For many, filing for bankruptcy is a necessary but unwanted choice. There is a stigma surrounding the word bankruptcy, and when many people are faced with this option, there is a lot of fear.
The good news is that when you work with a bankruptcy lawyer, there is no need to be fearful of the future. No matter the reason you are filing for personal bankruptcy, whether it is a bad financial decision, a business ending, or if you have recently gone through one of the 876,000 divorces that happen across the country every year, it is crucial you go in with knowledge of what to expect. To help guide you through this complex legal process, we have created a beginner’s guide on what to know before you file for bankruptcy.
You have two personal bankruptcy options
Typically speaking there are two options when filing, Chapter 7 and Chapter 13 bankruptcy.
Chapter 7 Bankruptcy: Often referred to as liquidation bankruptcy, this option will discharge all your accumulated unsecured debt such as credit card debt and personal loans. You may have to sell some assets to prove that you fall within a specific income tier, but filers are likely to keep the majority of their assets. Filing for Chapter 7 takes about three to four months.
Chapter 13 Bankruptcy: Often referred to as reorganization bankruptcy, filers will be able to set up a payment plan with their creditors. While no assets are lost in the process, Chapter 13 often takes up to five years to finalize.
There are some debts that cannot be removed
Filers sometimes think that all their debts can be instantly removed when choosing bankruptcy. This is untrue, unfortunately, as back taxes and over due child support are exempt from the process. Always consult with a bankruptcy lawyer before you file so you can know what specific personal debts can and cannot be included.
Your credit score will be affected
No matter what type of bankruptcy you choose, your credit score will be negatively affected. Filing for bankruptcy can even stay on your credit report for up to 10 years, so it is important to go into this process knowing that this may be an option.
Filing is public record
Bankruptcy filings are completely public, and anyone who wants to look up your financial information will be able to. But remember, while you may lose some privacy in the process, choosing bankruptcy is nothing to be ashamed of.
Creditors can challenge your claim
When filing for bankruptcy, you have to list out all of our debts and what path you will take to repay them. You will have to meet with your creditors during this time, and they do have the power to challenge or even deny your bankruptcy claim in order to get the full amount they are owed. This is why you should always work with a lawyer who can help advise you on alternate options.
Don’t face bankruptcy alone. Our lawyers are here to help you, and no question about filing for bankruptcy is too small.