Unexpected Hardship: Could Emergency Bankruptcy Help?

Many people are experiencing financial difficulty, and hardships are rising as the pandemic continues. Could filing an emergency bankruptcy petition help protect you while you’re facing this unexpected hardship? In this article, you’ll learn more about how filing emergency bankruptcy  may protect you as well as what you can do after you’ve filed an emergency bankruptcy to get your life back on track.

What Is an Emergency Bankruptcy Petition? 

An emergency bankruptcy petition is a process that is used by someone who needs to file a bankruptcy right away to stop collection actions. Certain bankruptcy forms are completed and filed with the bankruptcy court to put an immediate stop to: 

  • Wage garnishment

  • Repossession

  • Collection efforts, including calls from debt collectors and collections lawsuits filed against you

  • Foreclosure

This is known as an automatic stay. With this type of bankruptcy petition, you receive an automatic stay faster. This makes it ideal for unexpected short term financial hardships that affect your ability to pay. 

Which Documents Are Used in an Emergency Bankruptcy?

Although emergency bankruptcy is a faster process to gain an emergency stay, there are certain bankruptcy forms that must be filed regardless of whether you’re choosing a Chapter 7 bankruptcy or a chapter 13. 

  • The bankruptcy petition that has all of your basic information, including whether you’re seeking to file a Chapter 7 bankruptcy or a chapter 13;

  • A creditor matrix that identifies the names and addresses of your creditors, debt collectors, attorneys representing debt collectors or creditors, or other parties who want to collect from you;

  • The certificate that shows you’ve completed the required credit counseling or your request for a waiver if you meet the qualifications (the certificate from credit counseling or the request for waiver must be included with your bankruptcy forms. You can take your credit counseling course in person, online, or over the phone as as long as you receive the certificate.); and

  • Bankruptcy Form B121 which provides your Social Security number; however, this document can only be viewed by the court and is not part of the public record.

Finally, you’ll also have to pay the filing fee, go through the application process to request a waiver for the filing fee, or go through the application process to pay the filing fee in installments. 

What Happens After You File an Emergency Bankruptcy?

What happens after you file an emergency bankruptcy, depends on whether you file for Chapter 7 or Chapter 13. If you file Chapter 7, the remainder of your bankruptcy forms must be filed within 14 days of the emergency petition or your bankruptcy will be dismissed. If it is dismissed, collection proceedings, such as wage garnishments and foreclosure, can begin again.

If you file for Chapter 13, not only do you need to file the remaining documents, you must also propose and file a payment plan, and you will need to begin making monthly payments. You are required to submit your repayment plan within 14 days of your emergency bankruptcy filing. If you do not meet this deadline, your Chapter 13 bankruptcy can be dismissed by the court and collections will resume against you. 

After the remainder of the documents are submitted for either form of bankruptcy, the process continues like a normal bankruptcy. A Chapter 7 may or may not have assets that may be converted to satisfy some of the debts. A Chapter 13 bankruptcy allows you to keep all of your assets while completing a three to five year payment plan. In some cases, Chapter 7 bankruptcies may be converted to Chapter 13. Some Chapter 13 bankruptcies may also be converted to Chapter 7. 

Moving Forward After Recovering from Financial Hardship

Both Chapter 7 and Chapter 13 bankruptcies are designed to help people recover from financial hardship. Even before COVID-19, layoffs, foreclosure, divorce, and other unexpected hardships made bankruptcy a necessity for many people. Bankruptcy has also remained a tool available for people who simply made unwise or unfortunate financial decisions. It’s a legal tool designed to help people get a fresh start. 

Regardless of why you needed to file for an emergency bankruptcy, you are entitled to peace of mind and to recover from your financial hardship. Here are some practical steps you can take to help you do just that. 

Forgive Yourself If You Haven’t Done So

Financial hardships happen to most people at some point. Whether you feel like you could have somehow controlled or avoided the situation or not, you need to forgive yourself. Continuing to blame yourself isn’t healthy. In fact, it can eventually lead to what’s known as a self-fulfilling prophecy.

If you’re unable to let it go, it’s likely that you will not believe that you’re capable of doing anything different. You may go right back out and engage in the same behavior that brought you to the point of needing to file for bankruptcy. It could also lead to you developing other dangerous or problematic behaviors such as overeating or developing a problem with drugs or alcohol just to make the guilt temporarily stop. 

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You may have to take it day by day or even moment by moment to build new patterns or habits. You can take free classes to learn more about how to create a financially secure future for yourself and  improve your credit report. You can create new habits to help you cope with the anxiety that you may feel because of what happened. Studies show that mindful meditation programs may help improve both anxiety and depression. 

Learn How to Create and Stick to a Budget

Budgets can be scary when you’re new to using them, but they are a great tool to help you better understand your money. It is used to show you how much money comes into your household, how much you need to spend on your expenses, and what you have left over. In short, it’s a financial tool to help you get better control of your spending. It can help you avoid taking on debt as well as help you pay off debt that you may have, such as financial aid that you may have received while you were in college. 

There are lots of great free budgeting tools available online. Ultimately, the budgeting tool that you choose needs to be one that works well for you. You can use Microsoft Excel along with a budgeting template that does all of the math for you, you can use a budgeting app that is on your phone, or you can even just use a notebook. The key is to choose something that you’ll stick with and to be honest with yourself when you’re creating a budget. 

Some of the best known financial budgeting experts with articles you may enjoy include:

  • Dave Ramsey

  • Chris Hogan

  • Suze Orman

Start an Emergency Fund

One of the best ways to avoid another financial hardship is to be proactive. An emergency fund is a special savings account that is used only when you have a legitimate emergency. For example, you lose your job, the transmission in your car goes out, or you have an unexpected medical emergency. It is not for vacations, presents, or other little things. It is for actual emergencies. 

An emergency fund is generally funded with three to six months of what it takes to support you in the event that you did not have a job and needed money to survive. You can begin an emergency fund by simply starting a savings account with your bank. Add the emergency fund to your budget and plan to add money to it each time you get paid. Having an emergency fund may help you avoid high interest loans or credit card debt in the future. 

Create a Rainy Day Fund 

A rainy day fund is a savings account that is used for urgent expenses. This type of savings account generally is much smaller than an emergency fund. It is usually only funded with around $1,500 in it, depending on what you think may be needed for urgent expenses. For example, if you recently replaced the roof on your home, you may not think you need enough money to replace it again, but in Oklahoma, you may need enough money to cover your insurance deductible for a particularly nasty storm or to patch your roof. 

Make a Mistake? Fix It!

No one is perfect. It is hard to create new habits. If you fall back into your old spending habits and buy something that throws off your budget and creates a problem for you, fix it! 

  1. Try to take the item back. Depending on what you bought and where you bought it from, you may be able to get a refund. Even if that feels difficult, go through with it. This is something that you need to do so that you can adopt your new habit of better spending. 

  2. If you can’t return it, sell it. Being unable to return the item doesn’t mean that you should keep it. Remember that you’re trying to build a new habit. Don’t beat yourself up, but also don’t keep the item. Sell the item so that you have some, if not all, of the money to add back into your budget. 

  3. Promise yourself that you’ll do better. It’s never easy to build a new habit, and a new habit of better spending is no exception. One of the best things you can do is to stay away from the places that make it easy for you to overspend. 

Learn More about Emergency Bankruptcy

If you’re struggling with an unexpected financial hardship, emergency bankruptcy may be able to help you stop wage garnishment, foreclosure, and other collection activities. To learn more about the process, please call us to schedule your consultation with the Law Offices of B. David Sisson now. We want to help you regain control of your financial future.

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