Declaring yourself bankrupt is sometimes the only way out of a difficult financial situation. However, it is worth bearing in mind that it will not wipe out every type of debt and certainly not solve all your debt issues. In fact, this is a huge decision that should not be taken lightly. If you are considering filing for personal bankruptcy, make sure you read this comprehensive guide first.
There are two most common types of bankruptcy: chapter 7 and 13. You may already heard about chapter 11, but that relates to businesses not individuals. Chapter 7 means that certain debts like loans, credit cards, and even medical expenses are entirely erased, and in exchange, you agree to appoint a trustee to oversee your case. The money obtained from the sale of some of your assets will go to the creditors.
Some of your assets are not part of the deal, such as your home, its furnishings, and your car. However, if your house is about to be foreclosed, filing for chapter 7 will allow you to remain in your property and the bank will have to stop the foreclosure proceedings.
It is worth noting that not all debts are forgivable in a chapter 7 bankruptcy. Student loans, alimony, overdue income taxes, and child support must eventually be paid. The entire process for filing a chapter 7 is from 3 to 6 months.
Now it is time to explain about chapter 13. This is when you cannot eliminate any debts, as you will just to re-organize them. You are required to pay a trustee a monthly payment for a period of up to 5 years. The trustee will then use the money to pay your creditors.
Keep in mind that filing for any type of bankruptcy is not a straightforward process, and, therefore, you should seek the guidance of an attorney. After all, there is all the paperwork you would need to do for filing chapter 7. This is the reason people tend to hire a lawyer.
Your assigned lawyer can then file your paperwork on your behalf and send the petition to court. You will be required to provide details of all your assets, income, and debt. Once this has been done, your creditors will stop contacting you and will not be able to file a lawsuit against you.
After the paperwork is filed in court, you will be assigned a trustee who will schedule a meeting between you, your attorney, and your creditors. If you have any secured debts, the collateral used against those debts may need to be returned to the lender. It is best to discuss all these factors with your lawyer beforehand in order to avoid any unpleasant surprises later in court.
It normally takes three to six months after you file the petition for your case to be discharged and all your debts forgiven. This will be a tough time for you and your family to go through, but once it is all over, you will be able to rebuild your credit and start your life again. By seeking the guidance of an experienced lawyer, you can start a more stable life once again.