Blog Layout

The Things You Should Know before Filing for Bankruptcy

Jul 25, 2022

If you are facing large medical expenses, are recently divorced, or have lost your job, you might want to file bankruptcy to alleviate your financial burden. However, despite the relief it can provide, filing for bankruptcy is not always the only option for all situations. You should only proceed to file for bankruptcy after carefully weighing its benefits and potential drawbacks.


Read on to learn some things you should know before filing for bankruptcy.


You Can Try Alternatives First


Though bankruptcy offers relief from accumulating debts, it should be a last resort after exhausting all other possible alternatives. For example, before you file for bankruptcy, you can try negotiating a loan restructuring with your creditors. Some creditors may accept longer payment periods, which can significantly reduce your monthly payments.



For long-term loans like mortgages, some lenders can accept postponing your payments for an agreed period or modify your loan to relieve your burden. All these options take less time and cost you nothing.


You can Choose Chapter 7 or Chapter 13 Bankruptcy


The type of bankruptcy that is best for you may vary depending on your situation. While bankruptcy options are wide, individuals can only file a Chapter 7 or 13 bankruptcy. While Chapter 7 bankruptcy liquidates your assets to pay your creditors, you'll retain your assets if you file for a Chapter 13 bankruptcy.


So, if you file for a Chapter 7 bankruptcy, the bankruptcy trustee appointed by the bankruptcy court sells all your non-exempt assets and distributes the money to your creditors. These assets include any other property apart from your primary residence, investment accounts, recreational assets like cars, boats, bikes, and high-value items like watches or other jewelry.


Therefore, you keep some assets like your home, car (if you have one), clothing, tools for your job, and pension. Also, if your Chapter 7 bankruptcy case is successful, you will no longer be obligated to pay the debts discharged through the process. However, some debts, like student loans and taxes, are not dischargeable. Only go for Chapter 7 bankruptcy if you have little or no assets.


On the other hand, Chapter 13 bankruptcy allows you to retain your assets, but you have to pay your debts within a specified period. Therefore, you must have a regular source of income to qualify for Chapter 13 bankruptcy.


You Should Be Honest When Filing for Bankruptcy


If you transfer your property to others or get more loans before filing for bankruptcy, your creditors will challenge your eligibility for bankruptcy discharge. The court also views spending sprees in the 90 days before filing for bankruptcy as potential fraud. This suspicion by the court could harm your bankruptcy process or even lead to hefty penalties.


Also, if you fail to disclose property transfers before filing for bankruptcy, the court could consider your actions a bankruptcy fraud, leading to the dismissal of your case. Bankruptcy fraud is also a federal felony that carries significant consequences like a penalty or a jail term.


Your Financial Situation Will Be Made Public


If you file for bankruptcy, all the information you submit is available to the public. Therefore, anyone interested in your case can access your personal financial information, from your income to debts and assets. So, before you file for bankruptcy, be ready to share your financial matters publicly.


Like any other case, filing for bankruptcy requires preparation and good knowledge of the process. The information above will help determine if filing for bankruptcy suits your situation. However, hire an experienced bankruptcy attorney to help you through the process for the best results.


At Ozment Law PA, we are committed to helping our clients improve their financial situations and move forward. Contact us today to schedule a free consultation.

07 Mar, 2024
Foreclosure is an overwhelming and daunting process for a homeowner. Continue reading to learn more about the legal proceedings and your rights.
13 Feb, 2024
Student loan debt can feel overwhelming. If you're grappling with student loan debt and in need of assistance, we invite you to peruse our blog.
23 Jan, 2024
Wage garnishment is an unfortunate reality for many people struggling with debts. Learn how an attorney can assist with wage garnishment.
18 Dec, 2023
Understanding the ins and outs of Chapter 7 bankruptcy can be daunting. Explore some common terms used in Chapter 7 bankruptcy proceedings.
20 Nov, 2023
Foreclosure Alternates To Filing for Bankruptcy | Ozment Law
04 Oct, 2023
The law allows for various defenses that could potentially help you avoid foreclosure. Read about those legal defenses in this blog.
Sold House for Sale - West Palm Beach, FL - Ozment Law
15 Sep, 2023
As you navigate real estate closings, a real estate attorney can make a world of difference. Learn about the valuable benefits of hiring a legal expert.
16 May, 2023
If you face foreclosure, you must understand how the process works. Explore the various phases of the foreclosure process so you know what to expect.
28 Feb, 2023
Are you facing foreclosure on your home due to unexpected financial distress? Learn about some ways you may be able to prevent foreclosure.
24 Jan, 2023
Sometimes, regardless of how well you manage your finances, life may throw curveballs that push you into unmanageable debt. For many people, filing for bankruptcy is the best way to get out of a bad financial situation and start afresh. Chapter 13 bankruptcy is a favorable option for people with a regular income who want to pay off their debt. With chapter 13, you pay off all the debts in manageable and affordable installments. But the million-dollar question is whether you can buy or refinance a car while filing for Chapter 13 bankruptcy. This blog explains everything you need to know about the subject. Can You Purchase a Car During Chapter 13 Bankruptcy? The answer to this question is yes — you can purchase or refinance an existing car loan in Chapter 13 bankruptcy. But you need to meet some conditions to do so. First, you must have an acceptable and convincing reason to buy or refinance a car loan. The purchase or refinance must be necessary and agreeable to the creditor and the bankruptcy trustee. For example, suppose your old work transport car has been damaged beyond repair. In this case, your bankruptcy trustee may approve the purchase or refinance of the car loan since it is an absolute necessity for you to have transportation to get to work and other places. However, if your primary reason for buying or refinancing the car is leisure and luxury, then it is likely that you won't get approval from your bankruptcy trustee. How Do You Get Approval for a Car Loan During Chapter 13 Bankruptcy? Before you apply for a car loan, you must get bank approval first. But your chances of being approved depend on what you do to prove eligibility. Discover some helpful tips on getting a car loan while in chapter 13 bankruptcy. Look For a Reliable Lender You need someone willing to finance the loan despite your bankruptcy status. For example, you may work with a credit union or bank, but most banks are unwilling to lend to someone with a bad credit score. You can easily qualify for a loan or car financing from a subprime lender, as such lenders do not consider credit score to determine your qualification. Acquire a Sample Buyer's Order Your dealer will provide a buyer's order for the car you wish to purchase. This document indicates the amount you will be financing, and the court will use it to determine if you can repay the loan. To get a buyer's order, choose the type of car you wish to acquire. The secret is to pick an inexpensive car that falls within your budget. Then, ensure the order includes an alternative vehicle you can use should the court choose not to approve your buyer's order. Present the Buyer's Order to Your Trustee The trustee will assess the document and determine if the purchase is necessary and within your budget. The trustee considers factors such as whether the car is necessary and whether you can repay the loan on top of your other debts. File Motion for Additional Debt  Your trustee files a motion with the court to let you incur additional debt. The court shares the motion with creditors, who can oppose or accept it. If everything goes well and your motion is approved, you can share the approval to incur more debt with the dealer or lender. This step makes it easier for them to approve your loan, and you can then purchase the car. You may buy or refinance a car loan even during Chapter 13 bankruptcy if you have an acceptable reason to do so. Most importantly, consult a bankruptcy attorney to help you better understand the process and get your car loan approved. You can count on us at Ozment Law to help you get through your bankruptcy and financial challenges. Our lawyers are knowledgeable and experienced in this field and can assist you in filing a motion for additional debt and other bankruptcy-related matters. Contact us to schedule an appointment.
More Posts
Share by: