If you’re considering filing bankruptcy, there are a plethora of pros and cons to consider beforehand. Plus, filing bankruptcy can certainly be scary, so it can help to educate yourself about the process. Here are some of our most important tips for anyone considering filing bankruptcy:
Pre-Filing Bankruptcy Tips
Keep your debts to a minimum before filing
If you are planning on filing for bankruptcy, don’t run up your debts. Judges and creditors will check your credit and financial history. When this happens, you don’t want to look like you’re trying to cheat the system.
In fact, many people max out their credit cards before filing for bankruptcy. However, this can lead to disaster if you file and the credit card companies don’t discharge the debt. Therefore, if possible, stop using your credit cards at least six months before you file, or even up to a year earlier. Also, do your best to pay the minimum payments on your cards for at least six months before filing. The better your credit history appears, the easier it will be to get new credit after filing bankruptcy.
Consider filing bankruptcy without a lawyer
Believe it or not, you do not need to hire a lawyer to file for bankruptcy. In fact, you can easily complete the bankruptcy process using the services of an experienced non-attorney bankruptcy petition preparer. The bankruptcy paperwork is quite voluminous, but using a bankruptcy preparer will give you some degree of relief and ease the process.
Unfortunately A People’s Choice no longer offers bankruptcy document preparation services.
Reaffirm debts you want to keep
Filing bankruptcy does not mean you will automatically lose your car, house, or other large items under loans. On the contrary, you have several options to handle these debts prior to filing bankruptcy. For example, you may choose to return the item and not owe anything further, or keep the item and continue to pay its loan.
However, if you keep the item, you will still be responsible for making payments on time to avoid repossession by the lender. If these payments are too much to handle, sometimes creditors are willing to renegotiate the loan and offer a lower monthly payment. Unfortunately, this is not always the case. Therefore, make sure you have the financial ability to make the ongoing monthly payments for debts that you reaffirm; otherwise, the creditor can sue you for the remaining balance due.
Post-Filing Bankruptcy Tips
Don’t be afraid to apply for credit
Filing bankruptcy can have an effect on your personal finances. However, after your bankruptcy is completed, don’t be afraid to apply for credit for purchases such as a new home or car. Believe it or not, many lenders will take your new financial situation into account and may be more likely to loan you money. Oftentimes, lenders are more eager to lend to someone who has no debt due to a bankruptcy than to the person with, say, $30,000 in credit card debt. However, you may still pay a substantially higher interest rate for that credit.
When applying for credit cards, try applying for one or two secured cards. This demonstrates to creditors your seriousness about revamping your credit record. After a while, you may be able to get unsecured credit again.
You can still own a home
One of the most common questions asked by debtors considering bankruptcy is whether bankruptcy will hinder their chance of purchasing a home. Luckily, the answer is you can do it. For some people, filing bankruptcy is an important wake-up call. In fact, bankruptcy can help debtors acknowledge the ramifications of their previous financial behavior and begin to live within their means. Many people take action to improve their credit score over time.
If you are considering filing for bankruptcy, want a fresh start, and want to focus on making the necessary changes and financial corrections needed to get you on the right track, you will be able to buy a home when the time comes.