How To Avoid The Pitfalls Of Personal Bankruptcy

Many people find themselves in financial trouble every now and then. It can feel hopeless and like the end of the world. This is because people don’t realize that filing bankruptcy is a viable solution to their problems. Filing bankruptcy is not as hard as we have been led to believe.

Do not get an attorney for your bankruptcy when you are feeling overwhelmed. You have got to be levelheaded when you hire a lawyer. After all, you will be expected to pay him/her for services. Find out upfront what you will have to pay any lawyer before you hire one.

If you lose your job, or otherwise face a financial crisis after filing Chapter 13, contact your trustee immediately. If you don’t pay your Chapter 13 payment on time, your trustee can request that your bankruptcy be dismissed. You may need to modify your Chapter 13 plan if, you are unable to pay the agreed-upon amount.

When meeting with a personal bankruptcy lawyer, be sure you have all of the necessary paperwork with you. This will make the whole filing process go much easier and quicker. Some of the paperwork you should have with you includes loan documents, credit card bills, and any other relevant financial documents.

Make sure that you fully understand the implications of declaring yourself bankrupt. Once you have filed for bankruptcy, you will find it difficult to secure any credit at all. While you may not see that consequence as a huge problem at the moment, if you wish to purchase a home in the future, or lease an automobile, you are probably going to need the credit.

Do not think of filing for personal bankruptcy as a shameful thing. Going through the filing process often brings out the worst in people, causing them to feel a variety of negative emotions. But, there is nothing positive about feeling this way and it can actually affect your mental state. If you are filing for bankruptcy and you are thinking negatively about the situation, make an effort to stop that now.

Do not be afraid to file for bankruptcy. Sometimes people find themselves so overwhelmed with debt that they just decide to do nothing and bury their heads in the sand. This is the worst thing that a person could possibly do. Instead, they should file for bankruptcy because by doing so, they are taking positive affirmative action and giving themselves another chance at managing their finances.

Never rely upon bill collectors to share accurate information about your debt and bankruptcy. Some unethical collectors tell consumers that their debts are exempt from bankruptcy rules, but this is actually only true for a few special kinds of debt. If a collection agency provides you with inaccurate information like this, report them to the Attorney General’s Office in your state.

Do not make the mistake of running up lots of new debt just prior to filing for bankruptcy. The court will take all of your spending into account, including recent debts you’ve incurred, and the judge may not be willing to waive debts if it appears that you are trying to game the system. Make sure that your spending habits reflect a true desire to change.

Make sure you are aware of all your options before you file for bankruptcy. For example, you may want to think about credit counseling. There are some good non-profit organizations that could help you. With their assistance, you can reduce the payments you have to make and even get some of the interest removed from your debts. You pay the organization, and they pay creditors for you.

Consider hiring an attorney to help you. The laws surrounding personal bankruptcy can be complex at best and confusing and convoluted at worst. If you feel unsure of how to go about moving forward, consulting with an attorney may be the best move you can make. An attorney can be the guiding hand you need to make the process as smooth as possible.

When you file bankruptcy, you want to avoid finding yourself in similar dire financial circumstances, so planning for and making a post-bankruptcy budget is a good idea. When you can create such a budget and stick to it after bankruptcy, you are far less likely to find yourself in the same position in the future, ensuring you are more financially free.

If you see yourself racking up credit card debt again after filing for bankruptcy in the past you need to stop yourself before you end up back to square one. Cut up any credit card s that you have and get in touch with a credit counselor as soon as you can.

How to Avoid Bankruptcy and Save Your Assets

Bankruptcy is not the only option for someone in severe debt there is another option which people should be aware of namely the consumer proposal.

Whereas in a bankruptcy your assets are assigned to a trustee (subject to exemptions) who then liquidates them to pay your unsecured creditors, this is not the case for a consumer proposal. The consumer proposal, under the Bankruptcy and Insolvency Act, is an offer to pay your secured creditors an agreed amount of money to extinguish your debts and thus avoid bankruptcy. This money is paid interest free over a period of up to 5 years.

When a consumer proposal is filed 3 major things happen:

  1. Interest stops on your debts
  2. Your assets are protected from the creditors and a stay of proceedings is in place
  3. Creditors can no longer contact you by phone or mail or any other means

So long as you keep up the payments your assets are protected under the Act. This option is usually the preference for people with savings or equity in their house or for small business owners who need to protect their business assets to maintain an income. If three payments are missed then the proposal is annulled and you are back to where you started!

Consumer proposals do adversely affect credit and are reported to the Equifax and Transunion credit bureaus until 3 years after the proposal is paid off. One option to speed up credit building is to pay off the proposal earlier which will remove it from the credit bureau earlier.

Other advantages of the consumer proposal over bankruptcy are:

  1. If your income increases during a proposal the payments to the creditors does not. In a bankruptcy your income is monitored and payments to creditors adjusted accordingly
  2. Inheritances and windfalls are kept whereas in a bankruptcy these are paid to the creditors.
  3. You can still be a director of a company whereas in a bankruptcy you cannot
  4. You can still sponsor someone into Canada, in a bankruptcy you cannot do this until discharged.
  5. There is the opportunity to rebuild your credit faster by paying off your proposal early

Bankruptcy is not the end of the world as some people may believe and may be seen as a good opportunity to press the reset button and start again. Even if there are assets which may be seized in a bankruptcy the debtor usually has the option to pay additional funds in lieu of the asset value.