What is the first essential thing you should do when your bankruptcy is finalized?

The first essential thing you should do when your bankruptcy has been finalized is plan to start rebuilding your credit .

What is the first step in declaring bankruptcy?

A bankruptcy case normally begins when the debtor files a petition with the bankruptcy court . A petition may be filed by an individual, by spouses together, or by a corporation or other entity. All bankruptcy cases are handled in federal courts under rules outlined in the U.S. Bankruptcy Code.

Who loses money first in a bankruptcy?

Key Takeaways The bankrupt company's outstanding debt is prioritized, with preferred creditors and secured debts paid first .

Can you spend money after a 341 meeting?

Can You Spend Money After 341 Meeting? If your trustee abandoned all the assets during the 341 hearing, the money, and income after the meeting is yours to spend. However, it is important to be sure about the outcome of your case before spending the money.

Who gets money first after bankruptcy?

Secured creditors like banks are going to get paid first . This is because their credit is secured by assets—typically ones that your business controls. Your plan and the courts may consider how integral the assets are that secure your loans to determine which secured creditors get paid first though.

Is it cheaper to file Chapter 7 or 13?

What Is the Cheapest Type of Bankruptcy? Not only are the fees of Chapter 7 bankruptcy lower, but you also end up paying less to your creditors. While Chapter 7 only requires that you pay the value of your liquidated assets, a Chapter 13 bankruptcy could result in you paying far more over three to five years.

Does Chapter 7 clear all debt?

An individual receives a discharge for most of his or her debts in a chapter 7 bankruptcy case. A creditor may no longer initiate or continue any legal or other action against the debtor to collect a discharged debt. But not all of an individual's debts are discharged in chapter 7 .

What is the fourth step to filing for bankruptcy protection?

Step 4: Creditor's Meeting About a month or two after filing for bankruptcy, you and your attorney will attend a creditor's meeting set up by your bankruptcy trustee.

What can you not do after filing bankruptcy?

For example, you can't discharge debts related to recent taxes, alimony, child support, and court orders . You may also not be allowed to keep certain assets, credit cards, or bank accounts, nor can you borrow money without court approval.

What are the bad parts of filing for bankruptcy?

Bankruptcy is recorded on your credit reports and remains there for seven years from the filing date for Chapter 13, or 10 years from the filing date for Chapter 7. A bankruptcy on your credit reports has a deep, long-lasting negative impact on your credit scores .

What is the most common bankruptcy procedure?

The most common types of bankruptcy are chapter 7, which are liquidating bankruptcy, and chapter 13 cases , often used by individuals who want to catch up on past due mortgage or car loan payments and keep their assets.

When a person who files bankruptcy ends up paying 5%?

A person who files bankruptcy ends up paying a 5% higher fixed interest rate on a 25-year home loan than a person who has not filed bankruptcy . The person that does not file bankruptcy pays a 7.5% interest rate.

Bankruptcy: 5 Steps To Knowing When You Should Consider It (2024)

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Today’s guest post is from Darlene Daniel, Attorney at Law who specializes in bankruptcy issues. Bankruptcy enables people who are delinquent in financial obligations to legally discharge (wipe out) their debts, often with little or no negative consequences. She can help determine if you qualify under the Chapter 7 “means” test, or if you will need to file for a Chapter 13 reorganization to repay debts over time.

Table of Contents

5 Steps To Knowing When You Should Consider Bankruptcy

Thanks to public service announcements, most of us are familiar with the warning signs of a stroke: slurred speech, crooked smile, loss of balance to name a few.But the warning signs for financial difficulty are usually the “elephant” in the room: no one really talks about it, and you don’t want to talk about your financial troubles with your friends and family.

Sure, there are plenty of courses that provide useful information on real estate investing and retirement planning; but, before you invest and plan for your future, you need to assess your financial health. April is tax time and tax season is a perfect time to take stock of your financial situation, especially if you are experiencing the following “warning signs”:* Living from paycheck to paycheck* Struggling to pay the minimum on credit cards every month

* Borrowing from friends and family to “tide you over” until the next month

* Using a credit card, or home equity line of credit, to pay for necessities such as groceries and utilities

* Using one credit card to pay the monthly payment on another

* Having nothing set aside for an emergency, such as a major car repair or medical bill

* Having no budget in place, and just “winging it” every month

Step 1: Look AtMonthly Income and Expenses

This is usually a very painful dose of reality for most of us, but it’s the only way to realistically assess your financial picture, and set up a budget. There’s no way to assess your finances unless you take this initial step.

The income side is usually straightforward, unless you are self-employed, or do seasonal work. On the expense side, only list monthly payments for rent/mortgage, utilities, groceries, student loan payments, car payments, insurance, etc. Do not list any discretionary expenses like vacations, eating out, and charitable contributions. This doesn’t mean that you will eliminate all of these expenses in your final budget; for now, you want to know what the “bottom line” is for all necessary expenses.

Deduct your expenses from your income-this is your “Bottom Line”.

Step 2: List All Credit Card Debt, Medical Bills, Personal Loans

List all of your credit card debt, medical bills, and personal loans, and add the payoff balances. You may want to pull a free credit report at annualcreditreport.com to verify the balances and see if there are any other debts lurking out there. This is a painful exercise, but I promise you will feel better knowing this figure. This is your “Discretionary Debt”.

Step 3: What’s The Bottom Line

Look at the “bottom line” in Step 1. Do you have money left over after necessary expenses? If you do, you’re still not “out of the woods”. Proceed to Step 4. If you have nothing (or less than zero) left, proceed to Step 5.

Step 4: Determine If You Can Repay In Five Years

The general rule is that, unless you can repay 60% of your debts in 5 years, you should consider bankruptcy. Here’s the formula:

Take the figure from Step 2, and multiply it by .6 (i.e. 60%)
Take that figure, and divide it by 60. This is your “Monthly Debt Payout”.

If your Monthly Debt Payout in Step 4 is more than your Bottom Line in Step 1, you can probably avoid bankruptcy, and work out a debt consolidation plan through a non-profit credit counseling company.

If the figure in Step 4 is less than the figure in Step 1, (or the result in Step 3 is less than zero), you need to strongly consider bankruptcy.

Proceed to Step 5.

Step 5: Take A Deep Breath and Don’t Panic

If the result in Step 3 or Step 4 steers you towards considering bankruptcy, you still have other non-bankruptcy options:

To solve your budget shortfall, you need one of 2 things: more income, or fewer expenses. Can you get a part-time job to supplement your income? Rent a room in your house? Can you cut back on eating out, vacations, and charitable giving? Are you willing to mow the lawn this summer, and not hire the landscaper?

If increasing income or reducing expenses isn’t an option, or it won’t give you enough income to “balance your budget” in Step 4, consider bankruptcy.

Filing bankruptcy is a major life decision. Working with a qualified attorney well versed in bankruptcy law is crucial in helping you make an informed decision. Make sure whoever you consult shares bothnon-bankruptcy and bankruptcy options to you, so that they can make a decision that is the best interest of you and your family.

The most common reaction clients have once they have filed for bankruptcy is “I feel like I’m in control again”. So, take control of your financial situation, and get back in the “driver’s seat”.

Attorney Darlene Daniele graduated from Suffolk University Law School and began her career as a member of the Massachusetts Bar. Her experience has been in a small firm setting, handling matters which range from real estate conveyancing to personal injury to bankruptcy. It’s her mission to deliver exceptional legal services to the local community while providing solutions to the complex challenges of the law. It is our desire to create a less intimidating experience by taking the burden off you. Personal service, responsiveness, and accessibility are what separatesher from other firms. For more information visit her web page Salem Legal Services.

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