Individuals who are unable to pay their bills because of the Coronavirus pandemic may be stressed about the financial uncertainty people are facing. Individuals in this situation may benefit from doing some preliminary research to see what options they may have available now to ensure they are taking the right financial steps to get out of debt. Below we will go through some of the “ABC” Steps. “A” stands for Hiring/ speaking with an attorney, “B” stands for bankruptcy, and “C” Stands for Coronavirus steps individuals should start thinking about taking now to get out of debt.
Step 1: Speak With a Bankruptcy Attorney
Most individuals hesitate to speak with a bankruptcy lawyer when they are in a bad financial situation. Often, individuals feel embarrassed about their debt and think that they can handle their debt on their own. Individuals who are facing debt should at the very least, sit down with a bankruptcy attorney to see what options they may have available to them. Most bankruptcy lawyers give free consultations, so it only takes a little time to speak with one.
Most Bankruptcy Lawyers Practice Other Debt Relief Options Aside From Bankruptcy
Individuals often eliminate the idea of speaking with a bankruptcy lawyer because they assume that bankruptcy lawyers will only direct them towards filing bankruptcy. Most people already have made up in their minds that they “don’t want to file bankruptcy so why speak with a bankruptcy lawyer?” This is not true. A good bankruptcy lawyer will assess an individual’s financial situation. Most bankruptcy lawyers will ask numerous questions and ask for documents to get insight into a person’s financial situation. Once an attorney has this information, they can determine what debt-relief options the person may have available to them. People shouldn’t assume that bankruptcy lawyers will only recommend filing bankruptcy, most bankruptcy attorneys not only practice bankruptcy, but they also provide debt negotiation services and can recommend credit rebuilding tips.
Why Speak With a Bankruptcy Lawyer and Not a Debt Settlement Company
Most bankruptcy lawyers do both, debt negotiation and bankruptcy. A bankruptcy lawyer can determine which option may be better for an individual. Most debt settlement companies don’t do bankruptcy and automatically steer people away from it who would otherwise be better off filing bankruptcy. Some debt settlement companies try to get individuals to sign up for a debt relief program that shouldn’t be in one. Debt settlement companies are not regulated. Whereas, bankruptcy lawyers are regulated by the American Bar Association and must adhere to strict ethics.
More often than not, debt settlement companies hire individuals with very little education to settle debts and give unsolicited financial information. Most of these people are “salespersons.” It is not uncommon for these salespeople to get commissions or bonuses on individuals they get to sign up with their company. Individuals seeking to settle their debt should speak with a bankruptcy lawyer first. A bankruptcy lawyer has the education and financial experience to guide them on what is best for their individual circumstances.
After Carefully Reviewing A Person’s Financial Situation a lawyer Will Decide Which Debt Relief Option Is best
Debt settlement and bankruptcy are debt relief options that can help individuals get out of debt. Bankruptcy lawyers will sometimes recommend people who have a large cash flow and little debt to enter into a debt settlement plan if they believe it is feasible and their debts can be settled quickly. This, however, is usually not always be the best option even for individuals who have a large cash flow. If individuals are far behind on payments, have pending judgments, lawsuits, wage garnishments, and bank levies, Chapter 13 bankruptcy can help individuals with high income, stop interest fees from accruing. It will is usually a better option.
Individuals who can’t meet their basic living expenses each month are often not good candidates for debt settlement. Instead, most attorneys recommend filing Chapter 7 bankruptcy. Individuals with low income can wipe out their debt and start over. Bankruptcy lawyers don’t recommend people with low income and high debt to enter into a debt settlement program because more often than not, these individuals fall behind and end up right back in the same position. Individuals who end up in debt settlement plans who shouldn’t be in them, often waste hundreds of dollars to ultimately end up filing bankruptcy.
Bankruptcy Lawyers Can Help Rebuild Your Credit Score
Most individuals in debt are worried about their credit scores and how they can rebuild them. Bankruptcy lawyers have vast knowledge about how credit works. Many bankruptcy lawyers can give tips and tricks on ways to help people rebuild their credit score.
How Does Bankruptcy Impact A Credit Score
If an individual files bankruptcy, it can help them raise their credit score much more quickly than someone who enters into a debt settlement plan. Individuals trying to raise their credit score when struggling with debt can be close to impossible. Trying to raise a credit score can be expensive and never-ending. To understand how individuals can raise their credit score quicker with bankruptcy they must understand a few basics about credit scores:
Credit Scores are determined by three things (1) Payment History; (2) The amount of debt that is owed; (3) How close the charges are to the limit on the cards; (4) New credit applications; (5) types of credit used.
According to Equifax, one of the major credit bureaus, late payments, foreclosures, repossessions, and debt collection accounts can stay on an individual’s credit report for 7 years. Moreover, using more than 30% of a card’s credit limit can have a huge impact on a credit score. Creditors use debt to income ratio to determine how much credit they will lend to an individual. The debt to income ratio plays a huge role in determining the interest rate an individual will be given. Individuals who are barely able to meet their basic living expenses and pay their debt off each month are unlikely to rebuild their credit scores.
Filing bankruptcy can be a better option to help rebuild credit quickly. Chapter 7 Bankruptcy wipes out most, if not all of a person’s debt in less than four months. Fico released some information that showed, a person with a credit score lower than 600 should still end up in the 530 to 590 range after their bankruptcy is discharged. Although, it may drop little individuals who file bankruptcy can have a perfect score within two years of filing. Unlike. others who don’t and walk around with bad credit scores for years.
Step 2: Bankruptcy
Individuals are often under a misguided impression that bankruptcy is the end of someone’s life. This is not true. Individuals file bankruptcy for many reasons. The coronavirus is one of the prominent reasons that individuals may need to turn to bankruptcy soon. Filing bankruptcy can help people get on a fresh start who are facing medical debt, unemployment, divorce, or job loss. Individuals and businesses can file Chapter 7 bankruptcy or Chapter 13 bankruptcy to help eliminate their debt.
Chapter 7 Bankruptcy
A Chapter 7 bankruptcy can immediately wipe out a person’s debt so they no longer have to pay back their creditors. Individuals who qualify for a Chapter 7 bankruptcy, can file bankruptcy and start over financially.
Chapter 13 Bankruptcy
A Chapter 13 bankruptcy, is a repayment plan over 3-5 years. Chapter 13 can allow individuals to catch up on their past due to payments.
Individuals often believe that filing bankruptcy means they have to get rid of all of their assets. This is not true. Bankruptcy exemptions allow individuals to file bankruptcy and start over.
Step 3: Corona Virus & Bankruptcy
The coronavirus is leaving individuals feeling lost and insecure. Speaking with a bankruptcy lawyer sooner or later can be vital. Individuals struggling to pay their debts because of unemployment or medical bills due to the coronavirus should at the very minimum speak with a bankruptcy lawyer.
Individuals who wait to speak with a bankruptcy lawyer often find themselves in a much worse financial situation down the line. A lawyer can provide the proper financial guidance individual’s struggling financially need. They will be able to explain what financial decisions you should be thinking about, things you shouldn’t do, and things you should do.
For example, many individuals believe that wiping out their retirement accounts to pay their bills is a good idea. The CARES ACT recently provided rules allowing individuals to take money from their retirement accounts without penalties. Wiping out retirement accounts to pay credit card debt is never advisable. Speak with a bankruptcy lawyer so that you can get ahead of your financial issues sooner rather than later.
If you are being impacted by the coronavirus and need financial help Karra L. Kingston Esq. is ready to answer all of your questions. Karra L. Kingston Esq. understands that the coronavirus pandemic is causing panic amongst individuals facing credit card debt. Call today so that we can help you plan out your financial future and get you back on track. Karra L. Kingston Esq. helps individuals in Staten Island file bankruptcy and individuals in New Jersey file bankruptcy. You can call us at (973)-979-9078 or email us at karra@klkbankruptcylawyer.com for a free consultation.