If you're in debt and you need a way out, you are probably considering many options. Maybe you're wondering, "Should I file bankruptcy" or maybe you've considered calling a debt consolidation company. If you own a house and you're behind on your mortgage you may also be looking for a way to save your home. None of these decisions are easy. We're here to help explain your options so you can make the best decision.
Filing bankruptcy is a major step. It is smart to have a qualified attorney on your side to guide you through the process and help you understand its complexities. It is a legal process that allows you to seek protection from your creditors in United States Bankruptcy Court.
The process for filing bankruptcy begins with evaluating your financial situation and determining if you are eligible to file Chapter 7 bankruptcy. To be eligible, your income must be less than the median income for people in your area. If it is more than the median income, if your monthly income, after expenses, is equal to 25 percent of your non-priority unsecured debt you will still be eligible for Chapter 7 bankruptcy.
In all other cases, you would have to file a Chapter 13 bankruptcy. Under Chapter 13, your debt is reorganized into a no- or low-interest payment plan that should get you back on firm financial footing in 3 to 5 years. You will be allowed to keep most of your property as long as you can continue to make the monthly payments on your payment plan and any debt owed on the property you keep.
Bankruptcy is a tool that can be used to discharge or restructure your debt. It is not meant to punish you for failure, and many consumers who file bankruptcy will be able to keep all of their possessions. Bankruptcy can stop foreclosure on your home, law suits, judgments and harassing creditor collection calls.
Getting the advice of a good lawyer is essential to getting through a bankruptcy with less frustration and stress. Our attorneys provide a free initial consultation to evaluate your case and set a plan to fit your needs.
Debt consolidation and bankruptcy advantages should be weighed carefully. Choosing debt consolidation over filing bankruptcy often comes down to three factors - the effect each option has on a person's credit score, how much the consolidation loan will cost and court protection.
Some financial experts argue that debt consolidation is built into the United States bankruptcy code through Chapter 13, which provides a repayment plan for creditors without any interest charges added to the debts included in it.
When a case is filed in U.S. Bankruptcy Court, creditors are forced to accept the terms decided by the court. Chapter 13 debts are consolidated and prioritized with unsecured creditors at the bottom of the list. That means creditors are likely to get a fraction of what they are owed for the three to five years that the case is active, and any balance on credit cards or medical bills is discharged when the bankruptcy is completed.
The downside of the bankruptcy system's version of debt consolidation is that it will have a negative effect on a debtor's credit rating for seven years.
Home foreclosure allows a lender to repossess or take ownership of a home if the borrower defaults on their loan by failing to make loan payments. States may allow either a judicial or non-judicial foreclosure.
Depending on the state and the foreclosure process allowed, the mortgage company or lender will notify the borrower of their intent to foreclose on the home or property through a public default notice, called a Notice of Default, or through a pending lawsuit, called a Lis Pendens.
States which require judicial foreclosures will require the lender to go to court to initiate the foreclosure process.
If you live in a judicial foreclosure state you may have a bit more time to prepare your strategy to avoid foreclosure. If you fail to respond, however, the foreclosure will proceed, the court will issue a default judgment for the lender, and the lender will auction your home.
Other states allow lenders toforeclose through a non-judicial foreclosure, which means they do not have to go to court. States which use this process will have specific laws related to how a foreclosure must proceed, how many days notification the lender must give you, how the property can be sold, and whether or not you can reinstate the loan prior to the auction or for a short time period following the auction.