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A Beginners Guide to Bankruptcy


Declaring bankruptcy can make you feel like a failure.


For most of us, we try everything we can to avoid making this life changing decision. From maxing out credit cards to selling off belongings, we’re never willing to give up hope that soon our streak of financial bad luck will come to an end.


According to Attorney Bruce Warren, partner at Whitehurst, Blackburn and Warren, being overly optimistic about the future of your financial situation can dig you further into debt.


“The error people make in their financial lives is that they don’t give up hope soon enough,” said Warren. “They just dig the hole deeper and deeper until there really is no way out except bankruptcy.”


The signs that financial doom is eminent can look different for everyone. If you aren’t able to pay your bills for more than three months though, it might be time to give your attorney a call.


“It’s hard to generalize every situation,” said Warren, “but generally speaking, bankruptcy is the right decision for anyone who is facing a cash short fall in their life and finds themselves unable to pay their bills.”

For those considering this option, there are two primary types, or chapters, of bankruptcy an individual can claim: Chapter 7 and Chapter 13. When trying to figure out the right option for your unique situation, it’s best to start with an open and honest conversation with your attorney.

Chapter 7: A Fresh Start


“Let’s say you owed 15 different credit card companies,” said Warren. “You had a good job, but you lost it, and you ended up maxing out your credit cards. You robbed Peter-to-pay-Paul, and got cash advances. You did all the things people do while they’re trying to hold on, thinking all the time that things were going to work out. But, unfortunately, it didn’t.”


Now, a barrage of phone calls and collection agents have begun hounding you day and night, and there is no end in sight. When this scenario plays out, Warren says many people find themselves in need of immediate relief.


“You can file a Chapter 7 under those circumstances,” said Warren. “You’ll get rid of all of your debt – you’ll get a fresh start.”


Chapter 7 erases the vast majority of common creditors, including credit card and medical bills.


This fresh start can be a blessing for those who have little or no assets. On the flip side though, after filing a Chapter 7 you will likely lose any property attached to your name, and have a negative bankruptcy plague your credit report for the next ten years.


Chapter 13: A New Plan


If you own a home or currently have an income, declaring a Chapter 13 could be a better option for you. Instead of the “clean slate” a Chapter 7 offers, Chapter 13 works more like a strategic pause button – offering participants the chance to catch up on unpaid bills by creating a payment plan that is monitored by the courts and lasts between three to five years. According to Warren, this type of bankruptcy commits any “access money” you make during that time to repaying your bills, which is oversaw by a court appointed trustee.


“You’d be allowed to catch up on any payments you missed on your house,” stated Warren. “You’d be allowed to readjust your car loan to reduce the amount of debt to the value of the car.” The benefits of filing a Chapter 13 verses a Chapter 7 are clear: keep your home, keep your car, and have a positive credit report. However, it is not a fresh start. While creditors may ease up with their constant phone calls, you’ll be required to follow your court mandated plan to the letter. What To Do Next


When it comes to bankruptcy, knowing the warning signs early on can save you heartache and headaches. Navigating the nuances of this complicated process require the trusted advice of legal experts.


If you’re considering your bankruptcy options, now is the time to contact an attorney at Whitehurst, Blackburn and Warren.

“Everyone knows someone who has declared bankruptcy,” said Warren. “The average layperson doesn’t exactly have a full understanding of the process though. Declaring bankruptcy is certainly worth discussing with your attorney before any action is taken.”



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