Bankruptcy is not for everyone, but it can greatly impact the lives of those who have nowhere else to turn. If you believe that’s you, and you’re thinking of filing for personal bankruptcy, here is everything you need to know about how it works!
When Is The Right Time To File For Personal Bankruptcy?
Although the right time to file for personal bankruptcy may differ for everyone, it might be time for you to really start thinking about it if:
- You’ve been sued over your outstanding debts;
- You have no savings to pay off, or make regular payments on your debts;
- You don’t have any assets valuable enough to cover your debts;
- You have expensive medical bills that your insurance won’t cover;
- You’ve had your wages garnished;
- You’ve tried to get help already through credit counseling;
- You’ve made every attempt to negotiate with your creditors.
What Type Of Personal Bankruptcy Is Right For You?
The two primary types of personal bankruptcy a person can file for are Chapter 7 and Chapter 13.
- Chapter 7 involves the liquidation of a person’s assets to pay off their outstanding debts, meaning many of their possessions and assets are repossessed in exchange for total debt forgiveness.
- A Chapter 13 bankruptcy allows a person to maintain ownership of their assets so long as they agree to and keep up with an appointed three- to five-year debt repayment plan.
If keeping your material possessions is important to you, or your income is too high to qualify for Chapter 7, Chapter 13 may be right for you. On the other hand, if you are drowning in debt and desperate for help, and you absolutely cannot help yourself, Chapter 7 is likely the best option for you.
What Debts Can’t Be Wiped Away When Filing For Personal Bankruptcy?
Medical bills, credit card debt, and more can be forgiven when filing for bankruptcy. However, that doesn’t mean that bankruptcy can wipe away all debt. For instance, bankruptcy cannot discharge:
- Secured Debts*
- Child Support
- Income Tax Liability
- Debts Related To Divorce
- Student Loans*
*Very rare exceptions for forgiving student loans and secured debts do exist, however, you should speak with a reputable bankruptcy attorney to learn if your unique situation qualifies you.
How Much Does It Cost To File For Personal Bankruptcy?
Filing for bankruptcy does cost money (attorney fees + filing fees), however we offer payment plans. If you’re thinking you can simply cut your costs by handling your bankruptcy case all on your own, think again. Filing for bankruptcy is an incredibly complex process filled with endless confusing paperwork, and any “misunderstandings of the law or making mistakes in the process can affect your rights.”
What Are Some Alternatives to Filing For Personal Bankruptcy?
The best alternative to bankruptcy is to try and get out of debt on your own. If you file you’ll have to undergo credit counseling anyway, so why not get a head start? You can also try getting another job, or cleaning out your house and selling everything you don’t need for a little extra cash. You might even try to communicate with your creditors and see if you can work something out that benefits you both. The point is, there are options out there; you simply have to decide if you’re willing to do whatever it takes to get back on track.
How Will Filing For Personal Bankruptcy Impact You?
Everything from your credit score to your assets may be affected by filing for bankruptcy. In terms of your credit score, if yours is decent or even on the high side, you will likely see a significant drop that could affect other areas of your life later on, like getting a home or auto loan. Secondly, you also have to consider how long bankruptcy will stay on your “record.” For Chapter 7, that number of 10 years since none of the debt is repaid. Although, Chapter 13 is a little better, falling off after only 7 years since a good portion of the debt has been paid off. Lastly, if you’re married, you may be surprised to know that only assets belonging to the person filing and jointly owned assets can be liquidated to pay off debts. Assets belonging solely to the spouse not filing may be spared.