People tend to feel bad about filing for bankruptcy because they feel like they have somehow failed and they’re not living up to their obligations, but the reality is, bankruptcy is there to help people make a fresh start. Even in the Bible, everyone’s debts were wiped out for 7 years in order to give them a fresh start; there’s nothing immoral about it, and certainly nothing illegal about it; cities file bankruptcy, as do churches, large companies and rich people, such as General Motors, Donald Trump and Ed McMahon.
The Bankruptcy Code balances the right of creditors to get paid with the right of debtors to make a fresh start; as long as you’re honest and upfront with everyone, you will get a fresh start and a great sense of relief.When they come into my office, most people tell me they wish they’d done this sooner, because filing for bankruptcy relieves the stress of all the calls and harassment and makes you feel better about yourself.
How Can Bankruptcy Impact a Person’s Life?
As soon as you file, your credit will begin to improve and you will start to get back on track. We file many bankruptcies for people on homes who are current with their payments, and they’ll get rid of their other debt, and it’ll be a lot easier to keep up the mortgage payments. If you’re renting and you file for bankruptcy, you can save for a down payment and in two years, buy a house and get started on your future.
What Are the Advantages of Bankruptcy?
There are a number of advantages to filing for bankruptcy. For example, if someone wants to keep their car, we can save them a lot of money by cramming down the loan if they’re under water. Say you owe $20,000 on a car that is only worth $12,000, you can cram down the loan and reduce it by $8,000 right there, which is a huge saving. You can cram down the interest rate as well, so if you’re paying 18 percent interest, we can cram that down to 4-6 percent, saving you lots more.
Under a Chapter 13 cram down, you also have no liability in the car, so if you’re 2-3 years into the plan, the car dies and you decide you just don’t want it anymore, you can just walk away and be done with it. So, the Chapter 13 can be a great way to deal with your car loan.Of course, if you’re still paying on the car, but it breaks down and you don’t want to keep it, you can file Chapter 7 and lose the car and the debt. If you file a Chapter 13, you can keep the car as long as it’s running and if it dies, we can just convert the case to Chapter 7 and you’re done with it and you won’t have to worry about it anymore.
Another reason to file a Chapter 13 is to save interest and penalties on your tax debt, and Chapter 13 can also stop a garnishment, which means you will get to keep a lot more of your paycheck. If you own a house and have a second mortgage on it and you’re under water on the first mortgage, we can get rid of the second mortgage, which can save tens of thousands of dollars. Chapter 13 isn’t for everyone, but it can be a great way to save a lot of money.
No-money-down bankruptcy is available as a way to help people deal with their creditors, but the main criteria for filing no-money-down bankruptcy is, you have to have some steady income, so if you’re unemployed and behind in your bills, Chapter 13 won’t work for you, since you will have no way to make payments after you file. If you have a steady income and you have an emergency need to file for bankruptcy, no-money-down may be the way to go.
Now, if you’re being garnished or they’re about to repossess your car, a no-money-down Chapter 13 might be a way to save money and keep them from repossessing it, while getting your creditors off your back.
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