Filing for bankruptcy is nothing to be taken lightly. In doing so, you’re asking the court to get involved in your finances, something most people would rather avoid. What’s more, once you’ve filed, there’s no going back. Given the consequences of bankruptcy – some good, some bad, but all significant – those considering this option have an obligation to themselves and others to weigh all factors before making a final decision.
While the decision to declare bankruptcy is ultimately yours to make, the following are some useful things to know before making a choice one way or another:
The choice of a lawyer is important
It’s possible to file for bankruptcy and succeed without the help of a bankruptcy lawyer. However, it’s not easy and it’s likely to lead to a less desirable outcome. With that said, picking an attorney to handle your bankruptcy filing takes more than hiring the first name you see in a Google search.
For one thing, it’s imperative to read between the lines. Most of their advertising and outreach will focus on potential clients’ financial problems while skipping over their experience and qualifications. If the bankruptcy lawyer marketing you see includes several indicators regarding skills and insights, put that name in the “maybe” pile. Follow up with research and careful reading of online reviews.
Once you’ve amassed a short list of contenders, call and arrange for a meet and greet. Most bankruptcy lawyers will agree to a free first-time consultation. This lets them get a sense of your situation while you get a sense for the cost of their services.
It’s harder than it used to be
Article 1, Section 8, Clause 4 of the United States Constitution explicitly defines the federal government’s all-encompassing role regarding bankruptcy law. In other words, the federal government gets the final say on how bankruptcies work across the entire country.
As a result, Congress occasionally updates and overhauls the bankruptcy code. The most recent changes occurred 16 years ago with the passage of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.
Simply put, if your existing understanding of bankruptcy court is based on events experienced prior to 2005, you’ll be in for a surprise if filing in 2021. As the name suggests, the law was passed to prevent abuse of the bankruptcy system. Filing has become harder and more strenuous.
Not everything gets discharged
One of the first things a lawyer will tell you is that certain debts are resistant to the bankruptcy process. That means it’s possible you won’t walk away from bankruptcy completely free from debt.
For example, student loan debt will linger after filing for bankruptcy. The same goes for unpaid taxes, alimony, child support, and monies owed based on civil court rulings.
You can keep your house
Homeowners who choose to file for bankruptcy can rest assured they probably won’t be forced to leave their house. The current bankruptcy code is designed to let people keep their homes.
With that said, some folks may be subject to eviction due to bankruptcy filings. Those behind on their mortgage payments, or those occupying a secondary dwelling in addition to their primary place of residence, will run the risk of their properties being seized to satisfy the demands of creditors.
The decision to declare bankruptcy is a significant one. Nobody should ever go forward with filing for bankruptcy without first considering the implications and consequences.