What to know before you file bankruptcy

What to know before you file bankruptcy

Are you behind on your bills and are you getting calls from collectors? Is your vehicle about to be repossessed or are your wages about to be garnished? Then you may be considering filing bankruptcy, however, there might be questions you want answered before you make your decision.

What is bankruptcy? Bankruptcy is a legal proceeding filed in federal court where people seek relief from their creditors. Bankruptcy can be an effective way to resolve financial problems.

Is bankruptcy always a solution to debt problems? While bankruptcy can be a solution, every person’s situation is different. If a person only has exempt property or income, then their creditors may not have anything they can repossess to settle the debt. It is advisable to speak with an experienced bankruptcy attorney for guidance on what is recommended for your situation.

What will bankruptcy do for me? Filing bankruptcy can stop harassment from debt collectors. It can stop the foreclosure of your home to allow you time to catch up on payments. When you file bankruptcy, it can stop wage garnishments and it can also stop the termination of utility service or even restore service.

What will bankruptcy not do? Filing bankruptcy will not allow you to discharge certain debts like alimony, child support, some student loans, most taxes, or criminal fines or court costs. An experience bankruptcy attorney can explain what debts can be discharged.

What is the difference between Chapter 7 and 13 Bankruptcy? Chapter 7 is sometimes known as a “fresh start” bankruptcy. Debts are discharged, however, non-exempt property is given to the bankruptcy trustee who uses it to pay your creditors. Secured property could be kept if there is little or no equity in the asset and payments are timely made. Chapter 13 Bankruptcy is sometimes referred to as “reorganization.” Filing Chapter 13 bankruptcy allows you to keep your property, like your car or home, if regular payments and back-payments can be made.

What are steps I should take if I want to file bankruptcy? Experts suggest that you should examine your finances before filing bankruptcy. Assess your income, expenses, assets and debts. Learn what led to your financial problems, so the same mistakes won’t be made again. A free credit report will provide information on all your creditors and is available from all three credit bureaus at www.annualcreditreport.com.

The next step before filing for bankruptcy is to consult an experienced bankruptcy attorney. Bankruptcy laws are complex and trying to file bankruptcy on your own can cost money and time. A knowledgeable bankruptcy lawyer will help you assess your situation and help you develop a plan that will work for you and your family.

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