Job losses, unexpected expenses, and significant life events like divorce create financial challenges and can cause you to fall behind on your bills. Consequently, you may spend your time dodging calls from collection agencies.
Resolving these issues is challenging but possible. When faced with financial hardship, you can consider several options, such as debt consolidation or filing Chapter 7 or 13 bankruptcy. While some may opt to try anything to avoid filing a bankruptcy case, others may welcome the opportunity for a fresh start.
Deciding whether to file for a Chapter 7 bankruptcy takes time, research, and, sometimes, all of your mental sanity. Navigating your options can be tricky, but these frustrations and questions can usually be best answered with the help of a practiced lawyer. If you’re planning to file for a Chapter 7 bankruptcy, here are six things you will need to prep for before you hire an attorney to help you with your case:
1. Explore your options
Before considering how to prepare for bankruptcy, it’s crucial to consider whether bankruptcy suits your situation. Since you have a few options you can use to resolve your financial issues, it helps to understand them and how they differ. Your options include the following:
Chapter 13 Bankruptcy
While filing Chapter 7 eliminates most debts, debtors must create a repayment plan and repay part of their debts when they file for Chapter 13 bankruptcy. However, Chapter 13 reduces monthly expenses by lowering payments, enabling people to meet their financial obligations.
There’s a notable difference between how Chapter 7 and Chapter 13 filings impact your credit report. Once you file for Chapter 7, your credit report will list your bankruptcy for 10 years, but filing Chapter 13 only impacts your report for seven years.
Your credit report impacts your ability to access funds. You may only qualify for a mortgage, car loan, or credit card once your bankruptcy is removed from your credit report. While you may qualify for federal student loans, bad credit may prevent you from qualifying for private student loans, affecting your ability to pursue a degree. It’s crucial to consider how these options affect your long-term plans since choosing Chapter 7 over Chapter 13 means your bankruptcy will impact your financial options for longer.
Chapter 13 lets you catch up on payments for significant expenses, such as mortgages and car loans. Although Chapter 7 filers may retain some essential property, it’s easier for Chapter 13 filers to retain their property.
Debt consolidation loans allow you to combine debts and make one monthly payment instead of multiple payments. Debtors typically pay less monthly, even if they’re subjected to a higher interest rate for their consolidation loan. That’s because the loan resets the clock, which can extend the time you have to pay off the balance owed on a car loan.
Debt consolidation loans may hurt your credit in the short term, but you can expect your credit to recover in 12 months. Since debt consolidation only impacts your credit for one year, a consolidation loan enables you to resolve financial challenges and get back on track with your financial goals faster than a bankruptcy filing.
2. Complex information
Beginning your journey through Chapter 7 bankruptcy is not easy. Read up on the process. Familiarize yourself with the associated legal terms if you plan to file alone. If you plan to hire a lawyer, knowing the logistics of a Chapter 7 bankruptcy will help you determine whether or not they’re qualified to help you. This might be the time to buy a self-help book!
It’s mandatory to complete a credit counseling course before and after you file. Since certification of completion is one of the items you’ll need when you gather the paperwork needed to file, it’s a good idea to locate an approved course and register. The course can help you determine whether you’re on the right path. The more you know about managing debt, the better your chances of making sound decisions to resolve your financial issues.
3. Plenty of paperwork
Because filing for bankruptcy is a complicated ordeal, you’re going to spend long hours filling out forms and providing documentation. To facilitate this process, be mindful of the items you need to file (e.g., voluntary petitions, schedules, and a statement of financial affairs). You will be asked to provide documentation for your finances from the past two years. This includes information on your property, debts, income, expenses, and expenditures.
When preparing for bankruptcy, you’ll need the following items for your filing:
- Application form. Print and complete the correct bankruptcy filing forms.
- Asset disclosures. Significant assets, such as a home, car, or vacation property, must be disclosed during bankruptcy proceedings. If you have a mortgage or car payment, your bankruptcy filing may eliminate those debts.
- Bank statements. Your bank account confirms your financial situation, showing how much money you typically deposit and withdraw each month. Bank statements establish your financial situation and confirm current expenses.
- Credit counseling course certificate. You may demonstrate that you’ve completed an approved credit counseling program.
- Filing fee. Check to verify the filing fee and ensure you have a money order or certified check to include with your application.
- Pay stubs. Your pay stubs verify your employment and monthly income.
- Retirement account statements. Although retirement accounts are usually protected during bankruptcy proceedings, they are assets and must be disclosed.
- Tax returns. Expect to be asked to show at least two years of tax returns. Your tax returns verify your gross and net income.
4. Conditions that may affect your case
Many things can make filing for a Chapter 7 bankruptcy more complicated. If you have an above-average income, are a business owner, or have fraud-related charges, the filing process may become more difficult. When you meet with an attorney, make sure you answer all of their questions to the best of your ability.
Determining how to prepare for Chapter 7 bankruptcy begins with determining whether you qualify. To be eligible to file Chapter 7, you must meet the following criteria:
- Complete the credit counseling course up to six months before the filing date.
- More than 180 days have elapsed since attempted Chapter 7 or 13 bankruptcy was dismissed.
- Passing an income means test for your state.
- Your previous Chapter 7 filing occurred more than eight years ago.
- Your previous Chapter 13 filing occurred more than six years ago.
5. Attending hearings
When you file for a Chapter 7 bankruptcy, you have to meet with creditors and bankruptcy trustees under oath. These representatives will ask you questions about your finances and bankruptcy petition to determine whether all of the information you’ve provided is correct. These meetings are thorough, and it’s best to be fully aware of the information you included in your petition. Any discrepancies will require further research and questioning. You can avoid complications by thoroughly researching the steps involved in filing bankruptcy and ensuring you have an exhaustive, accurate account of your financial situation.
6. The transfer of your property and debts to the court
When you file for a Chapter 7 bankruptcy, the court takes ownership over your property and financial obligations. For this reason, you cannot sell your property or pay your debts without the permission of the court during this time. This, of course, changes after you file.
Each state sets limits for property exemptions, allowing filers to retain some of their property. States may set value limits on property categories. The property you could retain when filing bankruptcy includes:
- Equity in your home
- Household appliances
- Work-related tools
How can a bankruptcy attorney help you with your Chapter 7 bankruptcy filing?
Why do you need a Las Vegas bankruptcy attorney? Financial matters can be complex and stressful. Attempting to navigate bankruptcy proceedings alone can compound your stress and lead to delays if you make mistakes. Bankruptcy attorneys understand bankruptcy law and use their in-depth knowledge of bankruptcy filing to give you detailed information about your options. Your attorney does the heavy lifting, enabling you to address your financial issues confidently.
Contact a bankruptcy attorney today. Our expert bankruptcy attorneys will provide a free consultation and answer your questions so you can begin to resolve your financial situation. If you are filing for a Chapter 7 bankruptcy in Las Vegas, don’t tackle it alone. Consult DeLuca & Associates to determine your best course of action. For more information, call (702) 252 -4673.
Maday, R. (2022). How to consolidate debt without hurting your credit.