Posted on: 27 February 2018
Your personal finances may be at a point where you see no way out other than a bankruptcy. You probably know that it will damage your credit rating for several years, but at least you will get a fresh start. However, there are a few things you should know about bankruptcy.
You need to qualify for bankruptcy
It's not simply a question of deciding to file for bankruptcy; you must qualify. There are several criteria to determine whether you are allowed to file for bankruptcy. In addition to that, there are two types of bankruptcies. The first, Chapter 7, has a more stringent standard for qualification. This is the type of bankruptcy that has the potential to eliminate the most debt. The second type, Chapter 13, is a reorganization of your debt. Sometimes your total debt is reduced, but you are paying back much of it. Qualification for either type of bankruptcy depends upon several factors such as income and assets.
It may not be a solution for your debt problem
Bankruptcy may not be the panacea for your financial situation that you think it is. Even if you were to qualify for a Chapter 7 bankruptcy and are looking forwarded to becoming debt free, you need to understand that many debts cannot be bankrupted. Debts such as back child support, income taxes and student loans are only a few examples. Secured debt will have to be satisfied by selling the asset. Debts that can potentially be eliminated by a Chapter 7 bankruptcy are unsecured debts such as credit cards, payday loans, personal loans and medical bills.
It may not save your home from foreclosure
One common motivation for bankruptcy is a foreclosure. If your house is going through a foreclosure, a Chapter 7 bankruptcy will likely shield you from any outstanding balance owed after the sale of your house. It may be possible to reorganize your late payments under a Chapter 13 filing, but this won't be much help unless you can stay current on your mortgage after your bankruptcy.
Creditors have a right to be paid
Even though the potential to eliminate a lot of debt exists with a bankruptcy, lenders have a have a right to be paid, even when the debt is unsecured. For this reason, you may have certain assets that a bankruptcy judge will want liquidated to satisfy a portion of your debts before discharging the balance. On the other hand, many assets are protected from liquidation under the bankruptcy laws.
The most important thing to understand about bankruptcy is that you should always have an attorney. Having an attorney like Charles J Schneider PC that understands the nuances of the bankruptcy laws will create the best possible outcome from a bankruptcy filing.Share