Whether you’re about to file for bankruptcy or are already in the process, it is essential to know what to expect from the process and the future financial implications for you in it. The prime purpose of bankruptcy filing is to provide financial security to the creditors and act as a financial cushion for the borrower regarding the repayment of debts they have incurred over time. Bankruptcy is more common than you would think. According to the statistics for 2020, the number of people filing for bankruptcy mounted to 544,463 — including individual and corporate filings. Here are five things you need to know before you decide to file for bankruptcy.
5 Things you should know before bankruptcy
1. Financial Implications of Bankruptcy on Your Credit Score
It is crucial to carefully consider whether to file for bankruptcy or not because it has long-lasting implications on your credit score. Bankruptcy stays for up to 7 to 10 years on your credit report. That means future borrowing is strenuous, if not impossible. Chapter 7 bankruptcy stays on credit score for ten years while the same remains for seven years in chapter 13 bankruptcy. Consequently, creating credit card accounts will be challenging. In the aftermath of the expiration of threshold years in both types of bankruptcies, the borrower may find it fatiguing to regain the confidence of the creditors with a history of bankruptcy on their credit report. It is advisable to explore alternative options, keeping bankruptcy filing only as a last resort.
Before you file for bankruptcy, you might want to try some alternative options available. Bankruptcy lawyers offer a free consultation to help you determine whether it is wise for you to pursue the route to bankruptcy filing. The objective is to get you financial relief. In most cases, this objective can be achieved through substitute ways such as debt consolidation, renegotiation terms of repayment with existing creditors, budget management plan, yearly payment plan, etc. It may vary from case to case and depending upon the nature of your case. A bankruptcy lawyer can give professional advice about your need to file for bankruptcy after a conscientious analysis of the facts. Try to be as accurate and honest about the facts of your case as possible. Some alternatives for bankruptcy are;
● Debt settlement
● Debt consolidation
● Negotiating repayment terms with your existing creditors
● Budget control plan
● Debt Counseling
● Saving plans
● Move to a less expensive living situation
● Borrow from family or friends
● Selling of property or assets
The most common alternative is debt consolidation – the process of consolidating all of your existing debts into one single debt, and terms of repayment are renegotiated with the creditors by a lending institution such as banks.
3. Hiring an Expert Bankruptcy Attorney
Hiring an expert bankruptcy attorney can increase your chances of obtaining a court discharge order. Not only a bankruptcy lawyer, who has relevant expertise, can aid you in determining whether or not you require to file a bankruptcy petition, but also they can represent you in court. Some benefits of hiring a bankruptcy attorney are;
● Negotiating with your creditors on your behalf and assisting the court to accept a three to five years repayment plan that is favorable to you.
● Most bankruptcy lawyers are familiar with judges and courts, and they can predict the potential outcome of a particular case based on their knowledge about the judge before it is presented.
● The chances of getting a discharge order from the court are higher for clients who present themselves through a bankruptcy lawyer.
● A bankruptcy attorney is familiar with all of the legal requirements, clauses of the relevant law, and legal terminologies.
There are many expert bankruptcy lawyers in Florida, and usually, Florida bankruptcy attorneys charge somewhere between $1,600 to $3,000 for a case. It depends on the complexity of the case. While hiring a bankruptcy attorney, you should be wary of law firms that handle cases in bulk. It is because they fail to focus on the individual case.
4. Bankruptcy as a Fresh Start
Bankruptcy may sound frightful, but it can also help you start afresh. After repayment of major debts, you can rethink how you handle your finances. Many debt counseling organizations help people in their financial management so they can avoid landing in a bankruptcy situation again. Although the situation is bleak in Chapter 7 bankruptcy, it can be an opportunity for you to start from a new place.
5. Filing a Bankruptcy Petition is Expensive
Contrary to common belief, filing for bankruptcy is not cheap. You have to comply with standard court fees to apply for bankruptcy filing. The fees for filing a Chapter 7 Bankruptcy petition may range from $338 to $500, while in some cases, the case reopening fee can also go up to $260. Similarly, for a fresh Chapter 13 Bankruptcy Petition, the fees can range between $313 to $450. For the reopening of Chapter 13 cases, the fees range from $230 to $300. A complete guide to Court fees for Chapter 7 and Chapter 13 bankruptcy petitions is available on U.S Bankruptcy Courts Fee Schedule.
Bottom Line Bankruptcy is not the end of the road for you, despite the social taboo that is associated with it. Many people incur huge medical debts that are often not their fault or an emergency financial crisis for which they were unprepared. Bankruptcy courts are established to help people out of such situations, and filing for bankruptcy is not uncommon.
By hiring an expert bankruptcy attorney, you can navigate this financial crisis effectively, and your chances of obtaining a discharge order from the court enhance if you hire a bankruptcy lawyer. Some negative impacts of bankruptcy can affect your future borrowing, but the good news is that those implications are not permanent. Alternatives are always available for you if you wish to avoid filing for bankruptcy. An experienced bankruptcy attorney can assist you with all of such matters.