About 5 years ago, I started to rake up so much debt, through using excessive credit that was available to me during the easy credit period of the 2000s. I easily had several credit cards with available balances of over $50,000. Thinking that I was invincible financially, and that the housing bubble simply cannot just collapse overnight, I used the equity of my house for every single purchase. I was eventually brought back into reality on the severity of my financial ruin when the housing bubble burst in 2008. I had accumulated so much debt, without any clear path on how and when I can pay off the debt. After much debate with myself (through Internet researches on websites like Wiki and FTC, I decided that the only way that I can ever recover from this mountain of debt is to file for bankruptcy protection. Once I decided that I need to file personal bankruptcy, I know that I do not have what it takes to take on the bankruptcy process myself, so I had to seek the help of a bankruptcy lawyer.
There are many bankruptcy lawyers out there. Make sure you find one that you are comfortable working with, one that can explain the bankruptcy law in plain English. You should find a bankruptcy lawyer who is sympathetic to your situation, and not just a regular “paper pusher”. Some bankruptcy lawyers do not care about their clients as individuals, but rather just as another set of paperwork that needs to be filed. You should have a comfort level with your bankruptcy lawyer because you want to be able to call him or her anytime if any question arises regarding your specific situation. You want your bankruptcy to be a “friend” to you, to help and guide you through this difficult situation.
What My Bankruptcy Lawyer Did For Me
- Helped me filed all the necessary paperwork
- Guided me with “selecting” the “more lenient” trustee
- Helped me determine what are exempt and non-exempt assets
- Helped me interpret all the legal mumbo jumbo
It has been 1 ½ year since I have filed for bankruptcy protection. But the beauty of having procured a bankruptcy lawyer is that I can always call on the bankruptcy lawyer if I have some questions on my particular situation. It was just last month that I received another letter from the mortgage company that had the lien on the house I had given up for foreclosure. The mortgage company was ready to start the foreclosure proceedings in the court of law. Even though I had a clear idea what the legal document is conveying, it was still nice to be able to get the reassurance of the bankruptcy lawyer who then explained the entire process to me. If I didn’t get a bankruptcy lawyer to handle my case and filed the bankruptcy on my own, I would have to do my own interpretation of the law. To me, it was just a better that I seek the help of a professional bankruptcy lawyer to handle my case. Granted, it cost me about $3,000 to secure this bankruptcy lawyer, I would say that it was still money well spent.
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If you have found this website, inevitably you are either considering filing personal bankruptcy protection, or you are in such tight financial hardship that filing bankruptcy protection seems like your only option, hence you are looking for more information regarding this whole filing process. If you have already made up your mind after doing all the due diligence, then fill out the form to the right of this blog to find a qualified bankruptcy lawyer serving your area. It is important to find a bankruptcy lawyer around the area that you live in, specifically since the bankruptcy law between states can vary somewhat. Sure, you can follow the information given by the United States Courts website about filing bankruptcy, but this complicated process should be left to the professionals.
Step 1 before filing personal bankruptcy
Take your time and figure out all your expenses and outstanding debt, ideally down to every single dollar. This is important because you must know your financial situation before making a life changing move such as filing bankruptcy.
Step 2 before filing bankruptcy
Once you have a clear picture your monthly expenses, and knowing your monthly income, you should be able to get a good idea if you can “afford” your expenses. Let me give you some simple examples:
Ex #1. You have $2,000 monthly expenses, $10,000 in debt and $3,500 monthly income.
This is not a good candidate for filing bankruptcy. If you are earning $3,500 a month and you have $2,000 in expenses, then you have over $1,500 leftover which you can use to pay off the debt. Even if you just pay off $1,000 per month, you can pay off the $10,000 debt in less than 1 year.
Ex #2. You have $2,000 monthly expenses, $100,000 in debt and $3,500 monthly income.
In this example, this is a “good” example if you choose to file for bankruptcy protection. Given that you have $1,500 to spare per month, it will take you over 66 months or about 5 1/2 years to pay off the entire $100,000. And this means that you cannot have any other expenses during this 5 1/2 year period. This means that you cannot take an unexpected vacation, or have any accidental breakdown of your car which will require money to be repaired.
Step 3 before filing bankruptcy
Once you have determined that filing bankruptcy is your best option financially, make sure you are prepared for the emotional aspects of doing so. Note that you should be prepared to deal with emotional “scars” such as:
- Bad credit score
- Bad credit history
- Emotional stress of not having any credit
I found myself in this situation after filing for bankruptcy. I was left with bad credit score and credit history. With that, it means that I will not be qualified for any kind of loans in the near future. And even though I now know what I have to do financially to get myself back into a favorable position, it is still disheartening sometimes knowing you cannot afford that extra $500 of expense, for anything that you have been “dying” to buy.
Step 4 before filing bankruptcy
Once you have made up your mind that you are filing bankruptcy, you should look for professional assistance to do the actual bankruptcy petition. It is true that there are computer software that you can purchase that can help you with the bankruptcy filing, but I personally would not trust such an important event in my life to a computer program. I would want to talk to a professional and qualified bankruptcy lawyer who will be able to guide me through this difficult time. By using a bankruptcy lawyer, he or she will also be able to help me determine what I will be able to keep post bankruptcy process. I find that having the expertise of a bankruptcy lawyer during the pre bankruptcy and post bankruptcy process helps me a lot through my transitional period and eased my anxiety and gave me the peace of mind.
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If you are under heavy debt, you have undoubtedly considered either seeking bankruptcy protection, or seek some sort of debt consolidation or debt reduction. Many people are bombarded by the recent popular monikers of “debt consolidation” or “debt reduction” services offered by some unscrupulous 3rd party vendors. Given the right circumstances, debt consolidation or debt reduction can get yourself out of the serious debt. But if you ended up using the services of the not so reputable second rated service providers, you might actually be a worst shape than you were previously. Therefore unless you can be certain that the debt consolidation or debt reduction service provider is legitimate, you should really consider filing for bankruptcy instead.
What Is Debt Consolidation?
The premise behind debt consolidation is so simple that everyone should be able to do it himself or herself. If you are currently paying various credit card debt such as American Express, Capital One and Chase credit card, in addition to the various store credit cards such as a Sears store card along with a Home Dept store card. The entire balance of all 5 credit cards might add up to $40,000. Instead of keeping track of 5 separate monthly payments, the idea behind debt consolidation is to lump all 5 credit card payments into 1 payment. By doing so you will have an easier time to track your outstanding debt balance and eventually be able to pay off the one consolidated loan. The way to achieve this is to get a line of credit (either through a home equity loan or another credit card) that will allow you to consolidate your other debt obligation, then it makes sense to do so. But honestly speaking if you are already in serious heavy debt, it is quite unlikely that you have the ability to get a line of credit big enough that will allow you to pay off all your other credit card bills.
You should be wary if you choose to hire a debt consolidation company. Many people were duped into thinking that all debt consolidation companies are legitimate. If you search the Internet, you will find many horror stories of people who have paid 10-20 payments to consolidation companies just to find that their original debt still exist when they should have become debt free by then.
What Is Debt Reduction?
Generally speaking, debt reduction is the idea that you will negotiate with the creditors to reduce the amount that is owed to them. For example you owe Chase credit card $30,000. You can try to negotiate with Chase to lower the full amount from $30,000 to $20,000. In my own experience, there are some credit card companies who will be willing to do this type of transaction, but there are conditions that will need to be satisfied. Credit card companies know that the economy is still stagnant, and many people just do not have the means to pay back all the debt. The credit card companies would rather recoup a portion of the money that is owed to them than to lose everything if the credit card holders file for bankruptcy protection.
Debt reduction is quite commonly done depending on the credit card company’s financial situation. I know of people who had their Discover cards’ balance reduced by as much as 60% – 75%. Other companies with stronger financial backings such as Chase JP Morgan are usually more stringent in their debt reduction program, even if they decided to offer you one.
Take Your Time And Do Your Research Properly
If you can be assured that your credit history and credit score will not be affected during and after the debt consolidation or debt reduction process, then you should definitely not consider filing for bankruptcy. If this debt consolidation or debt reduction process will still hurt your credit history and credit score, then it just makes perfect sense to seek for bankruptcy protection. At the end of the day, if you have chosen to file bankruptcy, you will literally become debt free overnight and will never be obligated to pay back the creditors. Why would you want to put yourself in a situation where you will still need to payback the creditors for months or years, without any real benefits? You can take the money that you will be using to pay back the creditors and save it as a “starting point” for your financial rebuilding. You should even seek the counsel of a bankruptcy lawyer, who generally offers a free initial consultation. Get all the facts straight, whether you are looking to file for bankruptcy protection, or to hire a debt consolidation/debt reduction service provider.
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