What Does No-money-down Bankruptcy Mean?
In today’s economy, people are really struggling to come up with money to file bankruptcy because they’re making less than they used to and they’re dealing with issues that take everything they have. Perhaps they’re being garnished or something along those lines and they just can’t come up with the money needed file for bankruptcy. No-money-down bankruptcy is something fairly common in other parts of the country and I’ve wanted to bring it to Maryland as a way to help people out to get out from under their debts.
Essentially, there are two kinds of bankruptcy available; Chapter 7, which most people are familiar with, is the one in which a person files and wipes out all of their debts. The problem is, with aChapter 7, all debts are wiped out, including the money you owe your attorney, so if they didn’t get their money upfront, by law they can’t collect money later, which creates a bit of a conflict for the attorney.
Another type of bankruptcy, called Chapter 13, is a payment plan, which means you can pay your attorney’s fees through the plan along with all the other creditors. It’s kind of a win-win, you get the advantage of the bankruptcy and your attorney can still get paid and represent you and help you through the whole process.
How Do People Get Into this Mess in the First Place?
Most people get into financial trouble due to job loss, illness or divorce; any one of those situations can cause you to fall behind in your bills and get you into a situation where you might be facing a car repossession or utility turn-off notice or you’re behind in your mortgage, being garnished or having creditors call constantly and you can’t deal with anymore. But the common reasons people end up in bankruptcy are job loss, divorce and illness.
How Can No-money-down Bankruptcy Help Someone?
No-money-down bankruptcy can help people because it’s very hard for people to save up to file a bankruptcy. Often, there’s an emergency and you need the relief the bankruptcy provides immediately. Maybe you’re facing repossession of your car or foreclosure on your home or some other dire situation in which you need immediate relief but can’t save enough. In those situations, a no-money-down bankruptcy can help you get the relief of a bankruptcy and still be able to pay for an attorney to help you through the process.
How Will Bankruptcy Affect My Credit?
The reality is, by the time you come see me your credit’s probably already shot; no one will file for bankruptcy when they’re up-to-date on their car payments and mortgage, or if they’re current on all of their bills. People file for bankruptcy because they’re facing some kind of loss; maybe their car or their home, or their pay, due to a pending garnishment.
Obviously if you’re behind in your mortgage and behind in your car and behind in your bills, your credit is pretty much shot anyway, so the bankruptcy will start to improve your credit, because it will wipe all those bad debts off your credit report and allow you to make a fresh start.
What If My Debt was Tax Related? Can this Still Work for Me?
Absolutely! Many people don’t realize they can pay off taxes in a Chapter 13. One of the benefits of a Chapter 13 is, it will stop the interest running on the tax debt and eliminate some of the penalties you may owe on the tax debt. Filing a Chapter 13 can save you a lot of money when dealing with the IRS.
The other advantage of paying your taxes in a Chapter 13 is the payment plan is based on your income, so you don’t really have to negotiate with the IRS. You can figure out how much you can afford and pay that into your plan and you don’t have to worry about the IRS agreeing to it; as long as you comply with the Chapter 13 bankruptcy rules, you don’t have to worry about anything the IRS has to say.