When it comes to managing your money, it’s easy to feel overwhelmed: overdue bills, mounting credit card debt, regular “emergencies” wiping out whatever you can manage to save. Even if you put together the right budget and begin digging ourselves out of a hole, a major car repair or a trip to the ER can derail your plans and make things worse.
Many consumers faced with insurmountable money challenges may consider bankruptcy as a way to ease pressure and reset their financial situations. But experts encourage you to take stock of several factors before taking the first step down “Bankruptcy Road.”
Consider Your Options
“Before committing to filing bankruptcy, you should consider all your options and see if your current financial crisis has short-term or long-term solutions,” said Regina Blackwell, a Transformance outreach coach. “While completing the bankruptcy process may mean a fresh start for your finances, it also may mean drastic hits to your credit score, or may negatively impact your ability to buy needed items on credit for a decade or more.”
Bankruptcy is a generalized term for a court procedure that enables consumers and business to get rid of debt and repay creditors. Typically, these bankruptcies involve liquidation (Chapter 7) or reorganization (Chapter 13). Bankruptcy procedures require financial counseling and the services of a qualified attorney. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 mandates that consumers receive financial counseling with an approved agency prior to their bankruptcy petition being filed. Further, the law requires consumers to participate in a financial education course before their debts can be discharged.
Meet with a Financial Coach
Transformance is a U.S. Trustee-approved non-profit agency that offers these services. Our certified counselors – known as Outreach Coaches – are prepared to help you meet the requirements of the law through in-person, phone or online coaching sessions.
“If you’re considering bankruptcy, your first step is to talk to a certified counselor or coach and go over all your options for debt repayment,” Blackwell said. “These experts can review with you all your options before you proceed.”
At Transformance, each bankruptcy coaching session includes an overview of the process, a review of bankruptcy alternatives that include the advantages and disadvantages to initiating the process, and a personalized budget analysis. Outreach coaches also review the factors leading up to the current financial crisis and can offer options on how best to avoid those issues in the future. In some cases, an aggressive debt management plan may negate the need for pursuing a bankruptcy claim.
Recently, Transformance expanded its offering of bankruptcy coaching across the U.S. Our certified Outreach Coaches are now able to advise those considering bankruptcy in every state except Alabama, Arizona, Arkansas, Nevada, North Carolina and South Carolina.
Ernest Lopez, a bilingual outreach coach at Transformance, said often individuals are unsure which type of bankruptcy to pursue or whether family homes might be lost in the process. He takes extra time to review the short- and long-term impacts and points out how filing bankruptcy may last 7-10 years on an individual’s credit report.
“In the past, bankruptcy had such a negative connotation; it was a stigma most folks wanted to avoid. But as the economy has suffered, filing for Chapter 7 or Chapter 13 has become a more viable way to fix personal financial crises,” Lopez said.
Consult an Attorney
In many cases, individuals and couples considering bankruptcy will need to consult with a licensed attorney to ensure successful completion of the process. There are many legal resources available to low-income families. These legal aid services -- like Texas Legal, a non-profit that serves thousands of Texas residents -- can make recommendations for qualified attorneys in the area.
Including an attorney in the bankruptcy process is necessary as many of the proceedings are mandated by federal and state laws and involve legal proceedings in a court of law. Bankruptcy protection and exemptions exist, and qualified attorneys can help consumer navigate the intricate world of financial law.
Is Bankruptcy Right for You?
If you’re not sure if bankruptcy is right for you, give us a call at 1-800-249-2227 and schedule an appointment with one of our certified coaches to review your financial situation. If we discover filing for bankruptcy might be the best course of action, we’ll work with you to develop a plan to proceed, enroll in pre-bankruptcy counseling and identify a bankruptcy attorney who can handle the legal work. (Fees may apply.)
Ultimately, our goal is help you navigate the financial storms you and your family may be facing.
“We’re here to help you along your journey and walk with you every step of the way,” said Lopez. “Together, we can find the ‘fresh start’ you need.”