is filing for bankruptcy a good idea

Is Filing for Bankruptcy a Good Idea?

Bankruptcy is commonly seen as a bad idea. That’s because people think it represents the end of a person or their business. But that’s not entirely true. Filing for Chapter 7 bankruptcy or the Chapter 13 alternative can be beneficial for you in certain situations, such as credit card debt or personal debt.

Many people think that declaring bankruptcy means losing all your money. They don’t know how this process works, though. Filing for bankruptcy should be a last resort for you. That’s because it’s a tricky and stressful process that can make you lose your property and other belongings.

Regardless of that, if you tried everything you could and still can’t pay off your debts, the bankruptcy process may help you take that off your plate. You need to know the bankruptcy basics if you want to go through this solution. That includes learning where to get a credit report or how to address credit card debt.

Keep reading to learn what you need to know about bankruptcy laws and everything related to it! However, we recommend you get legal advice if you want to file for Chapter 7 bankruptcy or Chapter 13 bankruptcy.

The most important part of this process is to know that this is not an end to your financial life. You can recover from this.

What Is Bankruptcy?

The first thing you need to know if you want to file for bankruptcy is how everything works. On a basic basis, bankruptcy consists of letting a judge know that you can’t pay your debts or bills. That includes personal debt, credit card debt, or a specific loan you owe to someone.

After examining your case and financial situation, the judge may decide to discharge all your debts or create a repayment plan for you to repay everything you can.

As a debtor, you can file different types of bankruptcy. The one you choose to file determines what the court can do for you. Many people file for bankruptcy to have a fresh start. Yet, not everyone is eligible by the court to go through this process. Apart from that, you can’t go through that process for free.

Your regular income, credit scores, and properties are essential for the court to decide if you can file for bankruptcy or not. This is a stressful and difficult process. That’s the reason we recommend you do it as a last resort.

There are also some moral setbacks in declaring bankruptcy. That’s because some people try to use the bankruptcy process to escape from debts they could pay. They do that to trick the system. You shouldn’t do that. People should only file for bankruptcy when they truly have no way to pay their bills.

Different Types of Bankruptcy -Chapter 7 Bankruptcy and Chapter 13 Bankruptcy

As we mentioned before, certain types of bankruptcy give you different benefits and have diverse consequences. The bankruptcy process works that way to give room for people under different circumstances to use this alternative. However, bankruptcy cases aren’t similar to each other.

Owing some money to the bank because of your credit card score it’s not the same as having personal debt.

Many articles online confuse the different types of bankruptcy. We want to make things simpler for you. Here are the most important ones:

Chapter 13 Bankruptcy

If you want to go through this process for yourself and not in the name of a company, then the only types of bankruptcy you care about are Chapter 7 bankruptcy and Chapter 13 bankruptcy. Those are the only ones related to individuals and natural people. The others are involved with legal entities and specific circumstances.

The bankruptcy laws for each of the bankruptcy types are different. If you want to file for bankruptcy Chapter 13, you need to have a stable income. Apart from that, your secured debt has to be less than $1,257,850, and your unsecured debt less than $419,275.

This type of bankruptcy may seem better for some people because it allows them to pay for their debts without losing their assets. That includes credit card debt, personal loans, medical bills, and mortgage issues.

When you go to a bankruptcy court and file Chapter 13 bankruptcy, the judge gives you a repayment plan you must follow with no excuses.

That plan requires you to pay an amount of money monthly to repay your debts. Considering that, you don’t get complete debt relief. Your payments are monitored by the court. You get no privacy when this happens. Take that into account if you decide to go through this process.

You have from three to five years to pay off all your debts. There can’t be any debt unpaid when the deadlines come. That’s because your bills aren’t fully discharged when you are filing this type of bankruptcy.

As a debtor, you could think it’s difficult to get all that money. After all, that’s the reason you decided to go through this process in the first place. Fortunately, the court’s plan aims to address that issue. Some articles say filing bankruptcy for Chapter 13 can make it difficult for you to pay for everything, but that couldn’t be further from reality.

Chapter 7 Bankruptcy

When filing for bankruptcy, Chapter 7 is the most popular among people. That’s because it helps the debtor to have all their debts and bills discharged. This doesn’t come for free, though. The court sells all your valuable assets to pay as much as possible of your debt. You could lose your house, vehicles, and other properties.

Everything expensive you have may be sold out by your bankruptcy trustee. However, there are some exceptions to that. Those exceptions apply to exempt properties, which are things protected by the law to keep creditors from taking them away.

The bankruptcy filing process has pros and cons. Many people end up keeping all their belongings because they are exempt properties while others lose most of them. That’s because all bankruptcy cases are different from each other.

You should hire a bankruptcy attorney if you decide to file bankruptcy. Doing that helps you keep the assets safe from being taken away from creditors. However, if you bought a property just before declaring bankruptcy, the court may sell it to reduce your debt.

Creditors can’t ask you for money if you file for Chapter 13 or Chapter 7 bankruptcy. That means they have to stop sending you letters or calling you. At least temporarily. If you want to start filing bankruptcy under Chapter 7, then those creditors may not call you ever again.

That’s because all your debts are discharged when that happens, so they don’t have to keep asking you to repay that money. Regardless of that, that doesn’t apply to all kinds of debts. You can’t ask a judge to give you debt relief for all your pending payments. Some exceptions are untouchable by the bankruptcy laws, so you still have to pay for those bills.

Many articles avoid that information, so it’s essential to understand it when filing for bankruptcy. However, as it happens with Chapter 13, there are some circumstances in which you can’t go on with the bankruptcy filing process.

When it comes to Chapter 7 bankruptcy, your request may be denied by the judge if you have a high income or a high credit score. The court may ask you to go through a means test to make a credit report and see if you are fit to go for a Chapter 7 bankruptcy. When that happens, they receive information about your credit cards, your assets, and any property you have.

Other Bankruptcy Types

As we mentioned before, you can file for bankruptcy in many different situations. Even if the only ones you need are Chapter 7 and Chapter 13, knowing the others is not a bad thing. Learning about that helps you understand how bankruptcy laws work in a better way.

Chapter 11 is one of the most popular bankruptcy types worldwide. That’s because it’s the one that businesses use when they need to get debt relief.

Filing for bankruptcy is not easy. Doing it’s a difficult and stressful process, so you have to take some time to consider your alternatives. If you’ve already made up your mind, the first thing you need to do is study your situation and see which time of bankruptcy you should file.

When someone files Chapter 11 bankruptcy, the judge creates a plan for the company to pay all its debts without stopping to work. More than one attorney is required in these matters. That’s because more things are involved in the bankruptcy process when it comes to business payments.

Fishermen and farmers use Chapter 12 when they need to declare bankruptcy. Chapter 9 applies only to towns and cities. However, Chapter 9 cases are not that common, so don’t worry about them. The last of them is Chapter 15 bankruptcy, which addresses all international bankruptcy cases in a special bankruptcy court.

How to File for Bankruptcy

Filing for bankruptcy is a difficult and stressful process. That’s because you can’t do it for free. Apart from paying some fees, many of your things can be taken away to pay your creditors. It’s a process that has many pros and cons. Yet, if you still want to file bankruptcy, you need to know how to do it.

The first thing you need to do when filing for bankruptcy is to study your situation and see which type of bankruptcy you should go for. You can ask an attorney to help you with that. Some people even get credit counseling to help them with that matter.

Make sure to hire a bankruptcy attorney you can trust. These processes are long, so you need someone who can give you all the attention you need. Some attorneys even offer you free debt evaluation. After that, you should gather all the documents you need to start the process.

Those documents include your tax returns for the last two or four years depending on which type of bankruptcy you are filing. Additionally, you have to get your income documents, identification documents, bank account statements, retirement information, mortgage information, vehicle information, and any documents related to other debts, such as a credit report of your credit score.

You can take a credit counseling course to help you understand all that. Taking it helps you when you have credit card debt. By doing that, you can learn everything you need to know about getting a credit report, paying off your credit card debt, and how to improve your credit score. Having a credit counseling certificate is needed to go on with the bankruptcy filing process.

Make sure you have funds to pay for all the fees and payments needed when filing for bankruptcy. Many articles don’t say that information, but it’s essential to know it. After that, you can start filling out your bankruptcy paperwork. Print everything and send it to your bankruptcy trustee. Have a meeting with them to discuss the terms and consequences of the bankruptcy.

Taking a debtor education course is also needed to complete the bankruptcy filing process. After that, you only need to wait for the judge to announce their settlement and act accordingly.

Is It Good to File Bankruptcy?

It depends on your situation. Many articles say that doing it can help you in many ways. That’s not entirely wrong, but bankruptcy is neither easy nor for free. It’s not as simple as asking a judge to discharge all your bills and loans and give you debt relief.

The first thing you need to consider when declaring bankruptcy is the funds you have to do it. This process is not free. That’s because of the fees of going through the bankruptcy itself and the attorney payment.

Apart from that, there are some downsides when you declare bankruptcy. One of them is that it’s more difficult to get a mortgage or any type of loan. That’s because your bankruptcy records are public, so everyone can see them. That includes banks, business owners, and real estate agents.

Those records tend to be available for seven years or more. Banks may be less eager to give you financial aid if they see you have bankruptcy records. However, not everything’s bad about it. Declaring bankruptcy still keeps creditors away from you.

If you are in a bad financial situation, this process could be the only option for you. Debt relief gives you a fresh start with the support of a bankruptcy court. Since a judge can discharge debts from loans or credit debts, you can forget about those issues.

Be careful if you bought a property before starting the bankruptcy filing process, though. Creditors want their money back, so the judge may sell some of your personal belongings and properties to make for that money they are missing. Some articles say you can declare bankruptcy without losing any property, but that doesn’t happen to everyone.

Does Filing Bankruptcy Discharge All my Debts?

The short answer is no. There are some situations in which the judge can’t let you walk free from your debts. That’s because some specific bills and financial assets are untouchable by the bankruptcy court, so it can’t discharge them or help you create a plan to pay them.

These are the bills you can’t discharge with bankruptcy:

  • Student loans.
  • Child support.
  • Alimony.
  • Taxes and any kind of debt with the government.
  • Any loan coming from an expensive item bought days before filing bankruptcy.

Take that into account when you analyze your financial situation. Naturally, you can’t use bankruptcy to avoid child support, paying off a student loan, or a loan for a property you just bought. However, there are always new ways of generating income to pay for those things.

Wrapping Up

As you could see, filing Chapter 7 bankruptcy can help you in case you have problems with credit card debt or any kind of debt in general. This process has some pros and cons, though. It’s not for free, and the attorney fees are not inexpensive.

Regardless of that, it allows you to forget about creditors calling you and disturbing your personal life. The life of a debtor is not easy, so there is no shame in filing bankruptcy to find debt relief. Many articles say doing this is a bad thing, but that’s not true.

You can recover from bankruptcy. There are always new opportunities to improve your credit score and find new ways of income. The bankruptcy filing process also brings a lot of stress to your personal life, though.

Take all the time you need to think about this matter. If you want to open a bankruptcy case, hire a lawyer and get ready to ask a judge to discharge your debts! Remember this is a long road, but you can recover from that and live your life like you used to.

The only thing you need to do is hire the best attorney you can find. Do your best to find more ways of income. Bankruptcy should always be a last resort. Keep in mind that, and don’t use it as your first option. 

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