Making the Most of a Bankruptcy Filing
In 2005, Congress put new bankruptcy rules into place that made it harder to discharge student loans and qualify for Chapter 7 protection. However, the good news is that bankruptcy may still be an effective way to get out of debt or better manage any balances that you could still owe after your case is completed. It’s important to know what steps you can take to maximize the benefits of filing for Chapter 7 or 13 protection.
Inventory Your Existing Debts
The first step in the bankruptcy process is to take stock of your existing debt balances. This will help you to determine if a debt is secured or unsecured, and it can also help you to understand which debts can be discharged in bankruptcy. Generally speaking, Chapter 7 bankruptcy may be best if you have unsecured debts and can pass the means test.
Chapter 13 bankruptcy may be best if you have mostly secured debt such as a mortgage, auto loan, or secured personal loans. Student loan, payroll tax, and child support balances are typically not discharged in a bankruptcy. However, filing may provide you with more time to figure out a way to pay those balances without risking further negative consequences.
Follow Filing Instructions Carefully
It is in your best interest to learn about and follow all instructions related to filing for bankruptcy. Failure to follow the rules could result in a case being dismissed or otherwise delayed. In some cases, not following instructions could cause your case to become a Chapter 13 proceeding instead of a Chapter 7 proceeding.
Omitting assets from a financial disclosure form can lead to charges of fraud from creditors or the trustee overseeing the case. A New Jersey bankruptcy attorney could be able to help you gather necessary financial and other information needed to fill out bankruptcy paperwork. Your bankruptcy attorney may also be able to help you fulfill the credit counseling requirement imposed on most people who file for either Chapter 7 or Chapter 13 protection.
Create a Payment Plan and Stick to It
If you file for Chapter 13 protection, you will be required to create a payment plan that lasts for either three or five years. As long as you stay current on plan payments, you generally will not lose your home or other property. If necessary, it may be possible to request a modification to your payment plan if your economic circumstances change.
During a payment plan, you may not have to make any payments to unsecured creditors. Your bankruptcy attorney could help you to convert a second mortgage or other secured debts to unsecured debts. If you owe more on a car loan than the vehicle is worth, the negative equity could be forgiven.
Avoid Making the Same Mistakes Twice
Once your bankruptcy case has been discharged, you may be fully out of debt or have significantly fewer payments to make. However, if you have not learned from your prior mistakes, you could run the risk of having to file for bankruptcy again in the future. If you had trouble with credit card debt, it may be in your best interest to stop using credit cards or keep your credit limit to a minimum.
It may also be a good idea to focus on creating an emergency fund to help mitigate the damage that a future job loss could cause. An emergency fund can also be helpful in the event that you incur an unexpected repair or medical expense. Creating a budget can help you to identify how much money you make each month and how much you spend. Having a clear financial picture may help you to cut back on your spending or make other adjustments.
If you need a way out of credit card debt, contact the NJ bankruptcy attorneys at Neuner & Ventura LLP today. You can reach us in Marlton by calling (856) 596-2828 or by visiting our office during normal business hours.