10 Things to Know About Bankruptcy

In today’s economy there is so much uncertainty, and those who are unemployed or underemployed are finding it harder and harder to pay bills. They try to stay above water, but find themselves in a losing battle. It is at this point they start investigating filing bankruptcy. There are 10 key things to know about choosing this solution before taking the step to move forward.

1. Not all Bankruptcy is created equal – There are two primary types of bankruptcy used by consumers, Chapter 7 and Chapter 13. Many may think they are the same, but they have distinct differences. Chapter 13 allows a person with a steady income to file for bankruptcy protection and still maintain most of their property that they otherwise might lose, such as their house or car. The court sets up a repayment plan over a period of 3 to 5 years, and once all the requirements are met then the debt is discharged. Chapter 7 is usually chosen when the debt far is so large it exceeds the debtor’s assets, and it allows for the court to liquidate all non-exempt assets to cover the debt. The process takes about 3 ½ months and once the process is complete the debt is discharged. The main differences between the two are, one is more of a debt consolidation while the other one gets rid of the debt by surrendering all non-exempt property in order to cover the debt, and the length of time it takes to discharge the debt.
2. Limitations apply – Some people think that they can file bankruptcy as many times as needed. This is not the case. There are specific limitations as to duration between filings. Chapter 7 cannot be filed again by a debtor has filed a new filing within 8 years of the old filing. A Chapter 13 will not be discharged within 2 years of a previous Chapter 13 discharge and 4 years from a Chapter 7 discharge.
3. Not everyone will know you filed Bankruptcy – Many potential filers are concerned that others will know that they have filed for debt protection. Although bankruptcy filings are a public record, unless you are a prominent social figure there is little chance that many will be aware of it. The only ones who would know are those persons a debtor tells or someone with access to the bankruptcy court record system.
4. You are not a bad person for filing Bankruptcy – There is over a million people that file bankruptcy every year, and a majority of the time it has been filed for circumstances beyond their control such as job loss or catastrophic illness. Just because a debtor finds him or herself in a position where they need to file for debt protection does not mean that they are bad people. Bankruptcy was created to help good people when they find themselves in difficult circumstances. There are those that take advantage of the system, but there is a vast number that legitimately have no other alternative.
5. You will be unable to get credit again – There are those that believe that if a person files for bankruptcy they can never own property again. That is not true. Once your debts are discharged you will be able to rebuild your credit. There are many companies that give those that have filed for bankruptcy and had their debt discharged that help the individual rebuild their credit, allowing them to own a house or car again. JD Byrider is one such company. Their mission is to help those with tarnished credit to purchase a vehicle they can afford while rebuilding their credit.
6. Creditors cannot harass you – Once an individual files for bankruptcy creditors are not allowed to contact you for any reason. They are not allowed to cal or send bills. If they do they are subject to penalties under the Federal Bankruptcy Laws.
7. You will not lose everything – Depending upon the type of bankruptcy filed, an individual’s property can be protected from creditors. Laws that allow a debtor to keep property vary from state to state, but an individual must find out the laws governing their particular jurisdiction before proceeding.
8. If you are married, it is not always necessary for both spouses to file – If the credit was obtained in only one spouse’s name then the other spouse is not obligated to file bankruptcy, but be aware if there is debt both spouses are liable for the creditor can go after the spouse that didn’t file for the whole amount.
9. It is not hard to file for Bankruptcy – There is quite a bit of paperwork involved in filing for bankruptcy. An individual considering bankruptcy does not technically need an attorney to file bankruptcy, but it may be easier to navigate through all the legal jargon.
10. Filing for Bankruptcy will not permanently ruin his or her credit – Many people believe that once they have filed for bankruptcy they have permanently ruined their credit score. However, there are some that obtain a higher credit score after their debt has been discharged if they are able to successful alter their spending habits.
Bankruptcy is not the end of the world, and for many it is the only option left to them. It is essential individuals do their homework prior to filing for debt protection in order to choose what is best to meet their needs. The best thing to do is research and gain knowledge to protect your interests prior to filing for bankruptcy.