Source of Bankruptcy Money

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Source of Bankruptcy Money

Bankruptcy is the process through which, individuals or businesses who are in conditions of surplus debts and in the situation of financial struggles, get relief of this scenario and regain their stability with finances. In order that this process be debtor beneficial, the type of Chapter against which bankruptcy is filed will be important

  • Chapter 7 bankruptcy filing may enforce the liquidation of some of the non-exempted assets to pay off the creditors. The payoff is priority based and can be even partially done based on the liquidation amount at hand. As most of the Chapter 7 cases are no-asset cases, some of the creditors may not also receive payment prior to the discharge
  • Chapter 13 bankruptcy is all about the restructuring of the existing debts into a repayment plan that is over three-five years. This is mostly done with individuals who have sufficient income to repay the creditors on priority. Mostly at the end of the repayment tenure, unsecured debts such as debts with a credit card may be discharged

In both of the above bankruptcy scenarios, the money for the unpaid debts is usually sourced from the liquidation of assets or from available disposable income. It has to be noted that filing of bankruptcy does involve charges too and also will need money for paying the attorney, for credit counseling and financial management courses. So it can be a complex scenario as to how the amount can be arranged by debtors to pay for these costs and other financial obligations. Law firms with experienced bank attorneys, such as Recovery Law Group, have dealt with similar situations with a variety of their clients and hence would suggest some of the below ways:

  • Tax refunds which are received prior to bankruptcy can be a source of money for the debtors. Using these funds, you can also pay off your creditors as these assets are also considered as part of your bankruptcy estate. With appropriate inputs from skilled bank attorneys, this amount can be strategically projected for exemptions and used to pay off the attorney fees or even use it for your current necessities
  • Saving up the credit card payments ahead of bankruptcy filing is yet another way to handle the situations during bankruptcy. If you are determined to file for bankruptcy, given adverse conditions, it is wise to stop using the credit cards as they may pile up newer debts. Using more of them will only probe more analysis and review from your attorney during the hearing
  • If as a debtor, you have seen scenarios of repeated callings and harassment towards payment of dues from your creditors, then you can secure additional funds by reporting this as a violation of the Fair Debt Collection Practices Act. As per the FDCPA, the creditors cannot use forceful tactics on the debtors for the purpose of collection. Debtors can claim as much as 1000 USD when they report harassment from creditors and use the same for attorney fees
  • Reviewing your financial condition with an attorney can lead you to ways of identifying means of cutting costs in order to handle expenditure during the bankruptcy filing time. Saving funds using appropriate strategies of budgeting can be highly beneficial to gain control over your finances when you are rebuilding your financial path

Hence, work with professionals of the field and channelize your funds for appropriate handling prior, during and after your bankruptcy filing.