With our country’s current economic crisis, today is probably the easiest time in history to file a bankruptcy without being labeled as a “loser.” Not since the Great Depression has our citizenry experienced such personal financial devastation. It’s your right, as an American. You’ve worked hard all your life and now you are in the depths of despair; you deserve a new start just as much as the big corporations or bailed-out banks.
When Should You File a Bankruptcy?
- Your mortgage lender is threatening foreclosure and you are unable to afford the delinquent payments.
- You are plagued with huge credit card debt. You have tried for ages to catch up with your payments, but between late fees and underpayment penalties (and the higher interest rates they charge when you are delinquent), you have a “snowball’s chance” of ever digging out from under these debts.
- The creditors are crawling up your back; you get more collection mail than any other kind; you “reject” any 800 number incoming calls on the spot and pretend to be someone else, until the caller identifies themselves; i.e. you are being harassed to the “nth degree.”
Immediate Effects of Filing For Bankruptcy
- You will receive a filed case number; which means that all of your debts are automatically “stayed” (you cannot be pursued by any collectors).
- All of your creditors should receive a notice of stay from the court (this comes from the list of debts you submitted when you filed for the bankruptcy). Sometimes a collector may call or write because one department hasn’t talked to the other; just give them your case number and court name and you won’t hear from them again.
- Repossessions, foreclosures, garnishments or levies are stopped.
- No new lawsuits or levies can be initiated.
- Your landlord cannot evict you for unpaid rent, nor can they turn off any utilities that are included in your lease agreement.
A Few Important Points Along The Way
- If you truly can’t afford a lawyer, you can absolutely do-it-yourself; for instance the Nolo Press in Berkeley, California, specializes in legal books on bankruptcy everyone can understand. Bankruptcy really isn’t rocket science, you need to be able to pull together a complete list of all your debts (along with their account numbers, addresses, etc.), and then just closely follow the instructions and remember you can ask questions of the court clerks.
- The bankruptcy process takes 3-6 months to complete, depending on your district court’s work load. As long as you have given a thorough and honest picture to the court, there should be no problems. Make sure any monies received (from rents or tax refunds) are turned over to the court, or it could completely blow your entire case; there are people who have unwittingly made this error and had their bankruptcies dismissed.
- When it’s over, you will receive an official “discharge” of your debts. Keep this paper along with your list of creditors and make sure each one is fully aware of this status. Check your credit report and make certain each discharged debt shows a zero total owed amount and indicates a bankruptcy. Report any errors or duplicates to your credit bureau.
- Creditors for collateralized loans (your car for instance) will apply to the court to “lift” the stay so they can take back their property. If you plan to keep the car you must appear with them in front of the judge and prove that you are able to make the payments, as well as “reaffirm” the debt, in order to retain possession. Otherwise you will need to return the item.
- Within 6 months you will begin receiving solicitations for new credit cards; these will be “secured” cards where you must give them a deposit equal to your new “line of credit.” Take these offers to help you begin a new credit history; pay them on time and keep balances low (if they raise the limits, call them and have them lowered back down).
Now that it’s all over you can breathe easier and answer your phones again. The negative is that you’ve had a bankruptcy, and it will be reflected on your credit report. The positive is that you have had a bankruptcy; you have zeroed out your debt and are on the way to building a brand new credit history.
About the author
Sean Flaherty personally made a successful financial comeback, after devastating cutbacks led him to file for personal bankruptcy four years ago. He is now an independent software programmer and a frequent content contributor for Download Games. Sean recommends computer games as an uplifting activity for those under stress, while teaching them new problem solving techniques. A great place to start is with these free game downloads, like Roller Coaster Tycoon.
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