Important Points to Consider if You are Thinking About Filing Bankruptcy
Bankruptcy can seem like you are pushing a button to reset your finances. If you are considering bankruptcy, you need to know that that fresh start comes with a set of liabilities and gifts. Here are 10 things to think about if you are considering filing bankruptcy.
- There are two main kinds of personal bankruptcy: Chapter 7 allows you to walk away from your debts entirely and is used by people whose debts are too high or income so low that they do not have money for a payment plan after paying their basic expenses. Chapter 7 bankruptcy allows you to make a plan to repay at least a portion of your debts over a three to five-year period.
- Bankruptcy should not be used frivolously: People often use bankruptcy when they have a significant change in circumstances that increases their bills, reduces their income, or both. In about half of all cases, there are medical issues involved. Many bankruptcies are due to divorce and employment issues, as well. Bankruptcy will, at least temporarily, halt collection efforts and foreclosure attempts.
- Where you live matters: When it comes to the assets that you will be allowed to keep when filing bankruptcy, the rules vary according to state. The expense and income limits for Chapter 7 bankruptcy also vary by location, as do attorney fees and filing fees.
- You may get to keep your assets: Filing for bankruptcy does not mean that you will have to give up all of your possessions. You will get to keep most of your personal belongings such as clothing, household furnishings, and some other assets that are exempt. You may also be allowed to keep larger assets depending on the laws of your state, your finances, and the type of bankruptcy you file.
- You have to qualify for chapter 7 bankruptcy: You must be able to prove that your income is below the state median, or that through income and expenses if your income is above the state median, that you can not repay your debts. Most people do not have any trouble qualifying because bankruptcy is typically a last resort option. Learn more about the chapter 7 means test here.
- Bankruptcy will go on your credit history: As a general rule, bankruptcy will remain on your credit history for about 10 years. However, the older the bankruptcy, the less likely lenders are to be worried about it, and the less impact it will have on your credit score.
- It may not make your credit worse: If you have been having multiple missed payments or late payments, bankruptcy may not have much of a negative effect on your credit. You may actually see your credit improve within a year of your bankruptcy.
- Bankruptcy will not protect joint account holders: While bankruptcy will dissolve your obligation to creditors, it will not protect a joint account holder or co-signer. So, if anyone else is on the hook for your debt, that bill will become theirs alone.
- Your bankruptcy will be public: Many people mistakenly believe that since bankruptcy involves your personal information it will remain private. However, that is not true. If interested, someone could see anything they wanted to about your financial situation because it will be public information.
- You will be required to go to class: Before you file for bankruptcy, you will be required to take a second short class. You will be allowed to attend the class online, over the phone, or in person.
Contact an Experienced Bankruptcy Attorney Today
If you are considering bankruptcy and have additional questions, contact the Cornwell Law Firm today. Our attorneys will take the time to listen to your concerns, answer your questions, and guide you through what your legal options may be. Contact us today to schedule a consultation.