What To Know About Filing For Bankruptcy
It's tough to know whether to file bankruptcy or not, and many factors must be considered. In most cases, people are reluctant to file bankruptcy for worry that they'll never recover, or even how friends and family might judge them. But bankruptcy should be considered as more of a financial solution than as shirking financial responsibility. Executed properly, bankruptcy can help you get back on solid financial ground and can be good not only for you, but for the economy and those around you. If you're struggling with mortgage, auto, or credit card payments and considering bankruptcy, here's what you should know about bankruptcy.
You don't need an attorney to file bankruptcy, but you should get one. Unless you're familiar with legal paperwork and court proceedings, having an attorney will save you tremendously.
Costs for attorneys vary by area and the type of bankruptcy you are filing, but average rates are in the $1000 range. However, sometimes you can get an attorney to handle your bankruptcy for as little as $300. If you do shop around though, make sure your attorney will handle all your credit counseling paperwork. Credit counseling is required by the courts, and you will need to send the court proof of having completed the counseling. If you forget to do this, your bankruptcy is void.
Different Types of Bankruptcy
Chapter 7 bankruptcy is the liquidation chapter. All debts must be listed regardless of whether you plan on continuing to make debt payments. Chapter 7 is typically one of the most common filings of bankruptcy.
Chapter 11 bankruptcy is primarily used for businesses that are reorganizing their assets and debts. It’s not commonly used for individual purposes.
Chapter 13 bankruptcy is also called a wage earner's plan. It enables individuals with regular income to develop a plan to repay all or part of their debts. Under this chapter, debtors propose a repayment plan to make installments to creditors over three to five years.
Be sure to include every debt on your filing or it will not be exempted by the bankruptcy. This can take some time to gather all your debts, but don't overlook this. You don't want to file bankruptcy only to still have creditors to answer to.
Bankruptcy and Property
Individuals can exempt 12,000$ worth of property. That amount is doubled for married couples filing jointly. This exemption allows you to keep essentials like furniture and an inexpensive vehicle. Of course, you are allowed to 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.
During your post-bankruptcy period, you will receive several offers to establish credit again. It might be wise to wait for a time before getting credit cards again. But if you ever plan to borrow money again, you will need to start somewhere. If you apply for credit again, be sure to check interest rates and fees, as they will be high until your credit begins to improve.
Bankruptcy can be viable financial solution to those in trying times. It is federally sanctioned for the purpose of protecting consumers and businesses. If you are considering a bankruptcy, just be sure to inform yourself so you can proceed in an informed and relaxed manner.