Many people fear bankruptcy, even though it could be the only possible option to restructure their financial future. Look at it as a second chance to work on your mistakes and implement better financial solutions.
Bankruptcy is a legal procedure to allow people eliminate most of their debt and rebuild their credit history. In 2005 the laws have been changed, thus making the procedure a bit more complicated. That is why it is important to evaluate your options before you file for bankruptcy.
What Kind of Bankruptcy Is Best for You?
There are two main types of bankruptcy for individuals: Chapter 7 and Chapter 13. You need to find out more about them in order to identify the right type of bankruptcy for you.
Chapter 7 allows individuals to cancel most of their debts. The process might take up to six months.
You can use Chapter 13 bankruptcy to repay your debts over the period of five years.
First of all, you need to check your eligibility before your apply. In case you have a high salary – above the median income of your state, you will be ineligible to apply for Chapter 7 bankruptcy. You can file for Chapter 7 bankruptcy only if you have the high amount of debt and very low income. Otherwise, you can still file for Chapter 13 bankruptcy.
Defining what type of bankruptcy is best for you will save you a lot of time. You can also make a judgment to hire an attorney or file for bankruptcy on your own.
In some cases hiring an attorney is your best bet as you would need some professional assistance to prepare the paperwork and move with your case. You can also study the Federal Rules of Bankruptcy Procedures to know more about the process. The process is easy if you don’t have much property or other valuable assets.
Things to consider
If you think that Chapter 7 bankruptcy will cancel all of your debts, you may be mistaken, as you still need to pay your child support, student loans, certain taxes and other mandatory payments. This ‘straight bankruptcy’ procedure comes at its cost. Your debts will go away, the same might happen to your property and assets. Your creditors can take your unsecured assets as a result of the procedure.
If you still have a steady job, you can get a partial repayment plan if you file for Chapter 13 bankruptcy. This way you can keep your house and slowly repay all your debts within the next five years.
It is obvious that your creditors wouldn’t be happy about the bankruptcy. They may challenge the court decision and file a lawsuit 60 days after your first meeting with them. In case, everything goes smoothly and no lawsuits are filed, you will get informed that your debt got eliminated under the Chapter 7. Your payment plan under Chapter 13 will start up to 60 days after the last payment you’ve made.
Now you can start rebuilding your credit history and avoid making the same mistakes in the future.