Is Your Debt Situation Bad Enough To Declare Bankruptcy?
While the issue of how much debt a person is comfortable with varies depending on a number of factors, there are some warning signs that you should consider bankruptcy. For example, if you are about to be in danger of any of the following, you will want to talk to a bankruptcy lawyer right away and get some advice:
- Creditors are filing suit against you in court or you have already lost a judgment in court.
- You are being threatened with foreclosure or eviction and about to be without a place to live.
- You are behind on your auto loans and repossession is looming.
- You now have liens placed on your property, like your home, and cannot sell it or take any equity out of it without satisfying the lien.
- You are using credit cards to take cash advances to pay other credit cards or for necessities like food, fuel, and utility bills.
When Red Flags Are Not Enough
Unfortunately, even those who can answer "yes" to the above may have to resolve some issues before they file. That is because the bankruptcy code was reworked in the eighties to exclude those who are judged to be able to pay their bills. What that means is that it's a bit tougher for consumers to qualify to file chapter 7 unless they can prove that there is no way to pay their debts and still have enough money left over for food, housing, medical care, and other important basic needs. The bankruptcy courts use a pre-filing class to weed out filers who don't fit the profile for filing.
What to Know About the Credit Counseling Class
Before you file, your bankruptcy lawyer will direct you to take the credit counseling class. Calling it a class is a bit of a misnomer, however. This class consists of the filer filling out a budget that provides real-time information about debt obligations and income. This is not the budget you wish you had, the budget you used to have, or an estimated budget. The figures must come from your real-life bills and income. It's the bills you are currently paying (before you file for bankruptcy) along with the income you are being paid at the time you fill it out. Keep in mind when you fill out the budget – you are not trying to make yourself look either better or worse than you are. It has to be an accurate reflection of your current financial status. Your budget is reviewed by a credit counseling agency and a determination is made about your ability to file. If it's clear you are unable to meet your current obligations, you are given the go-ahead to file. If not, you will need to take another look at your budget and see if you meet any of the exceptions. Speak to attorneys at law to find out more.