There are two types of bankruptcy that consumers will generally file to deal with mounting bills they can no longer afford to pay. When you qualify for chapter 7 bankruptcy, you will generally discharge all unsecured debts (credit cards, medical bills) and find you are able to achieve debt relief faster than any other options available to you.
When you file chapter 13 bankruptcy, you're agreeing to either a 3 or 5 year repayment plan (most chapter 13 bankruptcies go the full 5 years). The full balances of your different accounts enrolled in the chapter 13 may not be paid back, but you have the courts protection from them chasing after you for any amount that remained unpaid - if you complete the repayment plan.
There are many clear signs that will point to filing bankruptcy as the best debt relief option. Even though there is usually a predisposition for wanting to avoid bankruptcy, depending on your personal finances and levels of debt, you may have no other option available.
Have a look at the below mentioned topics to know the reasons that compel people to file bankruptcy. Find out if do-it-yourself bankruptcy is a good option for them.
Why should you file bankruptcy?
Bankruptcy has benefits and drawbacks. Here is a brief list of why you would want to consider filing:
- Cannot afford your debts and have no reasonable way to plan around bankruptcy.
- Need to eliminate expensive medical debts that were not covered by insurance.
- Have not been able to keep up payments and are now being sued for unpaid debt and have no resources to resolve this situation.
- Need to keep from, or put a stop to wage garnishment, bank account levy, or liens on property that can result from a court judgment.
- Want to discharge unsecured debts and possibly still keep your home or car.
- Want to keep your home from being foreclosed, or cram down what you owe on a second mortgage through a chapter 13.
All of the above and more can be achieved through filing bankruptcy.
DIY bankruptcy - Is it a viable option?
The bankruptcy process is carried out in the courts. Most people will not have familiarity with court procedures. This unfamiliarity makes it difficult for many to attempt a do it yourself approach to bankruptcy. In fact, statistics show that those who approach bankruptcy on their own and without legal assistance fail to maximize the benefits in bankruptcy (which is already a tough and emotional situation). This makes it difficult to recommend people attempt the process on their own.
Some of the reasons you may be thinking about wading your way through the process solo, is the cost associated with hiring an attorney. Chapter 7, depending on where you live, could cost anywhere from $1700 to $2200.00. Chapter 13 costs could be between 3000.00 and 3500.00. These fees will seem high when you may be struggling to take care of your basic living expenses.
So how can you avoid the fees and set a course for uncharted territory by navigating the courts and the bankruptcy process on your own? A ton of time and study are required to do this. There is no easier way to put this than the fact that as much as the costs of consulting an attorney may be out of reach, the process of going it alone doesn't look much better.
You may be asking yourself "what kind of do it yourself bankruptcy article is this"? The answer: The kind that is honest enough to tell you to try every other avenue you can to get professional help prior to taking on the task yourself. Consider the following:
- There may be nonprofit organizations in your area that can assist you with some of the basic paperwork for filing bankruptcy.
- Locate the nearest low income legal aid office and ask what assistance you may qualify for. In you do not qualify for assistance, ask for a referral.
- If you have the ability to save up a few hundred dollars a month, this may allow you to make installment payments to a bankruptcy attorney over the course of a few months.
- Many bankruptcy attorneys advise their clients to stop paying nonessential bills when close to filing for bankruptcy. Attorneys suggest this not just because it will help you afford the process, but also because courts will often "claw back" payments made to some debts in the months just prior to filing bankruptcy anyway.
If you are faced with the fact that you must file, but do not have the money to consult an attorney, consider investing in some affordable resources such as "How to file for chapter 7 bankrutpcy" published by NOLO Press.