If you ask anyone to tell you about some of the more common debt relief options, they’re likely to at least mention the personal bankruptcy process. Perhaps it’s because bankruptcy is so heavily advertised as a “debt elimination” process or maybe it’s the stigma that’s been attached to the word throughout society. Whatever the reason, there are some common misconceptions regarding the process itself. For whatever reason, a large number of people think of it as a quick fix to their debt problems. They think of it as a way to quickly write off debt, though this is far from the truth. Not knowing the facts on bankruptcy can be dangerous, particularly when the process itself can have a considerable impact on your credit rating and your financial future.
Rather than list out the most frequently asked questions associated with claiming bankruptcy, we thought it best to summarize the process. Understanding how to claim bankruptcy is essential if you want to avoid making some of the common, but critical mistakes. Listed below is how to go bankrupt in bulleted format –
Some Basic Bankruptcy Facts
• The personal bankruptcy process was instituted to help troubled borrowers get back on track in terms of their finances; it’s meant for people that want or need to start over. Filing bankruptcy also suspends active collection activities and prevents creditors from contacting you directly.
• Borrowers must qualify to file a bankruptcy claim based on a combination of factors including their current debts, assets and household income.
• Once the debtor has been termed “bankrupt,” their debts are discharged, though not before the liquidation of non-exempt assets including property, automobiles and other personal belongings. These items are liquidated under the Chapter 7 bankruptcy code in order to pay back a portion of their debt obligations. Click on the following link for information regarding Chapter 7 exempt property.
Your Options For Filing
Individuals have two types of bankruptcy to choose from – Chapter 7 and Chapter 13. Chapter 7 is the most common form of bankruptcy, as it allows for the total elimination of debt. That being said, your valuable assets will be placed at risk of liquidation in order to pay down a portion of your debt. Any amount of debt that cannot be addressed through the liquidation of personal assets will be discharged and creditors will not be permitted to seek further damages once this has occurred. Feel free to check out our site for more Chapter 7 bankruptcy facts.
Chapter 13 is meant for debtors that wish to retain their valuable personal assets while paying back their debts under a structured repayment plan. Payments are made based on future income rather than through the liquidation of assets. Filing under Chapter 13 requires proof that the debtor will be able to make sufficient payments relative to the terms that are agreed upon.
How Filing Affects Your Credit
Filing bankruptcy will have a dramatic effect on your credit, and not in a positive way. Your credit rating will take a huge hit, making it very difficult for you to secure any form of desirable credit during the lifetime of your claim (normally 7-10 years). You can begin the process of rebuilding your credit while in bankruptcy by ensuring that your bills are always paid on time.
What Is Necessary For Filing
Before you can claim bankruptcy and clear debt you will need to collect detailed information related to your personal finances. This process can become extremely time-consuming, which is why many debtors choose to hire an outside professional to assist them. Though not required by law, you have the option to hire a bankruptcy attorney, a bankruptcy service company or a bankruptcy petition preparer (BPP) to assist you in your claim. Both parties can assist in document preparation and filing, though only an attorney can offer legal advice and representation.
For more bankruptcy facts and for specific information on declaring yourself bankrupt, please feel free to take a look around our site.