Frequently Asked Questions About Bankruptcy

A: Depending on your situation, bankruptcy could be the best financial decision you can make, especially if you’re facing a lot of credit card debt, a foreclosure or wage garnishment. The Bankruptcy Code is so powerful, it can stop any of those things from affecting you immediately, upon filing of a petition in the Bankruptcy Court. So, when you think about it, if you’re facing thousands of dollars in debt from credit cards, medical bills and the like, bankruptcy can wipe them away almost instantly.

If you are about to lose your house, a bankruptcy can prevent foreclosure and if your wages are being garnished, bankruptcy can stop that, too. There are few decisions you can make that can save you hundreds of thousands of dollars in an instant, without winning the lottery, so if you’re facing that kind of debt, bankruptcy may be the very best financial decision you ever make.

A: First of all, bankruptcy is not just a state law; it’s even included in the Constitution, because the Founding Fathers knew it was necessary. Bankruptcy actually allows the economy to continue moving forward; if it wasn’t possible to declare bankruptcy, consumer spending can grind to a halt, so in a counterintuitive way, allowing people to file bankruptcy helps to move consumer spending forward; that’s what powers the economy.

Lots of people have filed for bankruptcy, including people you know, and even celebrities; you may just not know about it because some people are ashamed of it, even though it may have been a good decision for them; don’t shy away from it if it’s a good option for you out of embarrassment. Even corporate magnates and millionaires like Donald Trump have filed bankruptcy, some of them multiple times; they see it as a business decision, and it makes financial sense for them. You should look at your personal financial situation the same way; if filing bankruptcy makes financial sense, why wouldn’t you do it?

Bankruptcy means a fresh start; it allows you to clear up your credit and set yourself up for a prosperous future. It will also relieve your stress more than you can imagine; you’ll be able to do a lot more; you’ll be able to sleep, get healthier and do things you always wanted to do, with that financial trouble gone forever. It can also save you an incredible amount of money, even hundreds of thousands of dollars in seconds, depending on your situation. It may be the best financial decision you can possibly make, and there’s no reason to be ashamed.

A: If you decide to file a bankruptcy petition, it’s important to hire someone to help you because there are a lot of mistakes to be made, such as listing your assets or exemptions the wrong way, not providing the proper documents to the trustee in a timely manner. Do any of those things, and your case can be dismissed, which means you’ve wasted your time, your filing fee, and you may lose the protection from repossession or foreclosure, all of which can represent serious consequences. That’s why you need an attorney who can help you do things the right way.

While it may seem like an unnecessary expense and there are many software programs that promise to help you fill out a petition, only an attorney can help you to understand your particular situation or prevent you from making those types of mistakes. If you want to understand the importance of hiring a bankruptcy lawyer go to the courthouse on any given day and sit in on some bankruptcy hearings and watch debtors who are representing themselves, almost all of whom have a serious problem with their bankruptcy filing and face dismissal, losing an opportunity to eliminate their debts. Hiring a bankruptcy lawyer is a necessity if you’ve decided to file.

A: The short answer is that nothing really happens. The bankruptcy court will issue an automatic stay and send it to all of your creditors, which means they can no longer contact you or ask for payments and all civil cases and foreclosure suits against you, as well as any wage garnishments, will stop immediately. So the only thing that happens immediately when you file bankruptcy is, your phone will stop ringing, and creditor harassment and wage garnishments will stop.

Other than that, everything continues the same way; you’ll get to keep your house and you won’t be evicted from the home you’re renting. You’ll be able to keep your job and keep putting food on the table, and you’ll be able to keep spending your money freely. That means you’ll do nothing differently after you file bankruptcy, except to enjoy the fact that you’ve taken a step toward a fresh start.

A: When you file bankruptcy, all of your assets go into the bankruptcy estate, and the world doesn’t end; you continue living and getting paid, paying your rent or mortgage; it all starts over without having to do anything. You keep your financial accounts, your car lease, your home, whether you’re renting or buying, and everything is sort of put into a separate pool from the bankruptcy. The trustee assigned to your case will handle that and distribute whatever assets are available to distribute to your creditors according to the law. Between your attorney and the trustee, you shouldn’t have much to do after you file; you just continue on with your life.

A: The myth filing bankruptcy will ruin your creditor is just that; a myth; something creditors and lenders want you to believe to scare you away from filing bankruptcy. However, think about it; if you’re considering filing bankruptcy, you’re probably already in serious debt trouble and have credit problems. Most of my clients have really low credit scores when they come to see me, they’ve been struggling against creditors for some time and they have a number of negative items on their credit.

When you file bankruptcy, it stays on your credit report for 10 years; it does have a negative effect on your credit, but it erases the other debts on your credit; the ones causing your score to be so low in the first place. Instead of struggling to try and pay back all of those creditors over a long period of time to slowly rebuild your credit, the bankruptcy will erase all that debt from your credit report as soon as you have an official discharge.

At that point, you will have a negative mark from the bankruptcy, but the other negative marks will be gone, and you can rebuild your credit by taking out responsible loans and repaying them on time, a process that is much, much faster than if you hadn’t filed bankruptcy.

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