What You Should Know about Filing for Bankruptcy

Millions of people owe thousands of dollars in debt. Unfortunately, it can be very easy to get underwater with your monthly payments. When you can no longer pay back your debt, it can be a good idea to file for bankruptcy.

According to Forbes,” the top five reasons that people go bankrupt are: medical expenses, loss of job, excessive usage of credit lines, divorce proceedings and unexpected life expenses such as car or home repairs.” Many people live paycheck to paycheck and rely heavily on credit cards to fill the gaps in their household budgets. Once the debt burden becomes too much to handle, bankruptcy can be the ideal legal remedy to start over again financially.

A bankruptcy law firm birmingham al can help consumers who wish to begin a bankruptcy filing. Unsecured debts such as credit cards, medical bills and loans can be discharged during the proceedings. It is incredibly hard to get student loans discharged because these loans are secured by the Department of Education and must be repaid.

The bankruptcy lawyer that works on your case will evaluate all of your debt and the income that you have coming in. You will need to show the judge that you have such a financial hardship that bankruptcy is the only avenue that you can take to survive financially. You will need to contact each of your creditors to let them know that you will take this form of legal action. The process usually ends with a court order being issued so that the debtor is no longer legally required to pay the outstanding debts.

The courts require individuals to get credit counseling from a counselor so that they can learn how to better manage their personal finances. The counseling sessions also cover how to create a household budget so that people are less likely to have financial issues in the future.

There are two common types of bankruptcy in the United States: chapter 7 and chapter 13. Chapter 7 is the more traditional route you can take. You must prove that your income won’t allow you to pay at least some of your debts. If you decide to file for Chapter 7 bankruptcy you will probably lose property, and the negative remarks will remain on your credit report for a decade from the date of filing. This can make it hard to open new credit cards or get approved for loans at affordable interest rates.

Chapter 13 bankruptcy involves restructuring your debt so that you can eventually pay it off within the next five years. A trustee will work with you to ensure that the payments are being made wisely. There will be a creditors’ meeting to discuss if the repayment plan is fair enough. The judge will review the plan and then decide if it should be signed off on so that the proceeding can be closed. According to Wikipedia,” bankruptcy fraud is a federal crime.” Therefore, it can be beneficial to have a lawyer on your side so that you have all of your documentation in order.