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Bankruptcy – Everything You Need to Know About Filing

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It isn’t always easy to know when you should take a particular financial step. Variables from interest rates to origination fees can significantly affect your decision-making at any given time. For example, if you’re thinking about seeking debt relief solutions, you may have numerous concerns. “Do I have enough funds available for debt settlement?” “Will my credit score be helped or harmed if I take a specific approach?” “Is it time to think about filing for bankruptcy?” 

By carefully considering your options, the variables involved, and the risks associated with each, you can make an informed decision. If you’re thinking about filing for bankruptcy, you’ll need to familiarize yourself with the process before you can decide if it’s the best alternative for your situation.


When Is Filing for Bankruptcy a Good Option?

Filing for bankruptcy will affect your credit for a number of years, so it’s important not to approach this process lightly. It’s true that bankruptcy can help your family or business achieve a relatively fresh financial start. Depending on the kinds of debt you have, it may even help you become debt-free. However, filing for bankruptcy isn’t the best option for everyone. If most of your debts are secured debts, they may not be dischargeable. 

If you’re concerned that you’re going to fall back into debt again after filing for bankruptcy, know that it’ll be more difficult to use this debt relief option more than once. You could have your house or business property foreclosed upon or your car repossessed if you file for Chapter 13 bankruptcy and default on your repayment schedule, . If you don’t earn much income but own expensive property, a Chapter 7 bankruptcy trustee could sell your valuable property to repay your creditors. Bankruptcy isn’t always the best option.

However, bankruptcy can be an excellent debt relief option if you’re not at significant risk of immediately falling back into debt. This process can help you to re-establish a solid financial foundation so that you can improve your credit over time. Regaining control over your finances can help you to focus on meeting your family’s immediate needs or saving your business instead of focusing on looming debt payments. 

Bankruptcy can also help to stop recurring late and overdraft fees, legal action by creditors, foreclosure, repossessions, garnishments, and creditor harassment. Filing for bankruptcy can allow you or your business to theoretically begin again. This is as long as you file the Chapter appropriate for your situation, seek necessary support, and don’t fall into bad habits after your case has concluded.


Types of Bankruptcy

There are three main kinds of bankruptcy Americans turn to when times get tough. Chapter 11 bankruptcy is generally reserved for business owners. Whilst Chapter 7 bankruptcy can only be filed by low-income households. Chapter 13 bankruptcy is most often filed by individuals and families who don’t meet the income requirements for Chapter 7 bankruptcy. There are exceptions, so it’s a good idea to speak with an attorney about which Chapter is right for your situation. 

The main difference between the two primary forms of personal bankruptcy involves repayment. Chapter 7 bankruptcy results in the elimination of eligible debts in as few as 90 days with no repayment requirement. Chapter 13 bankruptcy requires filers to repay their creditors (per the terms of an approved repayment plan) for 3-5 years before their eligible debts are discharged. While it’s possible to file for Chapter 7 bankruptcy on one’s own, it’s not generally a good idea to file for Chapter 11 or Chapter 13 bankruptcy without professional assistance. These processes are usually too complex to navigate alone if you don’t have a law degree.


The Process of Filing for Bankruptcy

Before you can file for bankruptcy, you’ll need to carefully assess your debts. If you’re thinking about filing for Chapter 7 bankruptcy, know that not all debts are eligible for discharge. Meaning, only some of your debts can be wiped out if you file for this kind of bankruptcy. The Court may forgive your medical bills, credit card debts, and some overdue taxes. However, it won’t forgive most student loans, secured debt, and family support obligations. 

Most of your basic possessions are considered exempt and won’t be sold to pay your creditors back. But if you own expensive property, that could be sold during a Chapter 7 bankruptcy process. When you file for bankruptcy, you’re protected by an automatic stay. That means that your creditors have to stop taking action against you and may even be prohibited from contacting you. If your Chapter 7 bankruptcy is approved, you’ll receive a discharge notice within a few months.

If you file for Chapter 13 bankruptcy, you’ll work with your attorney to construct a repayment plan for your existing debts. You’ll also be granted automatic stay protection until your case has concluded. This approach can be helpful if you have access to steady income and can pay some of your debts but not all of them at once. Restructuring your debt will make it more manageable. After 3-5 years of consistent repayment, you’ll be granted a discharge of your remaining balances on your eligible debts. If you’re risking foreclosure, bankruptcy may or may not be able to help you avoid a negative foreclosure judgment. That process is complex enough that you’ll want to consult an attorney for guidance. If you’re hoping to save your business by filing for Chapter 11 bankruptcy, an attorney can help there as well.


Bankruptcy Assistance Is Available

If you’re thinking about filing for personal or business bankruptcy, consider scheduling a consultation with LawTrades today. Our bankruptcy attorneys understand the ins and outs of the bankruptcy process. We can help you or your business regain a solid financial foundation. Our efficient, cost-conscious, effective approach helps you receive the support and informed legal guidance you need at this time. We look forward to speaking with you.


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