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Life After Bankruptcy: Learning from Detroit
When an individual files for bankruptcy, their focus naturally tends to remain on the urgent financial needs that prompted them to file for debt relief in the first place. They may have concerns about life after bankruptcy, yet, the very act of filing for Chapter 7 or Chapter 13 protection indicates that one’s financial situation is so dire that thinking ahead has become a luxury.
When the dust settles, a bankruptcy filer may start to focus more on both the temporary, negative consequences that their filing has inspired and on rebuilding their credit. It is at this phase of the bankruptcy process that learning from Detroit can come in handy.
Eating an Elephant
Ten years ago, Detroit, Michigan became the largest-ever city in the U.S. to file for bankruptcy. The city is now experiencing new growth and new opportunity but getting to this point was not an easy journey and that journey is not yet over. One building inspector described the experience of rebuilding and revitalizing the city as “We’re eating an elephant here,” when interviewed by the New York Times.
Preparing for Your Chapter 7 Bankruptcy 341 Meeting of Creditors
Filing for Chapter 7 bankruptcy primarily involves filing detailed paperwork after ensuring the accuracy and completeness of all required documents. However, there are also a few unique requirements that involve filer participation in an experience. For example, there is both a pre-filing educational course requirement and a post-filing educational requirement. Additionally, each Chapter 7 filer is required to attend an interview referred to as a 341 Meeting of Creditors.
Setting Expectations
During your meeting, you will be asked questions about the information contained in your bankruptcy filing, your income, debts, property, and overall financial situation. Although it is rare that creditors choose to attend Chapter 7 341 meetings, you should be prepared to have one or more representatives of your creditors attend this conversation, as doing so is their prerogative. The meeting will likely only last about 15 or so minutes and will likely not last longer than a half hour. It will not occur in a courtroom but will instead, very likely, take place in a conference room.
Stay Off Social Media Until Your Bankruptcy Case Is Resolved
Filing for bankruptcy can be a stressful process, but it can also lead to a much-needed emotional and practical unburdening. You may ultimately feel so grateful that your interests are finally safeguarded by the automatic stay and that your case is moving forward that you feel inspired to post about your experience on social media. Yet, as difficult as it can be to refrain from connecting with others about this turning point in your financial journey, it is important to resist that urge until your case is fully resolved.
Your Social Media Activity Is Not Private
Social media platforms are public. Unlike email and text communications, which government investigators and actors can only generally access in the event that they have secured a warrant, anyone can search someone’s social media activity. If the trustee assigned to your bankruptcy case, a creditor, or a creditor’s legal representation chooses to review your social media activity, do not assume that strong privacy settings will safeguard your activity. You will want to assume that these interested parties both can and will get around your settings to view your activity.
Are Medical Bills Wrecking Your Finances?
The most common reason that Americans file for personal bankruptcy is not reckless spending, insurmountable credit card balances, or even safeguarding against the risk of foreclosure. The most common reason that hard-working adults in the U.S. file for bankruptcy is overwhelming medical debt. If you or a loved one has experienced an illness or injury that has devastated your family’s budget and made it difficult to get by, it may be time to consider filing for bankruptcy too.
Chapter 7 Relief
If you do not earn much income, chances are that you qualify for Chapter 7 bankruptcy relief. If so, you can have your outstanding medical debt balances discharged – after only a few months – without any obligation to repay your creditors first.
If all of your bills are owed to a single creditor, it may be to your advantage to speak with our firm about whether you are a strong candidate for an alternative debt relief or debt management approach. But, if you have other debts that are weighing you down, and you are eligible for Chapter 7 relief, it may provide you with the fresh start that you are looking for.
Is Debt Settlement a Scam or a Good Option?
When an individual is struggling mightily with debt, they often need assistance with resolving one or more accounts immediately. Waiting even a week to find a solution can result, under some circumstances, in repossession of a vehicle, the initiation of a creditor lawsuit, or so much stress when creditors call again and again that an individual’s mental health begins to break down. Because debt resolution issues tend to be particularly urgent in nature, bankruptcy alternatives – including debt settlement services – that promise quick results can be very attractive. It is simply important to understand the true ins and outs of any debt management or resolution opportunity before committing to an approach.
The Benefits and Limitations of Debt Settlement
Some debt settlement opportunities are legitimate. For example, if the Internal Revenue Service will allow you to submit payment for an offer in compromise, you will be able to settle your overdue tax balance for a fraction of what you owe. This can be a beneficial approach to debt resolution for debt that is not dischargeable in bankruptcy. However, for-profit debt settlement services – which often focus on debt that is dischargeable in bankruptcy – are often either scams or scam-like.
Are There Any Drawbacks to Filing for Personal Bankruptcy?
The benefits of filing for personal bankruptcy are undeniable. The automatic stay can help you to avoid repossession, foreclosure, and other creditor action for as long as your bankruptcy case remains active. The time that the automatic stay affords you can allow you to renegotiate secured debt to make repayment more manageable. You can also fine-tune your finances over this period of time so that you are primed to meet new goals once your bankruptcy case is complete.
However, there are also some potential drawbacks to filing for personal bankruptcy. Although these challenges are temporary, they are worth considering if you are thinking about filing for bankruptcy but you still have some questions that are holding you back from moving forward just yet. Bankruptcy is an excellent debt relief and debt management opportunity, but you will want to make sure that it is the best option for your unique situation before committing to the process.
Tips for a Successful Chapter 13 Repayment Period
If you are thinking about filing for Chapter 13 bankruptcy, you are likely already aware that you will need to adhere to the terms of a repayment plan that you and an attorney will create and that your creditors will – hopefully – sign off on. Only after you have successfully completed your 3-to-5-year repayment plan, will the court discharge your remaining eligible debts and close your Chapter 13 bankruptcy case favorably.
Laying Groundwork for the Future
Although your single debt payment each month will be designed to be manageable, the terms of your repayment period will leave you with very little disposable income. Without some careful planning on your part, this repayment period could become stressful. Thankfully, thinking ahead and monitoring your situation carefully as it evolves can help to ensure that your repayment period is truly workable for you and your family.
Why the Uptick in Corporate Bankruptcy Filings Matters for Families
According to S&P Global, more U.S. corporations filed for bankruptcy during the first four months of 2023 than any other year’s first quarter dating back to 2010. Evidence suggests that a combination of high interest rates, significant debt burdens, and consistently high inflation are all affecting corporate America’s ability to remain afloat without assistance. According to S&P, companies that specialize in consumer discretionary goods and services are being hit hardest. Although many businesses laid off workers within the last year to stave off financial challenges, their efforts did not make enough of a difference for those that have opted to file for bankruptcy.
Are Personal Bankruptcy Rates Going to Spike Next?
Generally speaking, when companies are laying workers off and filing for bankruptcy en masse, this indicates that many families across the country are also struggling financially. As a result, many individuals and married couples may discover that they too cannot regain their financial footing adequately without seeking the benefits that bankruptcy protection provides.
Why Do People File for Bankruptcy?
The 2008 financial crisis did result in a silver lining, as challenging as the situation was for corporations, families, individuals, governments, and communities alike. It allowed the public a greater understanding of the reality that even the most hard-working and financially-conscious individuals are often only a few rough-pay cycles away from the risk of financial devastation. It has been this widespread realization that people can fall on hard times through no fault of their own that has largely eliminated the stigma associated with taking advantage of the opportunity to file for bankruptcy.
Most Bankruptcy Filers Are Responsible
The most common reasons that individuals file for bankruptcy have nothing to do with financial irresponsibility. Instead, challenges such as medical emergencies or significant medical developments that require extensive treatment, unexpected job loss, economic conditions outside of an individual’s control, the death of a wage-earning loved one, and other challenging circumstances lead most filers to seek bankruptcy protection.
Can I File for Bankruptcy Without a Lawyer?
If you are struggling to repay your debts, you may be thinking about filing for bankruptcy. Understandably, as you likely have no money to spare, the thought of hiring a lawyer to represent your interests may feel counterintuitive. As a result, you may be wondering whether you can successfully navigate the bankruptcy process without a lawyer’s assistance.
Maybe, But Probably Not
There are two primary kinds of personal bankruptcy available to individual filers and married couples filing jointly throughout the United States. Chapter 7 bankruptcy is available to low-income filers and Chapter 13 bankruptcy is available to those who can make manageable monthly repayments to their creditors for 3-to-5 years.
There are some Chapter 7 filers who are able to file for bankruptcy without a lawyer. These individuals tend to have unusually straightforward financial circumstances and debt-related accounts. With this notable exception, bankruptcy filers generally cannot file for bankruptcy successfully without legal guidance.
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