Making the move to file for bankruptcy is a difficult choice for anyone. For the average person, there’s a lot of uncertainty surrounding the process of filing bankruptcy. Having knowledge of the process can make filing bankruptcy a little less scary.
Luckily, you’ve stumbled upon just the right piece of information to help you get in the know regarding bankruptcy. Here is a brief overview, featuring a few things you should definitely understand before beginning the process of filing bankruptcy.
The two most common types of bankruptcy
There are more than two types of bankruptcy, but there are two main classifications that you should know more about as an individual filing for bankruptcy.
- Chapter 7 Bankruptcy – This form of bankruptcy is typically referred to as a liquidation. Chapter 7 will get rid of most of your debts, but you have to pass the “means” test to qualify.
You may also be required to sell things you own that are not exempt in bankruptcy ruling. Overall, you will likely be able to keep most of your assets by filing Chapter 7.
- Chapter 13 Bankruptcy – Chapter 13 is a much different process, as you will be required to pay most of your debts back over a period of time. It may take up to five years to complete the filing process when you choose Chapter 13, so prepare yourself for a journey.
Filing bankruptcy comes with costs and stipulations
Filing bankruptcy places you at the mercy of the courts and your lawyer. You’ll have to do what you’re told with your money for a period of time, and be willing to handle following the rules laid before you.
You also have to pay your bankruptcy lawyer in full to successfully complete the filing process. Legal fees won’t be lumped in with your bankruptcy ruling, so plan ahead to pay your lawyer.
Bankruptcy affects your credit
You should know that filing bankruptcy will hit your credit pretty hard. The effects of bankruptcy can linger on your credit for up to ten years, and some employers require you to share whether or not you filed before completing the hiring process.
Not everything is discharged by bankruptcy
You can’t always count on bankruptcy to end all of your debtor worries. Not all debts are discharged by filing bankruptcy. Back child support or taxes are two examples of debts that will not be affected by your filing status.
Bankruptcy is a public matter
You’ll be subjected to a lot of financial intrusions when you file bankruptcy. Know that your bankruptcy is a matter of public record, and certain individuals will have the ability to access that information in the future.