Looking for answers to some of your bankruptcy questions? Let us make things a bit easier for you. Here are some fast facts about bankruptcy you should know in case you ever need to decide to file:
- The two main types of personal bankruptcy – The most common type of personal bankruptcy is called Chapter 7 or the “fresh start” bankruptcy. Typically, filing Chapter 7 bankruptcy is beneficial for individuals or families with high amounts of unsecured debt (like credit cards or medical bills) and low amounts of assets (like paid in full homes or vehicles). A Chapter 7 bankruptcy can eliminate most types of unsecured debt, thus providing the debtor with a “fresh start.” The other type of personal bankruptcy is Chapter 13, which is a tad less common but still extremely beneficial. Chapter 13 bankruptcy involves a 3-5 year repayment plan in which the debtor is allowed by the court to pay back a percentage of their total unsecured debt.
The effect bankruptcy has on your credit – Don’t be fooled, bankruptcy does not completely ruin your credit as legend states. When you file for bankruptcy it will show on your credit report for 7-10 years, but that does not make it impossible for you to rebuild your credit, purchase a vehicle, or even a home. In fact, most individuals who file bankruptcy have better credit 1 year later than they ever had before. It’s all about choosing to make positive financial decisions once your filing is complete.
- The cost of filing – Just like any other legal process, filing bankruptcy cost money. There are attorney fees, and court fees involved. The attorney that you choose to hire will set their own fees based on the amount of work your case will take, but the court fees are the same for everyone: $306 for Chapter 7 and $281 for Chapter 13.
- The procedural requirements – When an individual files bankruptcy in the US there are certain requirements asked of them by the federal bankruptcy court. First, there are two courses that must be completed either over the phone or online. One is a credit counseling course, and the other is a debtor education course. Towards the end of the filing the debtor is required to attend a hearing known as the “meeting of creditors.” Although it is legally required that all creditors be invited, it is rare than any show up. This is a 8-15 minute meeting in which the bankruptcy trustee asks the debtor general questions regarding their case.
If you are struggling with an overwhelming amount of debt and do not think that you can eliminate it on your own in the next year, then perhaps you could benefit from filing bankruptcy. Talk with friends or family who have previously filed, or contact a local attorney in your area for a free consultation. For more information feel free to browse our site more, or visit the federal courts bankruptcy website here.