Know Before You File: Three Things That You Must Do Before Filing Bankruptcy
When you can no longer handle your debts, your only option is to file for bankruptcy. However, there are some steps that you must take before you are eligible to file. Not knowing about these issues before you file could make it harder to have your filing approved.
You Should Ask Your Creditors For A Debt Settlement
Your creditors may make it difficult to file for bankruptcy if you have not asked for a debt settlement. Creditors may try to block your ability to seek relief because they would rather get something in a settlement rather than risk not getting anything in a bankruptcy case. The argument they use the most is that you are abusing the system and that you should be forced to accept a payment plan instead of outright bankruptcy.
There May Be A Court Ordered Appointment With A Credit Counselor
The judge presiding over your case may force you to go to a credit counselor before allowing you to proceed. A credit counselor will determine if you can get out of debt through better budgeting or through loan modifications. If it is determined that you could get out of debt without the need for bankruptcy, you may be forced to give it more time before having your debts reorganized or discharged by a court.
You Must Have Paid All Of Your Income Taxes
If you haven’t paid your income taxes over the past three years, it may not be possible to file for bankruptcy. At the very least, the IRS is going to want you to settle your tax debt or enter into a payment plan before you can file for bankruptcy. If you are filing for bankruptcy due to tax issues, you have to prove that you would suffer from an undue hardship before a judge would allow your case to proceed. The same rules apply if you are late or delinquent on your state or local taxes. You can go online to view site for more information about how your tax situation impacts your ability to file for bankruptcy.
Opting for bankruptcy is not something that you should go through without thinking carefully about your other options. Bankruptcy can have a negative impact on your credit score for years to come. If you are not a good candidate for bankruptcy, it may be difficult to convince your creditors as well as a judge to allow you to go through with it.
Image Credit: Tax Credits