What should be considered before filing bankruptcy in Maine?

There are a few steps debtors should take to ease their financial burden before they move forward with the bankruptcy process.

Many people in Maine who find themselves struggling with debt believe that filing bankruptcy is the best option to find relief. Although filing bankruptcy is a viable solution for many, there are steps people should take before they make the final decision to file for either Chapter 7 or Chapter 13 bankruptcy.

Viable possibilities

There are a few steps, according to the Federal Trade Commission, that debtors should take before they move forward with the bankruptcy process. These include the following:

  • Debtors should contact their creditors to see if they are willing to work out a modified repayment plan.
  • Debtors may want to reach out to a credit counseling service. These organizations require debtors to deposit a certain amount of money into an account on a monthly basis. Then, the agency take responsibility for paying off the creditors.
  • Debtors should assess how much money they spend on a monthly basis and how much they earn. Then, they should develop a workable budget that helps them work toward taking control of their financial situation.

If debtors consider taking out a second mortgage or a home equity line of credit, they should be aware that by consolidating their debt through this option, their home may be used as collateral.

The consequences of bankruptcy

If the above-listed options are not appropriate or possible, debtors may want to think about filing bankruptcy. However, they should not move forward with this process until they are fully aware of how it will impact them. For instance, if Chapter 13 bankruptcy is filed, debtors are required to use their future income over a period of three to five years to repay their creditors. Due to this, debtors do not have to use their personal property to pay off their creditors.

Comparatively, during the Chapter 7 bankruptcy process, all exempt assets are sold to repay a debtor's creditors. Exempt property can include basic household furnishings, work-related tools and vehicles. Those who have filed this form of consumer bankruptcy before must also wait at least eight years before a discharge under this chapter can occur again.

Seek the guidance of an attorney

Those in Maine who are in the middle of dealing with debt may wonder if bankruptcy is right for them, but still have hesitations about how this legal process will affect them. When this occurs, debtors should seek the legal assistance of an attorney who can help them determine if bankruptcy is a beneficial solution to their financial struggles.