When people struggle with insurmountable debt, bankruptcy can be a useful tool in getting back on track. The bankruptcy process is not something to be undertaken without consideration, however. It is a big deal and requires a significant commitment. To this end, it is critical to understand exactly what bankruptcy can and cannot do.
The following are a few of the most important things that you should remember when filing for bankruptcy.
Bankruptcy Takes Several Forms
Chapter 7 bankruptcy is a type of bankruptcy that is capable of discharging all or most of a person’s debts. Although it is possible to hold onto some belongings during this process, most assets will be liquidated to pay off outstanding debts.
Chapter 13 bankruptcy is a type of debt reorganization that involves the creation of a payment plan to pay back creditors. The chapter 13 bankruptcy process almost always takes between three and five years.
Businesses are able to file for Chapter 7 bankruptcy, but most often file for Chapter 11 bankruptcy, which involves the reorganization of debts so a company can continue operation.
Bankruptcy is Not Free
While the costs should not dissuade you, it is not free to file for bankruptcy. Filing costs for Chapter 13 bankruptcy tend to be higher than Chapter 7. This is because Chapter 13 bankruptcy tends to take longer to resolve.
In the short term, bankruptcy will also impact your credit score, which means that for a short period of time, it will be difficult to obtain a loan or a credit advancement. Many people, however, discover that the tradeoff of temporarily having bad credit is worth it for the opportunity to rebuild a damaged credit history.
Bankruptcy Will Not Erase All Your Debts
In many cases, filing for bankruptcy is the best possible solution to address financial problems. It is important to recognize, however, that not all debts can be erased in bankruptcy.
Some of the debts that are seldom discharged through bankruptcy include alimony, child support, student loans, taxes, and real estate liens.
As part of the bankruptcy process, you will be required to attend a creditor meeting during which time your creditors will have one last chance to dispute any debts that you have. If a creditor wins this argument, you will still owe them money.
Bankruptcy is Much Easier with a Professional’s Help
It can be nearly impossible to determine if filing for bankruptcy is the best option for your situation. Fortunately, an experienced bankruptcy attorney can review your situation and help you determine the best way to proceed.
A knowledgeable attorney can also make sure that you fill out all of the necessary bankruptcy paperwork and successfully meet each filing deadline.
Speak with an Experienced Bankruptcy Attorney
If you have questions or concerns about the bankruptcy process, you should not hesitate to speak with an experienced attorney. Contact the Adam Law Group today to schedule a free initial consultation.