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All I Want For Christmas Is A New Year And A Fresh Start

By Cathy Moran

fresh start

The best gift you can give yourself for Christmas may be a fresh financial start by filing bankruptcy.

2020 has been rough. Jobs lost, small businesses devastated, people isolated, schools closed, and neighbors dying. Even if you headed into the pandemic in reasonable financial shape, little good has come of the year of staying at home.

So, what would it mean to shed your debt and approach the New Year with fewer debts? Let’s see.

Bankruptcy wipes out most debts

Unsecured debts, with few exceptions, are discharged in bankruptcy. Unsecured debts are those where the creditor does not have a lien on anything you own.

Credit cards, personal loans, online borrowing, and medical bills are typical unsecured debts. Get a bankruptcy discharge and they’re gone.

Unsecured debts from small businesses including PPP loans, vendors, and business rent are dischargeable, too.

What survives bankruptcy

Bankruptcy won’t wipe out your secured home loan or car loan, assuming you want to keep your house and car.

Some unsecured debts outlive a bankruptcy discharge. Recent taxes, family support and student loans make up the most common exceptions to discharge. Those debts will live on beyond the bankruptcy.

But don’t overlook the benefit of getting rid of other dischargeable demands on your income so you can pay those debts that survive the bankruptcy.

Ace the means test

Lowered incomes during the pandemic may allow individuals who may not have passed the means test before the virus hit.

The means test looks at your income for the past six months before you file bankruptcy. That may be a bleak stretch of income that makes a Chapter 7 filing possible.

Know too that you aren’t locked out of bankruptcy if your income is above the median income from your state. It just means you have to fill out another form to see what your bankruptcy options are.

Start now to file next year

For most folks, it takes some time to gather up the bills, tax returns, and budget information needed to file bankruptcy. If you get started now, you’ll have everything together to file in a matter of weeks.

If you have a home in California, you may want to file in January, when the new, much increased homestead exemption takes effect.

Fresh start creates new energy

Worry is debilitating. Studies show that stress actually costs you IQ points.

For some individuals, it makes sense to file bankruptcy for mental health reasons. If worry about your debt interferes with sleep, job or relationships, bankruptcy may be indicated just for stress relief.

To get that fresh start

To file bankruptcy, you’ll need a list of your assets; your debts with the creditor’s address; paystubs and any other documents showing your income for the last six months; and a copy of your last filed tax return.

You’ll need to get a credit briefing, available online or by phone.

To help you present all of this information correctly, you really do need the help of a bankruptcy attorney. Bankruptcy is a legal specialty and, although you are allowed to file without an attorney, it’s very risky. Make a mistake or omit needed filings and your case may be dismissed. Leave something important out, or tell less than the whole truth, and you may lose your discharge.

Be good to yourself

Treat yourself to a fresh start in the new year.

Read more

How to interview a bankruptcy lawyer

What bankruptcy should cost

How long does bankruptcy take

Are discharged debts gone forever?

Life after bankruptcy

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Filed Under: Featured

About Cathy Moran

I'm a veteran bankruptcy lawyer and consumer advocate in California's Silicon Valley. I write, teach, and speak in the hopes of expanding understanding of how bankruptcy can make life better in a family's future.

Bankruptcy Basics

About The Soapbox

You’ve arrived at the Bankruptcy Soapbox, a resource of bankruptcy information and consumer law.

Soapbox is a companion site to Bankruptcy in Brief, where I try to be largely explanatory and even handed (Note I said “try”).

Here, I allow myself to tell stories and express strong opinions. We dig deeper into how to consider bankruptcy and navigate a bankruptcy case.

Moran Law Group
Bankruptcy specialists for individuals and small businesses in the San Francisco Bay Area

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