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:

• Adhere to a monthly budget.  Everyone thinks they can plan a budget.  Everyone says they WILL plan a budget.  However, how many of us truly are men (or women) of our words?  This doesn’t solely pertain to using coupons during your next trip to the local supermarket.  I’m talking about physically sketching out a budget for you to follow on a monthly basis.  If you have a computer, you can utilize this wonderful program called Microsoft Excel and create a spreadsheet.  The trick is sticking to that budget.  Now that you’re on financial probation, it would be viable to record every expense, down to the cent.  Let’s say that after all your bills are paid, you’re left with $400.00.  Set aside a portion of that money for emergency expenses.  God forbid your child or significant other gets admitted to the hospital.  Depending on the medical fees, if you’re not prepared, you can revert to your old bankrupt self and will be forced to ring up your trusty trustee yet again. At this point, you may as well put your trustee on speed dial.
• Build a savings account.  Maybe you can set aside money from your “emergency expense” fund and transfer it to a savings account.  Let’s say you found a stable new position at that local law firm.  You could transfer some of your bi-weekly earnings into your savings.  You could transfer $200.00 or you could transfer $20.00.  Every little bit helps.
• Automated billing.  Unless you choose to pay your bills the old-fashioned way, by sending a check and hoping it doesn’t get lost in the mail, you could sign up for this nifty feature called “automated billing.”  If you pay your bills online, automated billing allows the required monthly payments to automatically get deducted from your checking or savings account.  This way, when you neglect to pay your monthly utility bill, you can’t claim that it “slipped your mind.”
• Check your credit report for errors.  Obviously, you became bankrupt for a reason.  You weren’t necessarily “in control” of your finances.  However, some of those errors on your credit report may not be your fault.  With identity theft running more and more rampant by the year, someone could’ve used your account for naught at one point in time.  Not everyone checks their balance on a daily basis, so most of us have no fool-proof way of keeping track of these things.  The next step would be to request a free credit report and get those errors erased from your records as soon as possible.  It would also be wise to alert all three credit bureaus (Equifax, TransUnion, and Experian) of your debts getting charged in bankruptcy. 
• Apply for a secured credit card.  Yes, you will have to pay an initial deposit, but it will help you re-establish your credit.  But don’t get carried away.  You may want to skip that $2,000.00 shopping spree, as appealing as it sounds.  Also, be sure to pay your balance each month.  The days of minimum payments are long gone.  Try not to pass 30% of your credit limit and, by all means, do not max out the card!  You should’ve learned your lesson the first time.
• Sign a reaffirmation agreement with your car lender.  Under this agreement, the lender is now under the impression that you will make all your payments from this point forward.  If not, the car will be repossessed.  You should know the routine. Make sure to get a debt management consultation and get the information you need. Fill out our online form