What to Know Before Filing Bankruptcy
Bankruptcy is an option for consumers when they find that they are too far in debt to pay their financial obligations. While there are many reasons that this can happen -- unemployment, illness and lack of financial management skills to name a few -- for some consumers declaring bankruptcy can be the only way to have a chance to start over financially.
Other People Are Reading
-
Type of Bankruptcy
-
There are typically two types of bankruptcy for those seeking protection due to personal debts. Chapter 7 relieves consumers from their obligations to repay unsecured debt. Unsecured debt includes credit cards, personal loans with no collateral and medical bills. In a Chapter 13 case, the trustee consolidates qualified debt and devises a three to five-year repayment plan. The consolidated debt consists of unsecured debt and accumulated amounts from non-payment of secured debt. Chapter 13 is only available to consumers who have enough income to pay the amount set by the trustee.
Loss of Property
-
If you file a Chapter 7, the trustee will use the exemptions allowed by your state to determine if you are able to keep your assets. While exemption amounts vary, if the equity you have in the asset is more than the exemption the trustee can order the sale of your property and use the proceeds to pay off your debts. The trustee in a Chapter 7 filing can allow your lenders to repossess your home or automobile if you do not have enough income to make your payments. If you file Chapter 13, the trustee considers the amount of your mortgage and automobile payments when deciding how much your plan's monthly payment will be. Your assets are not at risk if you are able to fulfill the terms of the Chapter 13 agreement.
-
Public Record
-
Bankruptcy is a matter of public record. Unlike a credit report where the credit bureau removes bankruptcy information after 10 years, information remains on public records forever. This means that the information will appear on any future background checks that an employer or organization may request. You will also have to check "yes" on official forms that ask if you have a bankruptcy in your past. While the length of time since your bankruptcy can lessen its negative effects, declaring bankruptcy can follow you for the rest of your life.
Joint Petition
-
Spouses can use a joint petition to file together if their debts are in both of their names. If the majority of unsecured debt belongs to only one spouse, that individual can declare bankruptcy on their own. Bankruptcy will still appear on your spouse's credit report for any debt that you co-own -- such as a mortgage or automobile -- but will not lower his score as much as if you and he filed a joint petition.
-
