In most cases people can see their bankruptcy coming from a long way off because of their spending habits, and the realization that they are currently living beyond their means.
But that’s not always the case.
Some people don’t take their debts seriously until they receive communication from a creditor or sheriff, advising them that their car is going to be repossessed, or their wages garnished, for example.
Situations such as these can be extremely stressful, especially if you only have weeks to remedy your financial situation instead of the months that are often required to complete a traditional bankruptcy filing.
So, an emergency bankruptcy allows you to seek the protection of the bankruptcy court but without actually completing all the forms required for a full Chapter 7 filing. That’s also why these types of bankruptcies are sometimes referred to as a “bare bones” or “skeleton” bankruptcy – you’re only completing some of the number of total forms required.
Most emergency bankruptcies are Chapter 7 filings because the person affected is typically a low-income earner, with a poor credit history and credit score i.e. they need the debt to be dismissed for them instead of repaid under a Chapter 13 plan.
If you are currently dealing with calls from creditors the very first step you need to take is to complete a credit counseling course, either online, over the phone, or in person. You will need to present a proof of completion certificate before you can begin your Chapter 7 filing, but you cannot complete the credit counseling course and begin your bankruptcy filing on the same day.
In terms of the petition itself, the goal is to get your filing started because once you’re in the bankruptcy process you receive an “automatic stay” from the court. This prevents creditors from contacting you directly or attempting to repossess any of your property, or garnish your wages.
An emergency bankruptcy only offers a temporary reprieve from creditors’ calls – it’s not an end-to-end solution for your financial problems.
In fact, if you don’t complete the rest of the forms required for a traditional Chapter 7 bankruptcy within 10-days of starting your petition, there’s a very good chance your entire Chapter 7 filing will be dismissed.
The “Emergency Bankruptcy” process is also not without fault. In some situations the bankruptcy trustee could actually sell some of your property to repay your outstanding debts, especially any which are either non-exempt or that you haven’t listed as an exemption, for whatever reason.
And once the bankruptcy filing is in progress, it can be very difficult to have your filing dismissed, especially once you pass the 10-day time frame for submitting the additional required documentation.
So, even though you filed for bankruptcy to prevent some of your personal property from being repossessed, it’s entirely possible those same non-essential items could be sold to repay your debts.
That’s why it’s essential that you seek professional legal counsel if you’re considering filing for bankruptcy.
A phone call today could save you tens of thousands of dollars later on.