Once a California consumer has made the decision to file for bankruptcy, the next step involves taking action to begin that process. One portion of the preparation is determining how to pay for the filing and legal costs associated with a personal bankruptcy proceeding. For many, long-standing financial troubles have depleted savings to the point that coming up with those funds presents a problem.
One option is to borrow money to file. However, when considering taking this approach, it is important to understand bankruptcy laws and how such a loan would fall within the process. The purpose of personal bankruptcy is to allow insolvent borrowers a chance to eliminate unsecured consumer debt and get back on track. The only debts that qualify for discharge are those that the borrower intended to pay but then was unable to make good on. Therefore, taking out a loan to file for bankruptcy with the intention of then trying to ‘roll’ that debt into the bankruptcy process is not permissible.
There are a number of other ways to finance a personal bankruptcy proceeding. It may be possible to sell personal property to raise the money, which has become far easier with the advent of online marketplaces such as eBay and Craigslist. A consumer could also pick up temporary or part-time work to fund the filing, or could ask friends and family to contribute small amounts to help reach the goal.
In some ways, the manner in which one funds their personal bankruptcy filing can be viewed as their first major step toward a new approach to finances in general. By setting a goal, working toward fulfillment and making an effort to pay for the process in a responsible manner, a California consumer is setting a good pace for continued success. While this approach may take more time than simply taking out a personal loan, the end result will be a fresh financial start without assuming a new debt.
Source: Fox Business, “Should I Take out a Loan to File for Bankruptcy?” Justin Harelik, May 1, 2013