Filing for bankruptcy is one of the most challenging decisions anyone can make. It’s also one of the most misunderstood. Most people think bankruptcy is a quick and easy way to erase all your debts and start over fresh. Unfortunately, that’s not always the case. Bankruptcy is a complex legal process with severe consequences.
If you’re considering filing for bankruptcy, it’s essential to understand what you’re getting into. Having someone like Reep Law bankruptcy attorney on your side can help make the process a little easier, but it’s still crucial that you know what to expect.
Here are fifteen things you should know if you ever file for bankruptcy:
1. Bankruptcy is a legal process.
Bankruptcy is definitely not a quick or easy way to erase your debts. It’s a legal process governed by federal law. This means there are specific rules and procedures you must follow. If you don’t, your bankruptcy case could be dismissed, or worse, you could be subject to fraud charges.
There are two main types of bankruptcies: Chapter 7 and Chapter 13. Chapter 7 bankruptcy is probably the most common type of bankruptcy. It allows you to discharge most of your debts, including credit card debt, medical bills, and personal loans.
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Chapter 13 bankruptcy is a bit less common, but it has some essential advantages. First, you can keep your property, like your home or car. Second, chapter 13 gives you a chance to repay your creditors over time, which can help you rebuild your credit score.
2. You must qualify for bankruptcy.
Not everyone who files for bankruptcy qualifies for chapter 7 bankruptcy. To qualify, you must pass the “means test.” The means test takes a quick look at your income and expenses to see if you have the ability to repay your debts.
If you don’t pass the means control, you may still be able to file for chapter 13 bankruptcy. With chapter 13, you can reorganize most of your debts and create a repayment plan that fits your budget.
3. Bankruptcy will impact your credit score.
Filing for bankruptcy will really harm your credit score. How much your score drops depends on several factors, including the type of bankruptcy you file and whether you have any other negative marks on your credit report.
4. You could lose some of your property in bankruptcy.
When you file for chapter 7 type of bankruptcy, the court will appoint a trustee to oversee your case. The trustee will sell any non-exempt property you own to repay your creditors.
Some states have laws protecting certain types of property, like your car or home, from being sold in bankruptcy. These laws change from state to state, so it’s essential to check with a bankruptcy attorney to see what property you might be able to keep.
5. You may not be able to discharge all of your debts in bankruptcy.
There are a few types of debts that cannot be erased in bankruptcy. These include child support and alimony payments, most student loans, and taxes owed to the government.
6. Bankruptcy can stay on your credit report for up to 10 years.
The effects of bankruptcy can last for years. Depending on the type of bankruptcy you pick to file for, it can stay on your credit report for up to 10 years. This can make getting approved for loans and other types of credit challenging.
7. You may have to give up your credit cards.
If you file for common chapter 7 bankruptcy, you will likely have to give up your credit cards. This is because all your unsecured debt, like credit card debt, will be discharged in bankruptcy.
8. You’ll need to complete a mandatory credit counseling course.
Before you can file for bankruptcy, you’ll need to complete a mandatory credit counseling course. This course must be completed within 180 days of filing for bankruptcy. The course will teach you about budgeting and other financial management skills.
9. You’ll need to complete a debtor education course.
After filing for bankruptcy, you’ll be required to take a debtor education course. This course must be completed before your debts can be discharged. The course will teach you how to manage your finances so you can avoid future debt.
10. You may have to sell your assets in bankruptcy.
If you file for chapter 7 bankruptcy, the trustee appointed to oversee your case may sell some of your assets to repay your creditors. These assets could include jewelry, furniture, or even your car.
11. You may have to give up your tax refunds in bankruptcy.
If you file for usual chapter 7 bankruptcy, you may have to give up your tax refunds for the next five years. The money from your tax refunds will be used to repay your creditors.
12. You may have to give up your retirement savings in bankruptcy.
If you file for chapter 7, you may have to give up your retirement savings to repay your creditors. This is because retirement accounts are considered assets in default.
13. Bankruptcy can be expensive.
Filing for bankruptcy is not free. You’ll need to pay filing fees and other court costs. You may also need to pay for credit counseling and debtor education courses. These courses can cost hundreds of dollars.
14. You may need to hire a bankruptcy attorney.
Filing for bankruptcy can be complicated. You may need to hire a bankruptcy attorney to help you with the process. Attorney’s fees can vary, so it’s essential to shop around and compare prices before hiring an attorney.
15. Bankruptcy will not eliminate all of your debt.
While bankruptcy can discharge some of your debts, it will not eliminate all of your debt. You will still be responsible for repaying any debts not discharged in bankruptcy.
There you have it! These are just a few things you should know about bankruptcy. If you’re considering filing for bankruptcy, you must speak with an attorney to get more information about the process and what to expect.