What Do I Need to Know Before Filing for Bankruptcy?

iStock 000001056012 ExtraSmall - What Do I Need to Know Before Filing for Bankruptcy?The decision to file for bankruptcy is not an easy one. The stigma, the damage to your credit and the loss of certain assets can be a struggle. But sometimes, bankruptcy is the best option to reset your finances and move forward into the future without the burden of mounting debt.

Things to Know About Bankruptcy Before You File

  1. You should know the difference between Chapter 7 and Chapter 13 bankruptcy. Chapter 7 bankruptcy involves liquidating assets in order to discharge most or all of your debt. If you opt for Chapter 7, you may be able to keep some of your assets, but you might have to give up nonexempt assets. Chapter 13, on the other hand, involves creating a payment plan to pay back creditors over a period of time. Chapter 7 tends to be a shorter process, lasting only a few months. Chapter 13 takes years to complete.
  2. Bankruptcy costs money. It sounds a little counterintuitive, but it’s the way it is. Costs can add up quickly between legal help, filing fees and potential court costs. Additionally, your ability to borrow money will be diminished due to the hit to your credit score.
  3. Some debts cannot be discharged, so after bankruptcy you will still be on the hook. Things like student loans, spousal support, child support, taxes, property liens and certain luxury items cannot be discharged in bankruptcy.
  4. Bankruptcies can leave incorrect information on your credit report. Keep an eye on your report using an online service like CreditKarma and remember that you can request a free copy one per year from each of the main three credit reporting bureaus.

Don’t be afraid to ask for help if you are struggling with the decision whether or not to file for bankruptcy. Our law firm is prepared to answer any questions you might have.



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