What Happens After You File for Bankruptcy?
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Decide if Bankruptcy is the Right Choice
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Determine if there are no other legal remedies available to you. A bankruptcy filing can have serious financial consequences for up to a decade. Investigate other options such as negotiations with your creditors or contact with dependents who will enable you to stay afloat financially for the immediate future.
Types of Bankruptcies
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If you have no other good choices, research all options. Individual bankruptcy filings are divided into two standard categories: chapter 7 and chapter 13. Chapter 7 bankruptcy is a straightforward liquidation of your assets to pay off creditors. Your property is sold off to pay down debt. You may lose title to your home and vehicles. Once this happens, your debts are considered cleared. You will not owe additional funds other than debt that is not discharged by a bankruptcy filing such as back taxes and court-ordered child support payments. Chapter 13 bankruptcy is more complicated. Essentially you will have an extended period of time to pay off your debt. This time frame is generally between three and five years.
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Talk to a Lawyer
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Consult a tax attorney. Once you have decided to file for bankruptcy, make sure you have a good tax lawyer to represent you. The tax lawyer will make sure all bankruptcy paperwork is filled out correctly and you are adhering to all necessary bankruptcy rules.
Chapter 7 Bankruptcy
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If you are filing a chapter 7 bankruptcy, a court-appointed trustee will inventory your assets after you have filed the necessary documentation. The trustee will divide your assets into those that can be sold off and others that are exempt. Assets that can be liquidated to satisfy outstanding bills will be sold at auction. The money received from the sale will be used to reimburse your creditors. Once the sale is concluded, you will no longer owe creditors any additional funds even if the debt has not been repaid. Assets that are deemed exempt may vary from state to state. You may be allowed to keep your house.
Chapter 13 Bankruptcy
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Once you have filed a chapter 13 bankruptcy, the trustee will work out a plan of repayment with you. As a debtor you will agree to pay a certain specific sum of money each month to cover all debt. After the three to five years are over, you will no longer owe any outstanding debt even if all bills have not been repaid. If you fail to make payments on time or do not pay the debt, the chapter 13 bankruptcy will be dismissed. You will be forced to satisfy any remaining debt that has not been paid off during this time.
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References
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