Overloaded in debt, little to no income, and no other options. These are what have come to be as the perceived requirements for filing bankruptcy. If you find yourself in a difficult financial situation and are unsure if bankruptcy is the right decision for you, it is important to know the facts as well as your rights.
Before You Consider Filing For Bankruptcy
There are many different alternatives to filing for bankruptcy that many people are unaware of. Bankruptcy can remain on your credit report for many years. This can affect a multitude of things, making it imperative to only use if absolutely necessary. Alternatives include seeking out credit counseling, credit card consolidation, and loan modification or refinancing. Keep in mind that bankruptcy doesn’t relieve all of your debts as it does not cover mortgages, student loans, taxes, alimony, or child support.
Additionally, you can lose non-exempt property in the process for it can be sold to help repay debts. That being said, bankruptcy isn’t as ominous as its reputation is. It is a common tool used by people looking for a fresh financial start. The United States Courts reported that 1,071,932 people and businesses filed for bankruptcy in 2013. And for those who have already had an immense amount of financial problems, it may not make your credit report any worse off.
What type of bankruptcy should I file for?
When filing for bankruptcy, there are two common types that you may be eligible for: Chapter 7 and Chapter 13 bankruptcy. Chapter 7 is considered a liquidation of your assets. All of your unsecured debts will be liquidated and creditors will not be able to contact you. This type of bankruptcy is common for those without an income that are completely unable to repay any debt. Those who do have an income may consider Chapter 13 bankruptcy. This involves a type of payment plan in which you will eventually pay back your debts. You won’t have to liquidate your assets, but you will have to repay your creditors in around 3-5 years. Many look to this type of bankruptcy to prevent foreclosures on their home.
Filing for Bankruptcy
Before you file for bankruptcy, you must complete a “Means Test”. This test will determine if you have enough income to pay off your debts. If you do, you will have to file for Chapter 13 bankruptcy and if you don’t then you are eligible to file for Chapter 7. Once this is completed your lawyer will be able to file your petition for bankruptcy. Preceding this for those filing for Chapter 7, they will attend a “341 Meeting” which essentially allows a Trustee to review your financial records and history. Best case scenario, your case should be settled in approximately four to six months where you then will either have your debts discharged or your payment plan initiated depending on which type you filed for.
Remember When Filing For Bankruptcy
Filing for bankruptcy is a tremendously difficult process. There are many forms that must be turned in and failure to do so can result in a delay or rejection of your case. To ensure that you are certain you should file for bankruptcy and that you file correctly, it is highly recommended to seek out legal advice.