It’s very embarrassing for a person to admit to anyone that they can no longer pay their bills each month. However, it’s much better to contact a lawyer and discuss their options than to pretend that the situation is fine. A debtor shouldn’t feel embarrassed about meeting with an attorney to discuss their financial situation. The attorney has seen and heard everything before. The debtor should bring all of their financial information to the initial meeting. This will help the lawyer determine the best course of action.
The debtor’s annual income will determine the options available to them. Federal lawmakers recently limited a Chapter 7 bankruptcy to people who make less than the median income for their state. Therefore if a person can claim two states as their residence, it would make sense to claim residence in one that would allow a Chapter 7 filing. If their income is too high in any state for this option, then they will have to use Chapter 13 in Jackson, MS.
While a Chapter 7 bankruptcy filing permits the debtor to sell assets and be free of debt in as little as three months, a Chapter 13 filing can last as long as five years. A judge will appoint a bankruptcy trustee to oversee the process. He will call a meeting of the creditors to determine how many creditors want to be paid and the amount each is owed. He’ll then look at the debtor’s monthly finances and create a strict budget for them. Each month the debtor’s salary and other income will be sent to the trustee who will pay their expenses and give them an allowance. All other funds will be given to the creditors.
If the judge has determined that this process will last 60 months, then the debtor must comply with the process for every month. If the debtor fails to pay even the last installment, the bankruptcy process will not be complete. This means that none of the outstanding debt will be forgiven. The debtor will be no better off than when they initially declared bankruptcy. Their lawyer will work with them to ensure that the budgeting plan is one that they can live with for the required length of time.