Bankruptcy is seen as a new beginning for many people.

Bankruptcy is prominently mentioned in the Constitution. Article 1, Section 8, Clause 4 of the United States Constitution states:

Congress shall have Power to… establish… Uniform Bankruptcy Laws throughout the United States…

Bankruptcy is a necessary option for those with a high debt-to-income ratio. However, it has serious consequences. Your credit will be ruined for up to 10 years, the process will cost you at least $1-2,000 to file, and lenders will be very tired of you. As a bankruptcy paralegal, I would not recommend anyone file for bankruptcy if they have less than $10,000 in debt. Debts can be paid, negotiated, etc. without destroying your credit report! However, if you find yourself in the midst of foreclosure or just can’t see a foreseeable way out, then bankruptcy may be your best option. If you are considering this option, consider these 10 strategies.

  1. pass the Media test: If you are single and earn less than $40,000 per year, you will most likely qualify for a Chapter 7 bankruptcy. If you are married and your combined income is less than $80,000 per year, you will most likely qualify. Some couples will strategically file for separation during bankruptcy proceedings to reduce their household income, however, the bankruptcy trustee will investigate your living situation to ensure it is a legitimate separation.

  2. Replenishment Orders they are often needed to repossess a debtor’s property, which requires the creditor to take it to court. Small items like toasters, televisions, or anything worth less than $1,000 can often be held if the debtor is brave enough to discover the creditor’s deception. Replevin orders cost money and time. In my years working as a bankruptcy paralegal, it is extremely rare to see a creditor file a Replevin order on any item worth less than a thousand dollars.
  3. Credit scores can be strengthened after bankruptcy if you get a secured credit card and pay it off quickly after making small purchases.

  4. Don’t purposely rack up debt on (non-essential) entertainment items and then file for bankruptcy right away. Most debts less than 90 days are generally examined and considered “fraudulent” debts in many bankruptcy cases.

  5. Chapter 13 bankruptcies will prevent your home from being foreclosed on, however, it will only allow you to buy for a few months. If you miss your Chapter 13 plan payments, the foreclosure process starts all over again.

  6. Chapter 7 bankruptcies will not eliminate mortgages and auto loans. Expect to return those properties after your case is complete, unless you enter into a “reaffirmation agreement.”

  7. Negotiate your reaffirmation agreement with your attorney, or better yet, try to avoid signing one! See if the creditor will continue to accept payments at the same rate as before. Creditors will often try to get you to enter into a new agreement with higher rates in order to benefit.

  8. Child support is a non-dischargeable debt. However, filing a Chapter 13 bankruptcy can help you reorganize your child support debt and avoid having your driver’s license suspended.

  9. Student loans and tax debt owed are generally considered non-dischargeable. In some exceptional circumstances, they can be discharged.

  10. Show up short! If you don’t get a notice in the mail from your lawyer, call him! Missing your short date can cause long delays and possibly get your case dismissed. It is imperative that before you file for bankruptcy, you set aside some personal time off from your employer. The judge doesn’t care about your apologies. If you don’t show up, it takes a lot of work from the attorneys, paralegals, and courts to get a new court date. Your attorney and the paralegals assisting you will no doubt thank you for making their job so much easier!

These are just some basic tips when it comes to filing Chapter 7 and Chapter 13 bankruptcy. If you have any additional questions. Feel free to contact me at [email protected]