Each year, 1.5 million individuals in the United States file for bankruptcy relief. Consequently, they must be paying for it in some way. Based on my experience working in a law firm that provides bankruptcy relief services, the following are the five most common ways individuals pay for the costs associated with filing for bankruptcy:
They cease to pay their other expenses.
Depending on the specifics of your case, your attorney may grant you permission to stop paying specific bills. Included may be credit card payments, medical payments, auto loan payments, and even mortgage payments. As long as you have a job or some other source of income, not having to pay your expenses frees up a substantial amount of cash. For example, if you were paying $400 per month toward credit cards and $150 per month toward medical expenses, you have the potential to pay $550 per month towards your bankruptcy.
DO NOT stop paying your expenses prior to consulting with a bankruptcy attorney. He or she will be able to inform you whether or not this will work for you and for which bills. If you cease making payments on your credit accounts, they will ultimately be wiped out in bankruptcy. It makes no sense to continue making payments on something that will be eliminated through bankruptcy relief. This is likely the most common method of bankruptcy filing expense coverage.
They establish a payment arrangement with their attorney.
Some law firms have a payment system that allows clients to pay for their bankruptcy case. After receiving full payment, the attorney submits the bankruptcy petition. For instance, if you are interested in filing for bankruptcy and the total cost is $1,500, you can bring in $300 per month until the $1,500 is paid in full. After receiving $1,500 from you, the attorney will register your bankruptcy with the court. In the interim, your counsel will contact your creditors by phone to inform them of your intent to file for bankruptcy. Frequently, this is sufficient to keep creditors at bay long enough to pay for the bankruptcy.
The reason the attorney does not file the bankruptcy case first and then collect payment is because if you file for Chapter 7 bankruptcy, the majority of your debts, including legal fees, will be discharged. Essentially, the attorney's legal expenses would bankrupt him. They don't want to do it, so they obtain the funds first.
They receive the funds from family or acquaintances.
A gift from beloved old mom is an additional method by which people pay for their bankruptcy. No one desires to have their parents pay for their bankruptcy as an adult, but desperate times call for desperate measures. Sometimes parents or family members offer to pay for the insolvency of a loved one because they despise seeing what is happening in their life. No one wants to see their grandchildren displaced or the minivan their daughter uses for her three jobs repossessed.
In addition, friends and family are frequently in the best position to determine that your bankruptcy filing is not the result of frivolous spending. It is due to a medical emergency, being cut off from work, or a divorce. If you built up your debt by purchasing designer handbags, you may not receive much sympathy from your peers. However, if, like the majority of people, an unanticipated catastrophe invaded your life, your family and friends will likely be your greatest supporters. Especially when they know the money will be used to solve the problem rather than just patch it up. While your family may use their own credit cards to pay for your bankruptcy, please read the following note.
They make use of their tax refund.
Contrary to popular belief, individuals who need to file for bankruptcy protection are not scofflaws. Frequently, they have extensive employment histories. The majority of bankruptcy registrants are employed and have an employer withholding income tax from their wages. Typically, this results in a tax refund being issued at the beginning of the year, after the tax return has been processed. Even those who lose their jobs or become unemployed during the tax year are eligible for a tax refund for any work they did perform. This refund may be increased by any earned income credit for which the individual is eligible.
Instead of using the income tax refund to pay portions of outstanding expenses, it is more effective to pay the bankruptcy attorney to resolve the financial issues.
They liquidate their IRA.
Cashing out an IRA is typically a last resort, but in certain situations it may be the only way to break the logjam. Negative aspects include early withdrawal penalties, income tax consequences, and the loss of compound interest. Age, overall financial situation, the IRA's value, and the individual's ability to """"afford"""" to wait for alternative payment options may all be considered when determining whether to liquidate an IRA to pay for a bankruptcy.
A person contemplating withdrawing funds from their IRA to pay for bankruptcy should consult a bankruptcy attorney before taking any action. IRA funds are protected in a bankruptcy proceeding; even if a person's other obligations are discharged and assets are distributed, the IRA remains untouched. The decision to cash out an IRA should be made with the assistance of an attorney and/or accountant.
Borrowing Money That Is Not Due
You will note that borrowing money is absent from the list. Using your own credit card to pay for your bankruptcy is the financial equivalent of wishing for more wishes. It is not permitted. If you incur new debt immediately prior to filing for bankruptcy, the bankruptcy court may deny your petition and can result in case compilations. Inform your attorney of any credit card activity in the 90 days preceding your bankruptcy filing.
Do not exacerbate your financial difficulties by failing to take the necessary measures to get back on track. Bankruptcy is a difficult time for those involved, but for those who qualify, it can provide tremendous relief and a fresh start. Consult with a bankruptcy counsel about ways you may be able to pay for your bankruptcy, as well as how to deal with debt collectors while you are gathering funds. Ignoring the issue will not make it go away, but resolving it can provide the necessary new start.""
" - https://www.affordablecebu.com/
