10 Things To Know if You Are Filing for Bankruptcy

Bankruptcy was created a form of financial protection for those who need it, but many people have used it for reasons that are less than ideal over the years. Some people think that bankruptcy is around for them if they can’t afford to pay their bills once they get in over their heads. And while this is true to an extent, it’s not the reason that this type of legal boundary exists. It’s not meant for people who just make poor financial choices to use in their lives because they want to have something to fall back on after they mess up. For those who have really just found themselves in a position that leaves them with no other option (often the death of a spouse without life insurance, divorce and loss of income have a lot to do with bankruptcy), however, this is an option that can really help. It’s a chance to start over and do it right this time around – do not take that gift lightly. Before you decide to file for bankruptcy, however, here are a few things that you need to know about the process.

Chapter 7

This is just one of the most common types of bankruptcy that you can file. This is one that allows you to walk away completely from your debts without repaying a single penny of what you owe. This is for those who have debts so high and income so low that they cannot pay it off no matter how much they try to make it work for them. This is not something that is available for all filers.

Chapter 13

This is a more common type of bankruptcy. With this type, you will need the help of a bankruptcy law attorney to talk down some of your debts and work out a deal with your creditors that allow you to pay off what you owe over the course of a few years. This is typically a time frame that lasts anywhere from three to five years and allows you to get a bit of a break since you no longer have to do things like pay for your interest that’s no longer accruing since deals were made.

Causes of Bankruptcy

For the most part, people who file for bankruptcy have gone through a tragic life experience, such as the loss of a job, the loss of a spouse, a divorce or some sort of medical issue. In fact, statistics prove that more than 60% of people who file for bankruptcy have incurred some sort of medical debt that they just cannot pay and are forced into bankruptcy because of it.

Temporary Financial Changes

When you file for bankruptcy, you might be able to put an end to some serious financial changes in your life. For example, if your home is in the midst of the foreclosure process, you can go ahead and put a stop to the process for the time being. It’s something that is done while your income and situation are being evaluated to see if you qualify for what you are attempting to receive. The bank does not want you to lose your house; they want their money so they will work with the legal system here.

Location Matters

Something very important to consider is your location. The rules that apply to bankruptcy differ in all states, which mean that what you might get here is different there. The rules don’t always apply from one location to the next, so be sure you do your research before you assume that you are getting the same protections in one place that you might in another.

Your Situation and Assets Matter

Another consideration is that you do have your own personal financial situation and assets, and they matter. You have to be able to prove them, you have to be able to show them, and you have to be able to do what is required by the law to keep them, sell them or use them to pay off or down your debts as is required by your state’s laws.

You Get to Keep Assets Sometimes

In some states and in some situations, the financial assets you have when you file for bankruptcy are yours to keep. You almost always get to keep your personal items such as furniture and cars, and you always get to keep your clothes and your mementos. But cars and furniture sometimes have to be auctioned off depending on laws and requirements in many places, so please be sure to check the laws where you reside.

You Have to Prove Your Qualifications

In order to file for bankruptcy, you have to be able to prove that your income is far less than your debt and that you cannot afford to pay it off. The requirement includes a lot of paperwork, a lot of discussion and a lot of proof. It is not a quick or simple process, and it’s something that you will find irritating, long and you will experience a great deal of impatience when you go through this.

It’s Very Expensive

Bankruptcy might save you money as far as your debts are concerned, but the price you pay to file for it is steep. The price differs depending on the type of bankruptcy for which you file and also depending on where you live. You can, however, expect to pay several thousand dollars to file, and the price could rise significantly depending on your situation. You won’t know unless you do some checking into the process where you are located.

Classes are Necessary

When you file for bankruptcy, you will be required to take some classes. You’ll have to take several, in fact. Some are online and some are in person, and these classes are a requirement. You will not be able to continue the process until you take the classes and prove that you are serious about taking care of your financial situation. You have to be ready to make some sacrifices for your financial future.

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