Bankruptcy can be a real hassle to manage effectively, and while it can be seen as a double-edged sword by some, it does have long term effects on your ability to make money. Bankruptcy is filed to get rid of outstanding debt to help the filer pay the debt off.
If you have no means of paying your debt and can demonstrate that, then you’ll go into credit counseling with a credit counselor. The counselor will walk through your finances and other methods of helping you handle your debt, but if you still wish to move forward with bankruptcy proceedings after that then you can.
Both types of Bankruptcy
There are two types of bankruptcy that you can file, Chapter 7 and Chapter 13 bankruptcy, and each one has its own method of dealing with the problems of bankruptcy. Chapter 7 bankruptcy is the most common form of bankruptcy, where assets are sold and the money goes into paying off your debt.
You’ll lose a few possessions and have the bankruptcy marked on your credit report for ten years, but you will be out of bankruptcy and have most of your debts paid off and cleared.
Chapter 13 bankruptcy doesn’t involve the sale of your property, but it gives you a three to five-year repayment plan to either fully or partially pay off your debt. Once the value of whatever is on the plan has been repaid, then the debt is discharged and wiped away.
Both chapters of bankruptcy have their own pros and cons, and the choice of which one to use is up to you and your attorney. Bankruptcy lawyers, like those at the Law Office of Ronald D. Weiss, P.C. will be able to help you understand which type of bankruptcy to choose.
The Aftermath of Bankruptcy
Bankruptcy can cause you to lose property, including land, jewels, cars, and other possessions to repay the loans and debts. Bankruptcy can also damage your credit and influence how lenders see you, and they could either deny you a loan or charge you higher interest rates. The bankruptcy information can stay on your credit reports for up to a decade and might make you think twice about filing.
Getting loans and mortgages can be much harder while the bankruptcy is on your account, and its often better to get the mortgage squared away while the bankruptcy proceedings are going on so you don’t have to worry about it.
Alternatives to Bankruptcy
If the costs of bankruptcy are too high to bear, then there are some other solutions. They will all be on your credit plan, but you won’t have to lose property. You can work with a counselor, take out a debt consolidation loan, or talk to your creditors to work out a plan together.
Also consider creating a personal budget, avoiding situations where you could go into debt, and paying your bills on time so that you won’t have to worry about bankruptcy in the first place.