How Can I Afford A Chapter 7 Bankruptcy?

How Can I Afford a Chapter 7 Bankruptcy?

If you’ve contemplated filing Chapter 7 bankruptcy, you may have asked yourself “How Can I Afford a Chapter 7 Bankruptcy”. Unlike a Chapter 13 Bankruptcy, Chapter 7 Bankruptcy fees need to be paid before your case can be filed. Getting the money together to file a Chapter 7 bankruptcy can be difficult – so here are 4 tips.

Four tips to answer the question: How Can I Afford a Chapter 7 Bankruptcy?

1. Save

The idea here is that if you have the ability to put some money aside that you would normally be paying on credit cards, medical bills, payday loans, etc — then you may be able to save up the money to file.

Some people even stop making payments on vehicles they were planning to surrender anyway. The obvious downside is you may get your car repossessed before filing and not have a way to get around for a while.

Think of other ways to save money. Cut cable. Stop eating out. Meal plan. Eat lots of rice, chicken and beans. Pack your lunch. Stop buying soda or going out to Starbucks for coffee. When you buy gasoline, avoid going inside the convenience store. Never go to the grocery store hungry. The idea if you trim the fat and stop paying on the debts that will go away in your Chapter 7 bankruptcy, you may just get enough money together to get a case filed.

2. Borrow from family or friends

If you are comfortable sharing your financial situation with friends or family and they have the ability to loan you money to pay for the attorney fees, this is an excellent source of funds.

You’ll have to have a chat about the fact the loan (as opposed to a gift) will have to be listed in the bankruptcy along with other bills you have. So they will need to understand after the bankruptcy is filed, your obligation to pay them back evaporates with the bankruptcy discharge. Consider it an “on your honor” type of loan.

And yes, you can absolutely pay them back after the bankruptcy. In fact, you can pay back anyone you listed in the bankruptcy after the case is over and you received your discharge. It’s unlikely many people pay back debts listed in their bankruptcy – as the whole point of bankruptcy is to get out from under debt – but it is an option.

3. Sell non-exempt property

Non-exempt property or assets are things that are not protected in a bankruptcy. Generally speaking, if you own a non-exempt asset that has any significant value over $500 a Chapter 7 Trustee will likely liquidate – or sell – the asset in an auction and give that money to your creditors. The idea is that instead of giving the money to your creditors in a liquidation, you sell it before you file bankruptcy and use the money to pay your attorney fees. Think of non-exempt assets as toys, or luxury items: jets skis, boats, trailers, 4 wheelers, motorcycles. The list is much larger, so speak with a bankruptcy attorney for more information.

4. Sell or borrow from exempt assets

Most property you own is probably exempt. Your clothes, household furnishings, electronics and retirement accounts are all exempt. You can cash out part of your retirement account to pay the fees. Also, take a look around your house for things you haven’t used in the last 6 months and sell them on Craigslist, Ebay or Facebook. You are likely sitting on at least a few hundred bucks for stuff you never use.

“I can’t save, I can’t borrow and I’ve already sold everything”

You’ve tried all the above. No one you know will loan you money. You’ve already sold everything you have to pay the bills. You have no retirement account to cash out. You certainly have no toys to sell. You’re looking down the barrel of a garnishment which will crush you financially. If that’s the case, you do have an option: Chapter 13 Bankruptcy. File a case now with zero money down. The only requirement is you must have a full time job or some type of regular income.

If you’ve asked yourself “How Can I Afford a Chapter 7 Bankruptcy”, please give us a call at 785-727-7700 for a FREE Consultation over the phone, in person or you can email us now.