Bankruptcy may be the appropriate course for you if you’re struggling with debt for many different reasons. It can seem scary and confusing, but you’re not alone. Here are a few things to keep in mind when beginning the bankruptcy process and discussing your needs with your bankruptcy team.
There are two main types of bankruptcy, Chapter 7 and Chapter 13. The processes and timelines look a little different, and the kind you file for will largely be based on if you have and can prove that you have a regular income stream. Deciding which form to file for will affect how long you remain in the bankruptcy process, what your payment requirements are, and how many of your assets you are able to retain. There are also Chapter 11 and Chapter 12 bankruptcy filings, but those are very specific to the people filing them.
Bankruptcy is an option for people in certain situations, but it’s important to remember that it will stay with you long after the process is complete. Not only will bankruptcy affect your credit score significantly—even if you have a history of good credit—but it will be required information when applying for jobs, filing government reports, and filling out medical information. It can impact future loans, education, and more, so explore other options to be certain this is the right choice.
It’s important to keep in mind that filing for bankruptcy costs money—and you’ll have to be able to pay those fees in advance, depending on which type of bankruptcy you’re filing. There are court costs and lawyer fees and other smaller payments to keep in mind, so analyze your budget going in to be sure there’s enough set aside to navigate the process.
If you decide to go the bankruptcy route in order to fix your financial situation, know that you won’t be able to keep any spending, debt, or income streams hidden. Both legally and in the interest of an effective filing, you’re going to have to be completely honest and open about your finances. If this might cause tension between you and a spouse or other family member, consider discussing it in advance before the information becomes public.
In addition to the costs incurred during the process and the impact that filing for bankruptcy has on your credit and financial records, it’s important to know that filing for bankruptcy will impact you in the long run. It is not an instant fix process and you’ll have to do a lot of work to ensure that you don’t end up in the same situation again. Pay close attention to debt and spending, repay any creditors or debtors, and work with a financial team to move forward successfully.
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