Bankruptcy should only be utilized as a last resort, but it happens to the best of us. Even Donald Trump once filed for bankruptcy. Common reasons people file are job loss, excessive student loan debt, or medical expenses. We understand that problems like these are sometimes unavoidable. You can’t impact your CEO’s decision to lay off 25% of his staff. Medical bills pile up inevitably. Nevertheless, you must be sure to weigh out all your options before declaring bankruptcy.
In the case of consumer proposal, the debtor assumes that you have a stable source of income, in order to make your monthly payments. In the case of bankruptcy, chances are you have barely a dime to your name. You’re at the point where you don’t mind surrendering your seven credit cards and multitude of non-exempt assets to the government. And why worry about the massive impact bankruptcy will have on your credit when your credit’s already shot?
What do you need to qualify for bankruptcy? You need to owe more than $1,000.00. In other words, virtually anyone in a financial bind can apply.
This also requires hiring a trustee. Luckily, bankruptcy trustees will try to keep the process as brief as possible. However, all bankruptcies must last a minimum of nine months. If it’s your first time filing for bankruptcy, the duration will be determined by the court. Failure to comply with any of your bankruptcy duties can cause a delay in the discharge.
What duties do you need to fulfill? Each month you must give a detailed report of your household income to the trustee, report any changes in your family situation, and hand over all pay stubs. This process may be time-consuming and feel like an invasion of privacy, but it will help you monitor how you spend every penny.
Bankruptcy only discharges unsecured debts. For example, your house and car do not count. But if you are leasing a car, it would be suggested that you forfeit the vehicle. After all, it’s easier to reduce your monthly expenses by taking public transportation (if it is, in fact, available where you live). But even certain unsecured debts do not apply. These are some examples: student loans less than 10 years old, child and spousal support, and court-awarded payments. Examples of debts that do go away are credit card balances, unsecured personal loans, unpaid electric and gas bills, past-due insurance premiums, and medical fees.
Bankruptcy may be the cheapest option, but it’s not free. Money still goes towards administrative costs, mailing costs, court fees, and filing fees set by the government. Even if by some great luck, you hit the jackpot in the lottery, you need to cough up those earnings to the Court. Hey, at least you get a lump sum of those earnings after you’ve been discharged. For free debt relief consultationplease fill our consultation form online
It can take a significant amount of time to recover from bankruptcy. By “significant,” I mean up to 10 years. If you thought consumer credit counseling and consumer proposals had major effects on your credit, the effects of bankruptcy can be double.
Life after bankruptcy is not easy, but it’s an opportunity to start things on a clean slate. Sure, you will probably have to deal with higher interest rates. It may be harder to find a job or lease a new vehicle. But there are six major steps you can take on the road to gaining back your financial freedom. They are as follows:
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