When should I file for bankruptcy?
How will the new bankruptcy laws affect me?
Will all of my debts be forgiven if I file bankruptcy?
What should I know about the bankruptcy hearing?
How much money can I have in my bank account when I file bankruptcy?
Q: When should I file
for bankruptcy?
The decision to file for bankruptcy is often one of
the hardest choices that a person has to make in his or her lifetime. Poor planning
can often make the process even harder. It goes without saying that filing for bankruptcy
should be a last resort, and should only be done when all other methods of satisfying
one's financial obligations have been exhausted. However, if your situation has
become so severe that you are in danger of foreclosure, garnished wages or repossessions
or are facing debts that you are in no position to pay, putting off the inevitable
can have devastating consequences. Procrastination can cost you your car, your wages,
and even your home. Filing your case in a timely fashion can spare you these losses.
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Q: How will the new
bankruptcy laws affect me?
The Bankruptcy Abuse Protection and Consumer Protection
Act, passed in 2005 puts much stricter guidelines on personal bankruptcy filings.
Some of these guidelines include mandatory debt counseling, income limitations on
who can and cannot file, and requiring some debtors in higher income brackets to
pay off a portion of their debt before allowing them to file. Depending on the amount
of money you have, your current income and your personal circumstances, you may
not be allowed to file for Chapter 7, which absolves most of your debts. Instead,
you may be forced to file for Chapter 13, which requires you to enter into a payment
plan. Before filing, it is important that you speak with someone experienced with
the bankruptcy laws so that you will have a better idea of what to expect when you
file.
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Q: Will all of my debts
be forgiven if I file bankruptcy?
Many people mistakenly believe that filing bankruptcy
will “wipe the slate clean" and absolve them of all their financial obligations,
but that is not necessarily true all of the time. Even if you file for bankruptcy,
you will still need to pay you child support, back taxes, federal student loans
or debts incurred as a result of fraud or theft (writing bad checks, for example).
If you are not clear on which debts will and will not be discharged, speak with
an attorney or reputable credit counselor before filing.
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Q: What should I know
about the bankruptcy hearing?
Not being prepared for the hearing. Failing to show
up or properly prepare for your hearing will not buy you more time. If you are not
present at the time of your hearing, your case could be dismissed, and you will
have to re-file at a future date. In addition, you will also be forced to pay court
costs. Not having all of the required forms and documents may result in not getting
all of your debts included in the bankruptcy, which means that you will still be
responsible for them even after you file. It is very important to arrive for the
hearing on time and that you bring all of your supporting documentation, including
a detailed list of all of your creditors. You will also need to bring a valid photo
ID to the hearing.
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Q: How much money can
I have in my bank account when I file bankruptcy?
If you have no other assets you can keep up to $5000
in the bank. Additionally, in most cases you can keep a bona fide IRA, school fund,
or other exempt accounts. However, you must consult an attorney for your specific
situation.
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