You could theoretically deal with debt collectors, and other companies involved in the debt process, on your own. But, there are certain circumstances that you might need to get help from a professional attorney. Certain legal matters should be handled delicately, so getting advice from an attorney could keep you from making a big mistake.

You’re considering bankruptcy.

If you’ve exhausted all your options and you’ve decided bankruptcy is the best option for you, it’s probably time to see a bankruptcy attorney. While you can file bankruptcy on your own, it’s likely easier to go through the process with someone who’s knowledgeable about bankruptcy law and experienced in the filing process. A bankruptcy attorney could look through your finances and help you decide which bankruptcy is right for you.

You could see a credit counseling agency before you visit the attorney if you’re not sure that bankruptcy is the final option. You should (more…)

There are two main types of bankruptcy for individual consumers. You may qualify for both of them or you may be limited to the type of bankruptcy that does not discharge your debt. Explore both options to decide which bankruptcy, if any, you could file.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy is commonly known as discharge bankruptcy. At the end of Chapter 7 bankruptcy, the court may discharge most or all your debt.

You might wonder why everyone doesn’t file Chapter 7 bankruptcy if it means you might not have to pay your debts. Well, before your debts can be discharged in Chapter 7 bankruptcy, the court evaluates all your assets and decides if any of them can be sold to satisfy your debts. Assets might include a (more…)

Bankruptcy can typically be a tedious process. You must do everything right because missing any steps could result in having your bankruptcy dismissed. If that happens, you likely can’t simply go back to the court and ask them to re-open your case. Instead, you likely have to wait 180 days (6 months) to file again. Because bankruptcy goes on your credit report when you file, you’ll probably have another bankruptcy listed on your credit report and factored into your credit score. It likely will be that much longer before the bankruptcy is removed from your credit report.

You failed to complete the required credit counseling. Bankruptcy law requires you to complete credit counseling from a court-approved credit counseling agency within 180 days before filing bankruptcy. In addition, you have to finish money management courses with the credit counseling agency before the court will discharge your debts. If you don’t  show proof that you’ve met these requirements, your bankruptcy can be dismissed.

You failed to appear in court or follow a court order. You’re generally required to be at court hearings pertaining to your bankruptcy case. It’s important that you (more…)

When you’re trying to decide whether you should go through with debt settlement or file bankruptcy, one big factor should play into your decision. That is the number of debts you have.

People have different debt situations and different tolerance for side-effects in dealing with debt. People considering debt settlement often also consider bankruptcy and vise versa and often choose one over the other because of the result they’re seeking.

Debt Settlement for Fewer Accounts

If you only have just one or two bad debts you need help with, debt settlement might be a better solution and here’s why. Bankruptcy has long-lasting consequences. It stays on your credit report up to ten years. It’s on public record forever. Creditors, lenders, and employers may ask if you’ve ever filed bankruptcy and you could be guilty of fraud if you say you haven’t filed bankruptcy when you actually have. You don’t face the (more…)

Tax debts can be some of the hardest debts to get rid of. Bankruptcy may be an option for certain types of tax debts. Don’t get your hopes up, getting rid of tax debt, even in bankruptcy, is usually very difficult.

Which Taxes Can Be Discharged

The IRS has strict limits on which taxes can be eliminated in bankruptcy. First, tax debt is typically only discharged in Chapter 7 bankruptcy. If you file Chapter 13 bankruptcy, you’ll likely end up paying some or all your tax debt. Second, you can only typically discharge income taxes. If you owe any other type of tax, like payroll tax or self-employment tax, you cannot discharge it in almost all cases. Third, you must not have committed fraud on the tax you owe. For example, if you filed a tax return using the wrong Social Security number on purpose, you almost always can’t discharge the tax you owe.  Finally, the taxes to be eliminated in bankruptcy generally must have been “due and owing” for more than three years before you file for bankruptcy.

Tax Filing Requirements

The IRS generally must have internally acknowledged or assessed your tax debt 240 days prior to the day you file bankruptcy.

Your bankruptcy case may be dismissed if you do not file (more…)

When you’re in a bad situation, sometimes it helps to figure out how you got there. Not only could this help you come up with a solution to get rid of the problem, it could also help you avoid getting there again. This is true of debt. As you face debt settlement, reflecting on what got you in debt might allow you see how you got into debt in the first place and help you develop habits that keep you from getting into debt again.

Spending more money than you make

Almost always people get in debt because they spend more money than they bring in. Credit cards and loans often lull you into a false sense of your spending ability, making you think you have more money than you actually do. When you spend all your money, then charge up credit card balances, you don’t have any money to pay your credit card bill when it comes due or you only have enough money to make the minimum payment. Do this month after month and soon you have a huge credit card balance, a larger minimum payment, and not enough money to sustain it all.

Failing to adjust your spending to accommodate an income loss

If you lose your job or experience a paycut, you should also lose some of the things you spend money on. Even if you have unemployment, severance pay, or an emergency fund to fall back on, you should still cut back your expenses because you don’t know how long the income loss will go on. You could be without a job for several months or more. You should make the money you do have last as long as possible.

Uncovered medical expenses

Not everyone who goes into debt does so because they made bad money choices. A 2007 Harvard study revealed that the majority of bankruptcy cases are caused by (more…)

If you’re overwhelmed with credit card debt, you may consider filing bankruptcy to either get rid of your debt or to restructure your payments so that your debt is easier to repay. Here are some details about bankruptcy to help you decide if it’s the right choice for you.

Two Types of Bankruptcy

There are two types of bankruptcy for consumer credit card debt – Chapter 7 and Chapter 13. Chapter 7 bankruptcy typically allows you to get a discharge of allowable debts – most credit card debt can be discharged, but there are a few exceptions, like debts that were incurred through fraud. To qualify for Chapter 7 bankruptcy, you must pass a means test that shows your current monthly income (as defined in chapter 7 of title 11 of the United States Code) is lower than the median income in your state. Chapter 7 bankruptcy may require you to give up some assets – if you have any. Those assets would be sold and the money used to pay back your debt. There are state and federal laws governing what assets you can keep and which you have to give up.

Chapter 13 bankruptcy is usually for consumers who make too much money to qualify for Chapter 7 bankruptcy or consumers with assets they don’t want taken by the bankruptcy court. Under Chapter 13 bankruptcy, consumers repay some or all their credit card debt through repayment plan that lasts three to five years. Debt repayment is prioritized, but you might not pay any of your credit card debt. Unsecured debt that remains after the repayment period is typically discharged.

Consequences of Bankruptcy

There are some negative side effects of bankruptcy that must be considered before you file bankruptcy. Bankruptcy will (more…)

Many people fall into this type of situation – they experience financial setbacks that prevent them from keeping up with monthly debt payments, but they have enough money in a retirement account to pay a portion of the debts. Strongly consider the consequences of using your retirement money to settle your debt.

Consequences of Withdrawing from Retirement

Many retirement accounts charge a penalty if you withdraw money before you reach age 59 ½. The amount you withdraw typically must be included in your taxable income if the contribution was made pre-tax. That could increase your tax liability and may cause you to end up with a tax bill when you file next year’s tax return. You may also face an additional 10% tax penalty.

There are some exceptions to paying the early withdrawal penalty. For example, the penalty doesn’t apply if the distributions are equal to or less than your deductible medical expenses. Unfortunately, most of the exceptions don’t apply if you’re using the money to pay off your credit card debt.

Losing Retirement Money

Taking money from retirement to pay off debt can be bad in the same way that creating debt can be bad – you’re essentially (more…)

When you’re thinking about settling your debts, you’ll probably also wonder what your other options are. After you evaluate the alternatives to debt settlement, you could decide if debt settlement is truly the best solution for your debt.

Chapter 7 Bankruptcy

A goal of Chapter 7 bankruptcy is to get most, or all, of your unsecured debts discharged. Good candidates for Chapter 7 bankruptcy have low income (less than the median in their state) and few or no assets. If your current monthly income (as defined in chapter 7 of title 11 of the United States Code) is higher than the median income in your state, then you won’t qualify for Chapter 7 bankruptcy. And if you have valuable assets, they’ll probably be seized and sold by the bankruptcy court and the proceeds will be used to pay back your creditors. But, if neither of these cases apply to you, then you could get your unsecured debts discharged in bankruptcy and might only pay the costs of filing bankruptcy and hiring an attorney.

Chapter 7 bankruptcy could stay on your credit report for up to (more…)

When people are considering debt settlement, they often think about alternatives such as bankruptcy. In order to understand how bankruptcies work, we have created a list of 19 blogs which share their knowledge and advice about filing for bankruptcy. Each provides ample amounts of information which is why we’ve named them the 19 must-read blogs about bankruptcies. (more…)