Written By:Adam H. Rosenblum
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3 Generations & 100+ Years of Combined Legal Experience
Many people think of bankruptcy as a last resort to deal with their debt, but the truth is that bankruptcy is nothing more than a helpful tool designed by the government to assist anyone who has fallen on hard times. Unfortunately, the stigma that many associate with filing for bankruptcy often results in delays getting started with the filing process by those with debt.
If filing is delayed, a number of unfortunate situations could result. A person could fall deeper into debt, their house could be foreclosed, the IRS could get involved, or debt collectors could continue to harass them. When asked, many people respond that they tend to push off filing for bankruptcy because they think it’s too expensive, too stressful, and takes too much time. They also fear that filing will not help their financial situation.
This article will review these common reasons for delaying a bankruptcy filing and explain why the decision to delay is usually not the best one. If you are curious about whether filing for bankruptcy could help you, it’s always best to consult with an attorney who can review your financial situation and advise you on the best route forward.
1. Filing Is Too Expensive
The most common response that we hear from those who have delayed filing for bankruptcy is that they believe it will be too expensive. After all, anyone thinking about filing is already dealing with considerable debt issues. How can they be expected to pile on yet another expense?
The answer is that for those who qualify for bankruptcy, filing and completing the proceedings will always result in this person coming out the other side in far better financial shape than they were at the outset. Successfully completing a bankruptcy proceeding will usually result in certain debts being either wiped out or significantly reduced. The reduction in debts is always far more than the costs associated with filing for bankruptcy.
Below are New Jersey’s filing costs for the three most common types of bankruptcy, for example. Chapter’s 7 and 13 deal with individuals who are filing, and Chapter 11 deals with businesses.
Chapter 7: Currently, the cost of filing for Chapter 7 in New Jersey is $306 ($245 case filing fee, $46 miscellaneous administrative fee, and $15 trustee surcharge).
Chapter 11: Currently the cost of filing for Chapter 11 is $1,717: $1,167 filing fee and $550 miscellaneous administration fee. In some instances, these fees can be paid in installments, with the last installment being paid no later than 120 days after filing the petition.
Chapter 13: Currently, filing for Chapter 13 is $310: $235 case filing fee and $75 miscellaneous administrative fee.
Of course, these costs are just one part of it. The process of filing for bankruptcy involves a lot of paperwork and some court dates that need to be handled very carefully to ensure a successful proceeding. It’s always recommended that anyone filing for bankruptcy speak with an attorney who can guide them through this process.
Most bankruptcy filings can be completed by an attorney on a flat-fee basis, and usually for much less than you would expect. If you’re curious about what it would cost for you to retain an attorney, Rosenblum Law offers free consultations where this can be discussed.
2. Filing Is Too Stressful
Dealing with debt is always going to be stressful, however, a lot of this stress goes away once the bankruptcy proceedings have begun. As soon as you file for bankruptcy, an automatic stay begins, prohibiting any creditors from attempting to collect on your debt and halting any foreclosure actions. If any creditor continues to contact you for collections once the bankruptcy has been filed, they can be subject to sanctions.
Another difficult and stressful part of filing for bankruptcy is determining whether you qualify, and which chapter of the bankruptcy code would be best for you to file under. Figuring this out often involves having a clear understanding of your total financial picture, and is usually best determined with the help of an experienced attorney.
When you hire an attorney to handle your bankruptcy, they take care of everything for you from start to finish, including filing all paperwork and attending necessary court proceedings. The best way to take the stress out of deciding whether or not to file is to speak with an attorney right away. They can explain what effect bankruptcy will have for your finances, the cost and timing of the process, and any other questions you may have.
3. Bankruptcy Takes Too Much Time
The length of time it takes to complete a bankruptcy filing will depend on which chapter of bankruptcy a person files under. For chapter 7, the process is very quick as it just involves determining one’s assets and debts, and paying off creditors accordingly. Anything that cannot be paid off and is not exempt will simply vanish at the end of the proceedings, which typically take a few months to conclude.
Things are a little different when dealing with Chapters 11 and 13. Those filing under these chapters, whether it be individuals under Chapter 13 or businesses under Chapter 11, will need to submit a payment plan to the court. This plan is designed to pay off one’s debts without selling any of their assets by providing them with a 3- to 5-year time window to repay what is owed. In some cases, the courts will approve a repayment plan that only pays a portion of the debts, depending on the circumstances.
The main thing to remember when dealing with a repayment plan is that once everything is filed and approved, you simply need to make the required payments over the course of the plan. Nothing else is required in terms of filings or court hearings, and all the while you are able to continue living your life and operating your business normally.
While it may feel like filing for bankruptcy is a very time-consuming process, the most involved parts of the process are typically in the first months after filing. Furthermore, if you retain an attorney to assist you, the entire process will mostly be handled by the attorney, removing any major time commitment from the person who is filing.
4. Filing Will Not Help the Financial Situation
Will my debt be discharged? This is one of the most common questions that we are asked when dealing with bankruptcy, and one could argue that it is the most important question. Fortunately, nearly all unsecured debts can be discharged in a Chapter 7 bankruptcy filing, which will leave the debtor in a significantly better financial position than they were in prior to filing.
When dealing with the repayment plans that are associated with Chapters 11 and 13, the question is no longer “will my debt be discharged?” but rather, “will I be able to keep my (home?/business?/car?, etc.)” The benefit of filing under these chapters is that the answer is a definitive yes.
For example, a person who has significant equity in their home might think that they have too much money to file for bankruptcy, otherwise they would risk losing the house. However, if they file under Chapter 13, and let’s say their primary debt was from credit cards, this filing will get the creditors off their back and allow them a period of years to pay down the debt – all while keeping their home and the equity in it. Things work in a similar fashion for business owners who need to pay down debts but want to keep a profitable business up and running while they do so.
The key takeaway is that, for those who qualify, bankruptcy will always help their financial situation. If you’re not sure whether you qualify or exactly how much debt bankruptcy can relieve you from, it’s best to contact an experienced attorney who can advise on these things.
What Should I Do?
Filing for bankruptcy can be intimidating for someone worried about the time, money, or stress that comes with filing. At Rosenblum Law, an experienced bankruptcy attorney can help guide through the process of filing and deciding which type of filing is best for the situation. Call Rosenblum Law today for an initial consultation.
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How to Cite Rosenblum Law’s Article
Adam H. Rosenblum (Oct 18, 2022). The Fresh Start Initiative and Student Loan Forgiveness. Rosenblum Law Firm, https://rosenblumlaw.com/fresh-start-initiative-student-loan-forgiveness/
Adam H. Rosenblum "The Fresh Start Initiative and Student Loan Forgiveness". Rosenblum Law Firm, Oct 18, 2022. https://rosenblumlaw.com/fresh-start-initiative-student-loan-forgiveness/