If you are thinking of using bankruptcy to change your life as it stands currently in terms of working to eliminate all that unmanageable debt that is piling up, consider how you can best use this tool—one that can offer a very favorable outcome–from every angle. Before filing, try to do your best at considering what your needs will be before, during, and after your bankruptcy. Obviously, if you are going to be filing bankruptcy you will going through a process meant to fix your financial problems as much as possible, and the thought of taking on another asset during that time is certainly an important consideration.
Making Purchases If You Are Headed for a Chapter 7 Bankruptcy
If you are headed into the simpler bankruptcy with a Chapter 7, with most of your non-exempt assets being liquidated, the idea of taking on another big expense right now may seem like a counter-productive action. But what if for some reason you need to purchase a large item that is a necessity in your eyes. What if you need a new used car to get back and forth to work?
The points to consider with spending are that one, you don’t want to be charging items on your credit cards just before filing bankruptcy, as you could end up being accused of fraud, and just adding to your problems. If you are making a purchase prior to bankruptcy, it should be one you are planning to keep paying on. Two, if you wait until you are into your bankruptcy to purchase something like a car, your credit will not be as good as it was previously and you may be looking at higher interest rates, unless you pay with cash on hand—and where that cash came from may be questioned. In a Chapter 7, you’ll have a shorter time to wait until your discharge (just a matter of several months normally) with most or many debts eliminated and perhaps if you can make it that far without purchasing something, it’s better to do so and make those decisions with a clean slate in front of you.
Making Purchases If You Are Headed for a Chapter 13
In Chapter 13, if you are hoping to make a purchase, you may need to get permission from the bankruptcy court. Not only that, don’t forget that while you may be making leaps and bounds in correcting your financial future through bankruptcy, potential creditors may not be so keen on giving you a loan while you are in the process, and your credit report is going to reflect the bankruptcy afterward too. There are lenders out there who are familiar with making loans to those going through bankruptcy, but you may be paying them an inflated interest rate too. And last, of course, the most important consideration is to be sure that you can afford another payment as bankruptcy looms, is still in process, or is ending and offering you a new foundation to thrive on.
These are all issues that an experienced attorney can help you navigate. It’s important that you consult with someone who knows bankruptcy law and will be able to advise you as you move ahead—something we’ve been doing for decades at Fitzgerald & Campbell, APLC. We offer understanding, knowledge, and will take the time to help you explore all your options as you work on reorganizing your financial structure, whether that be through bankruptcy or other options. We’re here to help you!