Bankruptcy can be a great tool for someone who is trapped in debt. If done correctly, it can offer a fresh start. However, before filing for chapter 7 or chapter 13 bankruptcy, there are things that must be considered.
1 – In general, there are 2 types of personal bankruptcy:
- Chapter 7 – the person filing is asking to walk away from most of their debts. Some assets will be liquidated to offset debt. You can file a motion to redeem a personal vehicle if you can afford to pay the market value of the vehicle in one lump sum payment.
- Chapter 13 – this form is available to those people that make enough money to pay debts, but who’s creditors will not wait for payment. Those who file this way are often allowed to create a payment schedule to be followed for 3 or 5 years.
2 – Bankruptcy does appear on your credit history
In general, a bankruptcy will linger on your credit history for 10 years. However, the longer it is on your report, the less it matters to potential new creditors. Another factor is your credit score. If you have prior missed payments, old charge-offs, etc., your score may not be affected that much by bankruptcy.
3 – If your loans have a co-signer, they are not protected by bankruptcy
If your mortgage, car loan, credit card, or any other debt obligation is co-signed or a joint account, the debt becomes the responsibility of the other person when you file for bankruptcy. You and your co-signer may be able to redeem certain assets to avoid putting them in a bad financial position so consider that option as well.
4 – Filing for bankruptcy is not free
While costs do vary from state to state, you can expect to pay:
- $1500 to $2500 in filing fees for chapter 7.
- $2000 to $4000 in filing fees for chapter 13.
These estimates do not include lawyer fees.However, consider how much debt you are freeing yourself of and how much interest you are avoiding and bankruptcy can often pay for itself.
5 – It is hugely beneficial to take immediate action
You should sit down and figure out if you are in a hole you cannot get out of if you are:
- covering all of your expenses with credit cards and only covering the minimum balances each month.
- getting phone calls from debt collectors.
- getting foreclosure notices.
- unsure of just how bad your financial situation is.
Bankruptcy is a wonderful tool that was created to give you a fresh start. You do not have to dodge calls from debt collectors every day. Take control of the situation. To do this, you need the skills of a licensed attorney. Elias Dsouza has been helping people take control of their lives for 15 years. Contact Elias today for a free consultation.