Bankruptcy is a legal process that helps individuals and businesses to remove all or a portion of their debt. It may be seen as a relief, but declaring bankruptcy has a serious, long-term effect on your credit.
Step 1: Find a Good Lawyer
You need to find an experienced attorney who can handle your case. There are many paths to find a good one. A friend or a family member can recommend you to a bankruptcy lawyer. Your best option may not be the least expensive one. Make sure that the lawyer you are dealing with is professional and that you trust him or her.
Step 2: Attend a Bankruptcy Counseling Session
At this point, you have obligatory credit counseling sessions that must be completed with a U.S. Justice Department approved counseling agency.
This happens before filing the bankruptcy paperwork with the courts. The counselor will examine your budget, discuss the advantages and disadvantages of bankruptcy, and the common alternatives to bankruptcy.
Step 3: Filing for Bankruptcy With the Court
In this stage, your credit report shows that you are bankrupt, and creditors have to stop attempting to collect on your debt. The reason behind this is that bankruptcy invokes that all legal activities to collect on your debt must stop taking place the moment the bankruptcy is filed.
Step 4: Liquidation or Repayment
This step includes liquidating any valuable assets to repay your creditors (Chapter 7) or repaying a part of your debt (Chapter 13). In the case of filing Chapter 7, and you don’t have any valuable assets, it is called a “no-asset case. The court will not eventually sell your property.
If you wish to keep some of your secured debt (a house or car, for example), you will have to continue making your usual payments, just inform your attorney if it is the case.
Step 5: Debt Discharge
This is the stage where most likely, you will get some relief. You will be discharged from eligible debts that are included in the bankruptcy. However, remember that discharging is not the end of your journey. Now you can begin the process of rebuilding your credit.
Keep in mind that filing for bankruptcy may remain on your credit report for up to 10 years, which can lower your credit score. Consequently, it will be harder to get credit in the future and result in less favorable interest rates. You must weigh these negatives with the positives of keeping your assets and getting debt relief.
Contact a McAllen bankruptcy attorney today to find out how you can get financial relief.