Financial Considerations Before Bankruptcy

A Morris County Bankruptcy Lawyer Discusses Common Questions

A consumer bankruptcy offers invaluable solutions to families who have found themselves struggling under an overwhelming amount of debt. However, every situation is unique, which is why there are important factors to consider and review before you prepare to file for a Chapter 7 or Chapter 13 bankruptcy.

Should I File for Bankruptcy?

If you feel like you are drowning in debt, if you are unable to pay your bills or if your home is being threatened with foreclosure, your Morris County bankruptcy attorney will work with you to determine the best course of action. At this point, you may want to ask yourself questions such as:

Do I want to keep paying my mortgage payments to remain in my current home?

Filing bankruptcy will trigger the “automatic stay,” which is a legal order that prevents any creditors from taking any action against you. This includes foreclosure notices and auctions. Depending on the situation, you may have the option of reaffirming the debt you owe on the house and continuing to pay the mortgage through a Chapter 13 payment plan. If you no longer want to live in the house or if the house is “underwater,” (meaning you owe more than it is worth), you may be able to surrender the house and not be liable for any deficiency amount.
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Is it worthwhile to keep paying for the vehicle I am driving, or is there a cheaper way that I could get around?

If your car is worth more than what is owed, certain bankruptcy exemptions may allow you to keep the equity in the vehicle. For most people, a car is essential to go to work or to take children to school. As with a home, you can either agree to keep paying for the vehicle, or you can surrender it, if you do not want to keep it or can no longer afford the payments. In a Chapter 13 payment plan, you can work the car loan into your budget. In some situations, you may even be able to reduce the amount owed in what is known as a bankruptcy “cramdown.”
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Do I have any valuable tools or books that I have to keep in order to do my job?

In most cases, you will be able to keep anything you need to do your job, as the bankruptcy code allows you to exempt such property.
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Have I given away money, jewelry or other valuables to family members in the past year?

It is not a good idea to give away money, assets or other property prior to filing bankruptcy. The bankruptcy courts prioritize creditors to ensure fair treatment to all. If a friend or family member received money or property from you prior to filling bankruptcy, the trustee may file a lawsuit to get the property back, known as a “clawback” lawsuit. Contact a bankruptcy attorney before paying a loan to a friend or family or giving away property if you are considering filing Chapter 7 or Chapter 13.
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Am I filing bankruptcy mainly to settle income tax or student loan debts?

Older income tax debts are dischargeable through bankruptcy if they meet certain strict criteria, but it is possible. However, student loan debt will almost always remain with you, even after Chapter 13 or Chapter 7 bankruptcy. Student loan payments can be worked into a Chapter 13 payment plan. No matter what chapter you file, bankruptcy can free up your income from paying other unsecured debts, leaving you with more money to pay your student loans in the future.
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Do I have alimony or child-support obligations that I will need to continue paying after filing for bankruptcy?

Divorce payments and owed child-support cannot be discharged, but payments can be included in a Chapter 13 case, and family support is considered a priority.
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Where Can I Find a Reliable Bankruptcy Attorney?

Your bankruptcy attorney knows how you can keep what you need to survive after filing, as well as which form of bankruptcy is best for your situation. An experienced Morris County bankruptcy attorney will advise you on how best to handle your debt obligations. Every situation is different, which is why it is essential to have a qualified bankruptcy attorney review your case before you file. Contact our office today to learn more during a free consultation.

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