In this economic climate, it is not unusual to get in a financial bind. Loss of income, declining home values, too much debt, business problems, raising a family, medical bills are all reasons why people get in way over their heads. It is not your fault if this happens to you. If your hole is so deep that you can't get out, consider consulting a Bankruptcy Attorney for a consultation.
There are two types of Personal Bankruptcy, Chapter 7 and Chapter 13. Chapter 7 offers you a fresh start by wiping out your debts such as credit cards, car loans and mortgages. If you intend to include your car in the bankruptcy, you have to give the car back. Chapter 13 restructures your debts so you can pay them off in 5 years. Certain items can't be included in a bankruptcy. You cannot include Federal Tax to the IRS and student loans. If you plan to include your home in the bankruptcy, you will not be able to keep the home.
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It is possible to file bankruptcy yourself, but it is tricky. Your interests are best served by hiring an experienced Bankruptcy Attorney to protect your assets. You can keep your home and car if you plan to continue paying on them. You can keep your 401K, IRA and retirement.
When you file bankruptcy an "automatic stay" is put on your debts. Creditors cannot call you or contact you in any way. They must contact your attorney. After your attorney files your petition in court, you will have a meeting with your creditors in bankruptcy court. Your attorney will be with you for this meeting. A trustee from the court will be in the room, and the creditors are welcome to attend. They rarely do attend. The trustee will swear you in, ask you about 10 questions to verify that you are who you say you are and these are indeed your debts. If there is no dispute, you will get a discharge letter in about 60 days. These debts are dismissed and you can move on with your life.
You will have to re-establish your credit as soon as possible. Of course, you don't want to get into unmanageable debt again, but you will want to start repairing your FICO score. One way to start is getting a Secured Credit Card. These are credit cards where you put the money into the account, and use the card the same way you would use any credit card. As you make payments each month on time, you will start to re-establish your credit. As time goes on you will get credit card offers in the mail with higher interest rates than you were used to getting, but if you don't keep a large balance or pay off your account in full each month, the interest won't matter much. Buying a car and paying it on time is another way to re-establish credit. Again, the interest rate will be high, so try to put down as much money as you can. After about 5 years, the bankruptcy will not weigh as heavily on your credit, depending on your credit usage after the bankruptcy.
The best way to find a bankruptcy attorney is by personal referral. If someone you know had good results with a bankruptcy attorney, considering setting up an interview with that attorney. If you don't know anyone who has used a bankruptcy attorney, you can check websites, the Bar Association, or your family attorney can recommend someone. Good luck on your journey.
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