Bankruptcy is a legal process that allows people to get a fresh financial start. Typically, bankruptcy can stop creditors from trying to collect debts or seize assets like a home or car and even prevent wage garnishments.
However, bankruptcy is not for everyone. It can be a lengthy and frustrating experience, and it can affect your credit for 7-10 years. It can also make it difficult or impossible to borrow money in the future.
What Are My Options?
The first thing you need to do is determine if bankruptcy is right for you. Your lawyer can help you do that, and he or she will explain which types of debts are dischargeable in bankruptcy and which aren’t. You might also try to work out a payment plan that gives you more control over your finances, helps you pay down your debts more quickly, or protects you from your creditors.
Chapter 13: This is usually used for individuals who are behind on their house or car payments and can’t catch up under a shorter-term bankruptcy, like Chapter 7. In this case, the court will consider your situation when determining whether to discharge your debts.
You will need to come up with a repayment plan and submit it to the court for approval. Then you will need to begin making your payments on time.
This plan can take a little time and a lot of patience, but it can work out well for you. After the bankruptcy is over, you will still be responsible for paying back your mortgage or car loan if it was secured by property, but your other debts will be discharged.
It can be a good idea to seek out free or inexpensive credit counseling from an approved agency before filing for bankruptcy. This is an important step because it will ensure you have exhausted all other possibilities before filing.
Once you have determined that bankruptcy is the best option for you, it’s time to figure out which type of bankruptcy you want to file for. This varies from state to state and may depend on your circumstances.
You can file for bankruptcy under either Chapter 7 or Chapter 13. In order to file for Chapter 7, you need to have some type of income, or a significant amount of property that will be exempted by the court. You can claim exemptions for certain property, such as your primary car, necessary household items, and equity in your home.
If you don’t have enough property to claim exemptions, you can sell some of your nonexempt property or liquidate your entire home and use the proceeds to pay your creditors. Having to liquidate your home can be an emotional and stressful process, but it’s one that’s necessary to resolve your debts and avoid foreclosure.
To ensure your bankruptcy filing is successful, you must be truthful and honest about all aspects of your finances. If you give the court a false picture of your financial situation, you can face serious consequences.