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Unlike most bankruptcy firms in the Dallas / Fort-Worth area, Allmand Law Firm, PLLC spends the time to understand the complete financial picture for every one of our clients. We provide resources, tools and advice to address the unique needs of North Texans.

Where Does Bankruptcy Money Come From?

Posted By Allmand Law Firm, PLLC || 21-Sep-2017

Bankruptcy is a debt relief process that enables consumers with insurmountable debt loads and financial struggles to gain control of their economic health. Achieving this goal and obtaining a brighter financial future will depend on the Chapter of bankruptcy filed under. For example:

  • Chapter 7 bankruptcy involves the liquidation of non-exempt assets to pay at least some percentage of debt owed to existing creditors in order of priority. Because many Chapter 7 cases are no-asset cases, some creditors may not receive any payment at all prior to discharge.
  • Chapter 13 bankruptcy allows individuals with sufficient income to restructure and consolidate debt into a repayment plan over the course of three to five years, during which they will make a single payment to a bankruptcy trustee. This payment will then be dispersed to creditors based on priority. At the end of a repayment plan, remaining debt on unsecured debts, such as credit card debt, will be discharged.

In both Chapter 7 and Chapter 13 bankruptcy cases, money for unpaid debts does come from somewhere – either a liquidation of assets or available disposable income. Because there are other fees and expenses associated with filing bankruptcy – including filing and attorney fees and credit counseling or financial management courses – we often hear concerns as to where debtors can obtain the funds necessary to address these costs and other financial obligations. By closely reviewing our clients’ unique situations, our Dallas bankruptcy attorneys at Allmand Law Firm, PLLC can help them explore ways to free up finances when necessary. Some of these options may include:

  • Tax refunds received prior to a bankruptcy filing can be used strategically and beneficially without introducing new legal complications. By waiting to spend a tax refund, it may be considered as part of your bankruptcy estate, which can be used to satisfy creditors. Refunds can also be used with guidance from an experienced attorney who can help you obtain exemptions, used the refund toward filing or attorney fees, and may necessary payments toward necessities and utilities.
  • Credit card payments, or the money you would have paid toward new credit card debt, can also be used wisely prior to or during bankruptcy. If you plan on filing, it is best to stop using your credit cards so that you do not create new debt, or subject yourself to scrutiny for racking up debt with hopes of it being discharged once a bankruptcy is finalized. By limiting credit card use before filing, you can free up necessary funds and later benefit from the discharge of debts.
  • Consumer protection actions may also allow consumers to secure additional funds when their rights have been violated by creditors who failed to abide by the Fair Debt Collection Practices Act. Under the FDCPA, creditors are prohibited from using a number of tactics when attempting to collect from consumers who are behind on payments, including excessive calls and other forms of harassment. When successful, these claims can allow consumers to obtain as much as $1,000 when creditors harass them, as well as other damages and attorney fees.
  • Managing expenses may be easier said than done, but when you are considering bankruptcy, every dollar saved can make the difference. Take a look at your financial situation, even with the help of an attorney, to see where you can cut costs and save money that can be used toward your bankruptcy and other necessary expenses. You might find that saving here and there can quickly add up and provide the funds you need. Taking a serious approach to budgeting and spending can also prove beneficial when during and after your bankruptcy case as you begin to rebuild your credit and gain control over your finances.

Aside from these options, some individuals also have options of seeking low-cost legal services, provided that they meet qualifying criteria, or ask friends and family for assistance if needed. Ultimately, the best thing you can do when considering bankruptcy and how you can initiate and navigate the process is to work with experienced attorneys like those at Allmand Law Firm, PLLC.

Led by Board Certified Bankruptcy Specialist Reed Allmand (Texas Board of Legal Specialization), our legal team can help you learn more about paying for bankruptcy and how you can benefit from the automatic stay and debt discharge. For a FREE financial empowerment session, contact us today.

Categories: Bankruptcy
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