Filing Bankruptcy? Don’t Panic.

Bankruptcy. For many, the word conjures up images of a person holding out a tin cup begging for coins or sitting on the curb surrounded by their meager belongings. While bankruptcy proceedings are not something you necessarily want to schedule as your next vacation, neither do they destroy your life, leaving you homeless and a pariah. Bankruptcy is simply a legal escape hatch for people whose finances, for whatever reason, spun out of control.

SEPARATING TRUTH FROM MYTH

As with many things in our world today, there is no lack of faulty information floating around regarding bankruptcy. People with good intentions can be one of the biggest sources of misinformation. Too many times a person facing financial problems will hear from a friend or family member something like “Bob told me that his friend Joe told him that Joe’s friend (who’s a paralegal don’t ya know) told him __________:

•  You’ll lose your house and car”
•  You’ll be renting the rest of your life”
•  Forget EVER getting credit again”

Fortunately, there are experts out there like the Doan Law Firm that can set the record straight and head down the right path. Expert advice is always 100% better than Bob’s friend Joe’s friend, the “paralegal.” Always.

AN OUNCE OF PREVENTION…

Let’s be honest, the best way to never experience bankruptcy is to never be in a position to need its protections. Financial management tools are foundational to avoiding bankruptcy court. Sadly, high schools and colleges don’t really seem to offer classes structured to give younger people a grasp of the needed skills involved. Human beings being prone to mistakes, especially when we’re not prepared for what’s coming, can find themselves in a deep monetary pit with no way to climb back out. That’s where bankruptcy laws come into play.

 CHARTING A COURSE

The United States Tax Code, formally known as Title 26 of the United States Code (26 U.S.C.) is frustratingly complex. Where do I get the notion that the code is mindbogglingly difficult you might ask? From no less of a source than the IRS itself.

Is this a personal or business bankruptcy? If personal Chapter 7 or Chapter 13? What about your house and other assets? And so on, and so on, I’m sure you get the idea. All of this and more just to cover the very basics of what kind of help you need, this isn’t even close to the complex stuff yet. This is why legal representation is vital when dealing with bankruptcies. I’ll go even further, get a lawyer or firm that specializes in tax law and bankruptcy. Over the years, I have gotten the impression many law students take the bare minimum requirement for tax law and then run away screaming, never to look at Title 26 again if possible.

ALTERNATIVES

Life is all about choices. For those who wish to avoid filing for bankruptcy, there are a few alternatives that can be explored.

Debt Consolidation: Take out one larger loan to cover several smaller debts. If the debt problem consists of, for example, two or three credit cards, a car loan and a payment plan for Junior’s braces, a person can be faced with multiple due dates, interest rates, and expensive late fees. A single personal loan or home equity loan can help make staying in front of things easier.

Work with Creditors: Companies that lend money generally want one thing above all else, the return of said money. When faced with the choice of writing off a debt or working with you, it is not atypical for the company to choose option B. They may be willing to lower interest rates, reduce monthly minimum payments or extend the length of the loan. This can be a viable option for someone with only a few creditors.

Debt Relief Agencies: We’ve all seen the ubiquitous commercials on TV by now. A company will work with your creditors on your behalf and arrange repayment schedule for you. A common solution these agencies use is to have you send them a monthly payment and then divvy it up amongst the creditors.

Just because somebody got in over their heads financially does not make them a “bad” person or some kind of doofus, it makes them a human being. There are avenues open to help clean things up.