Filing for bankruptcy is like waving a white flag of surrender. After all other attempts of paying your debts have proved to be futile, you then have no choice than to surrender all your assets to a bankruptcy trustee in return for the removal of your debt. You are probably well aware that bankruptcy provides quick debt relief with nearly-endless negative outcomes afterward. This "quick fix" option of debt relief should only be considered as a last resort, when you are desperate for a way out, when you've tried every other option and received no relief. The most dangerous aspect of bankruptcy is that your trustee may, at any time, be able to take any assets from you that are not proven to be exempt. Exemptions vary according to which state you live in, so be sure to review the bankruptcy laws in your state to get an accurate idea of what can be exempt. When you file for bankruptcy, your financial life, in essence, is being put in the hands of someone else.
There are five types of bankruptcy, in which two are consumer bankruptcy. The first type of consumer bankruptcy is Chapter 7, which is also known as liquidation. This allows consumers and businesses to surrender any non-exempt assets and simply walk away from their debts. You must have a lower income than your state's median in order to qualify. The other consumer bankruptcy is Chapter 13. This type of bankruptcy requires a little more work on the consumer's part. It essentially works in restructuring your debt loan, so you will most likely end up paying back most of your debt with full interest. The other types of bankruptcy are Chapter 9, which deals with municipalities; Chapter 11, which works in restructuring debt; and Chapter 12, which deals with farmers and fisherman. Determining which type of bankruptcy will work most effectively for you is best done by consulting with a bankruptcy lawyer. Feel free to get in touch with us about how to contact a bankruptcy lawyer.
What to Expect when Filing for Bankruptcy
Since bankruptcy is such a complicated process, you probably have a lot of questions about what you should expect and how it all works. Allow us to put it into simple terms by outlining the four-step bankruptcy process. Of course, the first step of bankruptcy is filing the paperwork. In doing so, you will meet with a bankruptcy trustee, and he or she will review your finances in order to determine if bankruptcy is the only option that you have left. Your trustee will then determine which type of bankruptcy will work best for your financial situation. Once all the details are straightened out, you will then fill out all of the necessary paperwork, and move on to the next step. Your bankruptcy trustee will then administer your information to your creditors, who will then file the bankruptcy claim. Once the claims are submitted, your unsecured creditors will be instructed to follow a "stay of proceedings." This means that the creditors must discontinue all lawsuits and wage garnishments, along with all contact with you. Finally, you must attend a meeting with your creditors in order to discuss your bankruptcy. All of your property that has not been claimed exempt will then be sold by your trustee in order to pay off your creditors. At the closing of this meeting, you will be discharged from your bankruptcy.
Though bankruptcy may seem like an easy way to shed your debt, it does come at a high cost - literally and figuratively. After the high court fees and attorney fees that you will need to pay, along with the fees you will have to pay years after filing, you will find that bankruptcy is not so affordable after all. In addition to the monetary costs of bankruptcy, you will experience some additional costs as well. Though bankruptcy only takes up to 5 years to complete, you can experience the negative effects of it for 10 years afterward. You can think of this as a ripple in water after a stone is thrown into it; the stone is bankruptcy and the ripples are the effects. These negative effects primarily include a detriment to your credit. The effects of bankruptcy can stay on your credit report for as long as 10 years, making it nearly impossible to qualify for even the smallest loan. If bankruptcy is indeed the only option left for you, though, then keep in mind that the ripples will eventually settle, and you can indeed recover from bankruptcy. Still considering bankruptcy? Contact our debt specialists for more detailed information by filling out the right-hand form!