Are You Too Broke To File For Bankruptcy?
Sep 20, 2022 By Susan Kelly

The process of filing for bankruptcy can be costly. Filing for bankruptcy will save you a lot of money in the long term. This is a long-term investment that will pay off quickly. However, you will need to spend money on an attorney shortly. Discover more about the bankruptcy process if you have no assets.

Benefit from No-Cost Assessments

First, consider that consultation with many or even most bankruptcy lawyers is free. A competent bankruptcy attorney can evaluate your situation and advise you on whether or not to file for bankruptcy, the best form to pursue, the best time for filing, and acceptable payment options.

The National Association of Consumer Bankruptcy Attorneys is a great resource for finding a competent bankruptcy attorney. Once you and your lawyer have had a chance to sit down and talk, you may start thinking about how to fund your case.

Use Your Tax Return

There is typically a spike in inquiries to bankruptcy attorneys in the spring, when people receive their tax refunds and begin thinking about their financial situation. Putting your money in the hands of the federal government isn't the most prudent move, but if you're trying to get out from under a lot of debt, having that cash might be a tremendous assistance.

Stop Paying Credit Cards

This strategy is also known as "letting your creditors pay for your bankruptcy." If you decide to file for bankruptcy and save the money you would have used to pay your unsecured creditors, you should have enough money to move forward with your case within a few months.

If you default on a loan to an unsecured creditor, they will not be able to take legal action to recover any of your assets. Car loans and mortgages are examples of secured debt, whereas credit card balances and student loans are examples of unsecured debt.

Seek Assistance from Relatives and Friends

Putting yourself out there and asking for assistance is difficult. It might not be very comfortable to explain your financial situation to close ones. When people reach out for help, they often discover that they have more options than they had realized.

The source of the funds is relevant information that must be reported in your bankruptcy papers and hence will be required to be given to your attorney. Creditor status is required if the debt is a loan.

Demand Payment from Your Debtor(s)

To the extent that bill collectors are harassing you, they may be breaking the Fair Debt Collection Practices Act or its equivalent in your state. If this is the case, you may be entitled to receive $1,000 in compensation for each episode of harassment, as well as any actual damages, any necessary legal expenses, and any other costs incurred.

You'll need thorough documentation and an attorney who's ready to see the case through. While not every bankruptcy lawyer takes on consumer lawsuits, those who do will be happy to put you in touch with one.

Keep Costs Down

It's time to look at your finances if you haven't done so. Try to find places you can save money and things you can go without. Many folks can easily spare a few hundred dollars monthly if needed.

Always remember that you'll need to detail your financial outlays in the bankruptcy filing, at least in broad strokes. Do not make drastic reductions that leave you with an untenable budget in the long run. Your lawyer can advise you on where the most savings may be had.

How To Avoid Going Bankrupt Financially

The options below are all highly desperate measures. You should avoid these alternatives unless you're in a hurry to submit your paperwork. These actions may cost you more than if you had consulted with a seasoned bankruptcy lawyer beforehand.

Increasing Credit Card Use

Don't get a loan if you plan on declaring bankruptcy. Consider that a car title loan puts your vehicle at risk and that you'll have to pay the lender money to get your automobile back.

High-interest rates and the possibility of being unable to repay a credit card advance make payday loans a poor choice.

You can lose your entitlement to a discharge if you incur needless debt in the 90 days before declaring bankruptcy or if you file bankruptcy intending to include the deficit in the default.

Using Retirement or Home Equity

If you use this money to pay for your bankruptcy case, you may be subject to early withdrawal penalties and hefty tax bills, even though the money will be shielded from these when you file for bankruptcy.

If you take out a home equity loan and then have difficulties paying the payments, you might lose your house. Unless you have enough debt that might be forgiven, the drawbacks of this strategy exceed any potential benefits.

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