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Bankruptcy for Individuals Dealing with Debt and Creditors

Posted in COVID-19,Debt Relief on April 5, 2020

Job losses, illness, and divorce can result in your finances spiraling out of control. When your debt exceeds your ability to pay, you wind up dealing with more stress than you think you can handle. In these cases, many people wind up facing daily calls from creditors, piles of credit card bills which continue to increase thanks to interest and late fees, and the threat of losing their home to foreclosure.

All of this can lead you to consider what potential options you have for relieving yourself of this added stress and the financial burden. One option for individuals is to file bankruptcy. Too often, debtors wait too long to file bankruptcy, making their situation worse. The sooner you speak with a Louisiana bankruptcy attorney to discuss your options, the better off you will be.

Bankruptcy Filing Offers Immediate Relief

When you are tired of avoiding telephone calls, afraid of opening your mail, or tired of the stress that comes from being in debt and knowing you cannot repay what you owe, filing bankruptcy offers immediate relief.

Once you have filed for bankruptcy, creditors must stop contacting you by phone and mail. All collection activities, wage garnishments (other than for child support), and foreclosure or eviction actions must cease immediately.

Determining Your Best Filing Options

There are two forms of bankruptcy which may be used by individual creditors. The first is Chapter 7. This form of bankruptcy is known as a “fresh start”. With a few exceptions, such as back child support, most taxes, and student loans, your debt will be eliminated upon discharge. However, this is no magic bullet. First, if you have a mortgage or a car loan, you will have to reaffirm those debts.

Oftentimes, mortgage companies and car loan companies may be willing to either tack on late payments to the back end of your loan or offer you the ability to make incremental payments along with your regular monthly payments. Keep in mind, any missed payments prior to your case being discharged, or the months following discharge will result in foreclosure or repossession efforts to be started again.

The other form of bankruptcy is Chapter 13, more commonly known as “wage earners” bankruptcy. This method allows you to restructure your debt. Any person who is filing bankruptcy who is unable to meet the criteria of the means testing for filing Chapter 7 could use this type of filing to reorganize their debt. In most cases, debtors will have up to 60 months (five years) to repay their debts. At the end of the payment period, any allowable debt which may be remaining will be eliminated. Again, keep in mind, most student loans, taxes, and child support are not forgivable debts.

The process of filing for bankruptcy can be extensive. In addition to taking a financial literacy course which is required by the court, you will have to disclose all forms of income, all bills you owe, and make a list of your personal property.

Common Questions About Bankruptcy

There is little doubt if you are considering bankruptcy, you will have several questions. Here are some of the most common questions posed to bankruptcy attorneys:

Will I Lose My Home and Car if I File for Bankruptcy?

Louisiana’s statutes, specifically La. Rev. Stat. Ann. § 13:3881 allows bankruptcy filers in Louisiana to exempt certain personal property from liquidation in a bankruptcy procedure. This means most people who need to file a bankruptcy petition can feel confident they are not jeopardizing their home or their vehicle.

Do I Need an Attorney to File Bankruptcy?

While you can file bankruptcy without an attorney, it is not recommended. The reason for this is there are several forms which must be filed with the courts, there will be a creditors meeting, and if creditors continue to call you, there is no one to turn to for advice. Hiring a skilled bankruptcy attorney can help ensure all paperwork is filed on time, and properly as well as making sure creditors follow the law.

How Long Does a Bankruptcy Disrupt my Credit?

A Chapter 7 bankruptcy filing stays on your credit report for ten years after filing, and a Chapter 13 usually remains for seven years. However, this does not mean you cannot rebuild your credit during that time. In fact, you may find you are offered several small credit lines following your discharge. While you should use caution, you can rebuild your credit in a short period of time.

Should I File Chapter 7 or Chapter 13?

This depends on numerous factors including whether you qualify for Chapter 7. A bankruptcy attorney can help you determine which filing is best suited for your individual needs. In most cases, for most debtors, Chapter 7 is the best option since it eliminates credit card debt, medical debt, and personal loans. Only those debts which are secured by real property (your car loan and home mortgage), certain taxes, back child support payments, and some student loans are not eliminated in bankruptcy.

How Long Does a Bankruptcy Filing Take?

Chapter 13 bankruptcy will not be discharged until such time as your payment plan is complete. For most consumers, this means it will be five years from the date of your filing until the bankruptcy is discharged. Chapter 7 bankruptcy is much different, in most cases, the discharge will occur between six months and one year after filing.

Why are Credit Counseling and Debtor Education Courses Required to File Bankruptcy?

These are educational courses designed to help you make better financial decisions. The first course, the credit counseling is to ensure you understand the long-term issues with filing. You will also be presented with alternatives to filing bankruptcy. Before your bankruptcy can move forward, a Certificate of Completion must be presented to the court. Should you fail to complete the credit counseling course, your file will be closed without a discharge.

Debtor education courses occur prior to your bankruptcy being discharged. This course is designed to make sure you have the knowledge necessary to make sound financial decisions after your bankruptcy is discharged. This course must be complete before your bankruptcy is discharged. Both courses can generally be done in the privacy of your home using a provider approved by the courts or the trustee of the bankruptcy. Your bankruptcy lawyer can provide you with additional information.

Contact the Law Office of John W. Redmann, LLC at 504-500-5000 if you are feeling overwhelmed by your debt and learn how filing bankruptcy could provide you a fresh start and help you on the path to a more stable financial future.