Are you behind on your mortgage payments and facing foreclosure? Have you been avoiding calls from bill collectors? Are you facing a creditor lawsuit? If you’re confronting large debts that you’re unable to pay, you may feel overwhelmed, anxious, and unsure of how to handle the situation. This may lead you to consider filing for bankruptcy protection. While it might seem scary, bankruptcy can sometimes eliminate your responsibility for repaying your debts, help you save your home from foreclosure, and provide you with a fresh financial start. However, bankruptcy can also have major repercussions on your credit report that last for a decade or more. The Law Offices of Craig L. Cook can help you understand when to declare bankruptcy and explore other options available to you.
When to Declare Bankruptcy
For the fiscal year 2019, the Administrative Office for the U.S. Courts reported that there were 773,361 bankruptcy filings in the United States. The American Bankruptcy Institute reports that 3,748 bankruptcy petitions had been filed in Arkansas as of May 2020 since the beginning of the year, and 3,346 had been filed in Oklahoma. If you are considering bankruptcy, understanding that thousands of other people are in similar situations might help the prospect seem less scary. There are several questions that you should ask to help determine when to declare bankruptcy, including the following:
- Are you only able to pay the minimum payments for your credit cards?
- Do you have bill collectors harassing you?
- Are you using your credit cards to pay for necessities?
- Are you uncertain how much you owe?
- Are you in danger of foreclosure?
- Are your wages being garnished for a debt?
- Has a creditor’s lawsuit been filed against you?
If you answered yes to a few of these questions, it may be time to consider bankruptcy as an option. When you owe more than you can pay, filing for bankruptcy protection might be the best option.
Figure Out Your Finances
Before you file for bankruptcy, you should figure out where you stand with your finances. Start by creating an inventory of your assets, including checking and savings, retirement funds, bonds, stocks, vehicles, real estate, and educational savings accounts. Provide a rough estimate of the value of each. Next, add up all of your debts. If you are unsure what you owe, get a copy of the most recent statements from each of your creditors. You should also obtain copies of your credit reports from the three major credit reporting agencies by going to annualcreditreport.com. Once you have listed and added up all of your debts, do the same for your income sources. This process should give you a much clearer picture of whether you should consider filing for bankruptcy.
Types of Bankruptcy
If you have decided that bankruptcy is the right choice for your financial situation, you will need to figure out which type of bankruptcy to file. The two main types of bankruptcy that individuals file are Chapter 7 and Chapter 13.
Chapter 7 bankruptcy is also called liquidation bankruptcy. Under this bankruptcy chapter, the trustee can sell some of your assets to repay a small portion of your unsecured debt balances. However, many types of property are exempt, meaning that many people can keep most of their assets. To qualify for this type of bankruptcy, you must meet the means test. Your lawyer can help you to determine whether you qualify to file for protection under Chapter 7. If you do, your eligible unsecured debts will be discharged in a successful case in approximately four months. This means that you will no longer be obligated to repay them, and your creditors will not be able to pursue any further collection activities.
Chapter 13 bankruptcy is a reorganization bankruptcy. In this type of bankruptcy, your debts are reorganized so that you can repay your priority debts and a portion of your non-priority debts during a repayment period that lasts three to five years. This type of bankruptcy is a good option for people who are faced with foreclosure because it allows them more time to catch up on their mortgage payments. To qualify for this type of bankruptcy, you must have a regular source of income and the ability to keep up with the bankruptcy case payments. Your total debt balance must also not exceed specific thresholds. At the end of your repayment plan, your remaining debt balances will be discharged.
Talk to the Law Offices of Craig L. Cook
Figuring out when to declare bankruptcy is not a simple task for most people. While it can be difficult to admit that you need help getting out from underneath your debt, bankruptcy is a viable option for many people. To learn more about whether it is the right choice for you, contact the Law Offices of Craig L. Cook to schedule a free consultation by calling us at 479-783-8000 or sending us a message online.