5 Questions You Need To Ask if You Are Considering Bankruptcy

Posted on January 27, 2008
Filed Under Uncategorized |

After being advised to speak with an attorney about bankruptcy, I have been doing some research into it. I am afraid that I have more questions than answers at this point. I have contacted an attorney who sent me a very thick envelope full of forms to fill out and a link to the CCCS Inc website to obtain a Credit Counseling certificate. I am not in any way advocating bankruptcy. I go into this hating every minute of it but I, at least, am going to go to the appointment and learn about the options.

Questions that you need to ask:

1. Is your income above or below the Median Income for your state? This will affect whether you can file a Chapter 7 or Chapter 13 bankruptcy.

If your income is above the Median Income, you might only be able to file Chapter 13 which will require you to pay your creditors what you can afford over 3-5 years
If your income is below the Median Income, you usually have the choice of Chapter 7 which liquidates all your debts and Chapter 13.

2. What is the Homestead Exemption for your state? The federal government sets forth Homestead Exemptions but each state has the option of accepting the federal amounts, setting their own or offering a choice between the two. There are some states that have much higher exemptions and some that are much less. In Virginia, the exemption is only $5000 whereas in Texas, it is almost unlimited.

3. Are you prepared to make a total accounting of your income, liabilities and expenses as well as your assets? While I knew that this would be necessary, I guess it did not realize the depth required. You will have to list all income, expected income in the future, all debts including personal debts to family or friends, and all your expenses. You will also have to make a list of all property including furniture, clothing, jewelry, etc and assign a replacement value.

4. Have you tried to work out a reasonable repayment schedule with your creditors? Call your creditors and try to work out a hardship schedule with your creditors. They may offer reduced interest and payments for a period of time to enable you to get back on your feet. This is a much better solution in the long run for both you and them. In my case, only one of my creditors has been willing to do this so far.

5. Have you looked into Credit Counseling and Debt Management Service? Be careful here. There are a quite a few out there and most are “for profit” organizations which means that they operate to make money. There are a few that are non-profit organizations such as Consumer Credit Counseling Service. These may offer a better way to pay off your debts than declaring bankruptcy.

You Also Might Enjoy

If you enjoyed this article, you may want to subscribe to my feed by RSS or get updates in email.

Comments

2 Responses to “5 Questions You Need To Ask if You Are Considering Bankruptcy”

Bouncing Back on January 28th, 2008 3:25 pm

The credit counseling certificate is needed before your attorney can file your paperwork with the court.

Like you I was only able to get a repayment schedule with one bank, the other two banks did not want to deal with me. I was willing to make payments, they wanted all or nothing and did not want to meet halfway.

The listing of your personal assets and liabilities is hard. You have to place a value on your possessions (somethings like your house,car, any antiques are done at appraised values or blue book).

Once you fill out all the paperwork, your attorney can further advise you on either CCCS, C7 or C13.

Good luck, the process can stink at times, but I managed to survive it with most of my dignity intact!
CindyS on January 29th, 2008 9:56 pm

Bouncing Back, Thank you for your advice and support. I need all of both that I can get right now. It’s good to know that this is not the end of life as I know it.

I am still not convinced that this is what I need to do, however, I need to do something. Then again, I have been burying my head in the sand and thinking that I would work a little harder and next month would be better for a long time now.