Declaring Bankruptcy: Piece-of-Mind & Overcoming the Stigma


Individuals have certain options available to them if their debts have reached a certain level. Chapter 7 and Chapter 13 are options available to you if having trouble with debt. You may want to discuss these options with an attorney to determine which option is best for your situation.

What does bankruptcy do?

Bankruptcy helps individuals wipe out excessive credit card debt. Once the debt is eliminated, creditors can no longer contact you about those debts. Creditors are no longer able to pursue any of the debts that were eliminated. In some cases, it can prevent you from losing your property and eliminate any unsecured debts. Debts listed in the file are formally discharged. Some bankruptcies are randomly audited to verify their accuracy.

Several benefits of bankruptcy:

• Foreclosure prevention
• Car repossession
• Wage garnishment

How long does bankruptcy affect your credit?

Bankruptcy is going to affect the FICO score. It will take a while until it stops affecting your credit. A new bankruptcy will have a greater impact on your credit file than one that has occurred several years ago. If you file for a bankruptcy, you are able to begin re-establish your credit. The sooner you begin actively improving your credit, the sooner you will be able to begin seeing a difference in your score.

What are the two types of bankruptcy?

Chapter 7 is a form of bankruptcy in which the discharge is processed within 90 days. All debts are listed, and the bankruptcy is finalized within six months. All debts owed are listed, and some you are able to continue paying on if you are planning to keep the property. Once finalized, a person cannot be eligible for bankruptcy for another eight years.

Chapter 13 reorganizes one’s debts. The debt repayment plan is designed to help individuals hold on to certain assets. The plan can be in place for up to five years. There may be a wage garnishment plan in place. The wages are directed to a trustee, who will see that creditors are paid.

Who should be considering bankruptcy?

Individuals who have excessive debt that cannot be paid due to low income file for Chapter 7. When all of the expenses are totaled, there isn’t much left to cover basic expenses. The other option is reserved for those who require some sort of plan to repay a portion of the debts over the course of five years. Chapter 13 allows a person to pay their debts over time.

Common reasons for getting a bankruptcy:

• Divorce
• Unemployment
• Medical bills
• Illness

What cannot be included in a bankruptcy?

Individuals can include most debts, but there are some debts that cannot be included. Student loans, tax liens, child support and alimony are some debts that cannot be discharged. Debts tied to fraud may not be included in a bankruptcy plan. Certain types of judgments aren’t allowed to be included in bankruptcy.

Bankruptcy is a very serious decision to make. One should consider whether or not the debt is something that could be managed. Consider totaling up your monthly expenses and evaluating whether or not it’s possible to repay these debts with some sort of arrangement in place.

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