counseling may work for you. There are a lot of organizations that are non-profits and can assist you. These organizations can work with creditors to lower your payments and interest rates. They act as intermediaries between you and your creditors; you pay the counselors and they pay the companies to which you owe money.
After a bankruptcy, you may still see problems getting any kind of unsecured credit. Secured cards can be a great way to get started if this happens to you. When you do this, it shows your determination to fix your credit history. Unsecured credit may be offered to you quicker than you think after doing so.
You will find many people, who have filed for bankruptcy, completely separate themselves from ever using credit again if possible. This isn’t wise since you need to use credit to build credit. Without using credit cards or other forms of credit, it is nearly impossible to rebuild your credit worthiness. Get one credit card and use it wisely to get on the right path.
You need to start getting responsible with your money even before you file for bankruptcy. Don’t boost current debt or get new debt before bankruptcy. When creditors and the judge are deciding on your case, they will consider your current credit history as well as your past credit mistakes. Your current spending behavior should show that you are making a real effort to modify your financial habits.
In conclusion, the option of bankruptcy is always there. But, filing ought not to be an automatic decision, as it does have serious implications. Learn all that you can about bankruptcy before you file. That way, you will be prepared to make the best decision for a happy financial future.
Look for a bankruptcy lawyer that comes from a personal recommendation instead of someone random on the Internet or in the yellow pages. Bankruptcy attracts a lot of fly-by-night firms that take advantage of desperate people, and a word-of-mouth recommendation makes it more likely that your bankruptcy will go smoothly.