Deciding whether to file bankruptcy can be extremely stressful, and there are many important things to consider when making such a decision. For many people, bankruptcy can be a solution to a dire financial situation. Whether you’re unable to cover your mortgage, auto loan, or credit card payments, bankruptcy can provide a fresh start if you are over-extended.
You are not legally required to have an attorney to file for bankruptcy, but having one will certainly help you navigate the filing process. And a good bankruptcy attorney will handle all paperwork, which can be a huge relief when in a stressful situation. Also, it’s important to understand court requirements. For example, one requirement is that you complete credit counseling. Without certification of this counseling the courts will not accept your filing. Bankruptcy attorneys can put you in touch with the agencies that offer such counseling.
Different Types of Bankruptcy
Chapter 7 bankruptcy is the liquidation chapter. All debts must be listed regardless of whether you plan on continuing to make debt payments. Chapter 7 is typically one of the most common filings of bankruptcy.
Chapter 11 bankruptcy is primarily used for businesses that are reorganizing their assets and debts. It’s not commonly used for individual purposes.
Chapter 13 bankruptcy is also called a wage earner’s plan. It enables individuals with regular income to develop a plan to repay all or part of their debts. Under this chapter, debtors propose a repayment plan to make installments to creditors over three to five years.
Bankruptcy and Property
Individuals can exempt 12,000$ worth of property. That amount is doubled to $24,000 for married couples filing jointly. This exemption allows you to keep essentials like furniture and an inexpensive vehicle. Of course, you will keep necessary personal items like clothing and housewares.
After filing and appearing in court, a judge will make a ruling regarding your bankruptcy. If approved, the bankruptcy process is completed and stated debts are removed and the agreed upon terms are finalized. The bankruptcy will be reported to credit bureaus and remain on your credit for up to 7 years. This may affect your ability to borrow money during that period of time.
There is nothing “bad” about filing bankruptcy. It is a federally enacted service for the purpose of protecting consumers and businesses. If you are considering a bankruptcy, be sure to inform yourself and consider all possible options so you can proceed in an informed and relaxed manner should you elect to file.