Today, more and more people need to file bankruptcy for one reason or another. Whether you have lost your job and main source of income, become ill and accrued an enormous amount of medical bills, or you have just become overwhelmed with debt and your basic living expenses, bankruptcy can be a great way to gain control of your finances.
Chapter 13 is a unique type of bankruptcy that allows you to repay a portion of your debts over a period of time. If you are considering filing bankruptcy, here are a few things you need to do first.
Consult a Lawyer
First and foremost, you need to consult a lawyer to determine if you qualify for chapter 13. Your attorney will need a variety of documents to understand your debt and income ratio. Income statements, such as pay stubs and tax returns from you and your spouse and statements detailing your monthly bills should be gathered and brought to your consultation.
Your attorney will use this information to determine if you pass a mean's test, meaning you do or do not have the means to pay back your debt while paying your basic living expenses. If you do not have the means to pay any portion of your debt, filing chapter 7 may be a better option.
Attend Credit Counseling
Before you can officially file a bankruptcy petition, you must enroll and complete a credit counseling class. During this class, you will learn the basics of budgeting, paying your bills in a timely manner, and tips for using credit in a smart, affordable manner. The class is designed to help you stay on course with your budget, reducing any financial issues in the future. It is important to note that the credit counseling class must be completed within 180 days before filing bankruptcy.
After filing for bankruptcy, your attorney will set up payment plans so you can repay your debt to a bankruptcy trust. Making these payments on time is crucial to avoid any future legal ramifications. If you have any difficulty making the payments, consult your lawyer immediately.
Once you file, you will also need to attend a post-bankruptcy counseling class. Known as debtor's education, the counseling sessions offer budgeting tips and advice for rebuilding your credit after filing bankruptcy. Bankruptcy 13 can be a great option for rebuilding your financial future, but proper understanding is key.