Questions to Ask Before Filing Bankruptcy
Filing for bankruptcy is a serious decision. It can also be complex, depending on your financial situation and the state where you live. So before you finalize whether or not bankruptcy is the right route for you, there are some key questions to consider.
What Types of Bankruptcy are Available to Me?
There are typically two kinds of bankruptcy that consumers can choose from:
Chapter 7 liquidates an individual's assets in order to pay back creditors. During this process, most of the person's unsecured debts are discharged.
Chapter 13 helps an individual create a reasonable payment plan for all or part of the debts. The plan may last anywhere between three and five years.
If I File, Will All of My Debts Be Eliminated?
While bankruptcy can get rid of many different forms of debt, not all of them will be discharged through this method. Student loans, criminal fines and court-ordered payments such as alimony and child support are not eligible for discharge. Unsecured debt, including unpaid medical bills and credit card payments, however, may be removed.
Will Filing Bankruptcy Stop the Phone Calls from Creditors?
In addition to helping to relieve serious debt, bankruptcy can also end the harassing telephone calls from collection agencies as soon as the case is filed. Furthermore, once an individual files bankruptcy, efforts to collect through wage garnishment can end as well.
What Will Happen to My Credit if I File Bankruptcy?
The downside of filing bankruptcy is that it will negatively affect an individual’s credit score and ability to be approved for loans. The bankruptcy filing will appear on a credit report for up to ten years, but bankruptcy's discharge allows a filer to begin rebuilding credit shortly after the case is ended.
Will I Lose My Home or My Car By Filing Bankruptcy?
Depending on the type of bankruptcy filed and the laws of your state, there may be certain exemptions that can be used to protect certain property like a home and a car. Bankruptcy may also eliminate certain debts that allow a filer to free up more money to make payments on their property.
Furthermore, a person may be at more risk of losing these belongings by not filing due to creditors seizing or putting liens on the items, versus taking a proactive approach to eliminate debts through bankruptcy.
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