If the failing economy has put you in the unfortunate position of not being able to pay all of your bills, it can be a very depressing situation, you should not feel bad though because you are not alone, many Americans are in the same position.
Many Americans and companies too, have had to file bankruptcy, and if you are contemplating the same thing you do not need to feel guilty, even some financial experts did not think the economy was as bad as it was.
One of the first things you should do is take a look at your finances yourself, make a list of your monthly income and a list of your monthly bills, try to find ways to decrease the amount that you are paying each month by doing away with things that you can live without, like subscribing to just the basic telephone and cable bills. Call the credit card companies and tell them you are considering bankruptcy, and see if you can get the interest rate lowered on your credit cards, and go out to eat less often.
If you just can’t find a way to reduce your monthly expenditures enough to make it possible to pay your bills with enough left over to live on, then it is time to file bankruptcy.
Before you can file bankruptcy, you will need to have mandatory credit counseling for six months, although in some cases this can be as little as 30 days before filing. Without having credit counseling the case will be dismissed.
Also, you also have to consult your lawyers in order to come out of legal hassles as the credit counseling is only one of the formalities that has to be adhered to so as to not encounter further turmoil as the credit history has already been tarnished and the San Diego bankruptcy code is a very strict law that treats financial defaulters with an iron hand and makes them cough up every single penny that they have ever owned in their lifetime so filing for bankruptcy is a risky business as you have to be prepared for the repercussions involved and go through the legal processes on a daily basis.
The two most common bankruptcies for the individual consumer to file is a chapter 7 or a chapter 13 bankruptcy.
If you file a chapter 7 bankruptcy, you will need to go to court declare that you are unable to pay the debt that you have acquired. A chapter 7 bankruptcy is known as a liquidation bankruptcy, and will release you of all unsecured debt.
This is achieved by turning over all non exempt property to a trustee, who will sell the property to pay your creditors. If the you want to keep your secured debt; such as your house and car, you will still be responsible for making those payments.
The court will set a date for you to meet with your creditors, and require you to turn in a copy of your latest tax return; then 20 to 90 days after filing you will be required to meet with the trustee and the creditors to determine your financial situation. After this meeting the court will determine whether or not you are eligible for chapter 7 protection; if not you may still be able to file a chapter 13 bankruptcy.
Whether it is a chapter 7 or a chapter 13 there are debts will still have to be repaid, they are; debts you forgot to list when you filed; student loans, unless it is an undue hardship, any personal injury or death caused by you while driving while intoxicated, back child support and alimony, fines and penalties for breaking the law, income tax within 3 years, and all other taxes.
These debts may not be forgiven by the judge in a chapter 7 bankruptcy if they are challenged by a creditor. Intentional injury to a person or a persons property, debts you owe from a divorce settlement, unless after bankruptcy you would still not be able to pay them or your benefit from the bankruptcy is more than the damage to your spouse, who would have to pay them if you listed them in you bankruptcy; debts you owe from committing fraud, debts from embezzlement, theft or breach of trust, purchases for $1,150 or more for luxury items obtained on credit 60 days before filing, cash advances or loans of $1,150 or more taken 60 days before filing;
With a chapter 13 you must make and submit a payment plan of from 3 to 5 years, the plan must meet 3 criteria, it must be delivered in good faith; unsecured creditors have to
be paid at least as much as in a chapter 7 bankruptcy; and all money not required to meet reasonable monthly expenses has to be paid into the plan for at least three years.
The advantage of chapter 13 is that it stops foreclosure and allows you to catch up on payments; it also stops garnishments and law suits and allows you to keep non exempt property. Back child support and taxes less than three years old must be paid. The court will usually appoint a trustee; the trustee will see that your creditors are paid as much as possible.
You can usually pay unsecured debt such as medical bills and credit cards, part of what you originally owed before filing, depending on the judgments against you, but usually you will be paying as little as ten cents on the dollar for these unsecured debts.
David Robson is the founder of Complus Alliance. He has been writing about different topics for almost 10 years. He’s main focus is delivering quality insights to a wide array of audience.