Things To Learn About Bankruptcy
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There are 10 things you need to learn about bankruptcy before declaring it. Times may be tough but there are other options out there and many different forms of bankruptcy. It sounds like an easy way to get out of trouble. Over 1 million people filed bankruptcy last year, but in the long run it's not an easy way to get out of debt and it lasts a long time.
Many people will file bankruptcy before the age of 40, over half of them will have lost a job or just gotten divorced. Before ever considering to file bankruptcy you need to learn about other options. Try working out a deal with creditors. Offer them to pay a set amount each month or see if they'll take half of what you owe. A creditor wants to see some money and if you file bankruptcy they won't see any, there best bet is to take it. Try getting a second job to pay off the extra bills that are piling up, you'll get out a debt sooner and stay away from creditors.
It does cost money to file bankruptcy. Filing a chapter 7 will cost $200 and filing a chapter 13 will cost anywhere from $800-2000 in lawyer fees.
Chapter 7
A Chapter 7 is called a straight bankruptcy, it's the most common type of bankruptcy to be claimed. This is when the person filing liquidates all his debts. You must hand over all non-exempt property so bank can make it into cash. Non-except items include automobiles, boats and real estate, etc. This is the fastest way to start over. With the new laws that hit in 2005 you will now have to pay creditors if you have the money, which would mean that you'll need to file a chapter 13 first.
You cannot file bankruptcy if you just moved to a state, you must live there for at least two years or more. If you were outside the United States and just moved back, you would file under the state you last lived in. Some states only allow you to file under their state law while others will allow you to choose between state law or federal law.
One way to figure out which Chapter you will most likely end up filing is to take your monthly income and subtract it from your monthly expenses, this does not include eating out. Multiple that by 60. $6000 or less will make you file a chapter 7, $10000 or more will be a Chapter 13. Before you can actually file either of these, you will have to go through a course which will help you in the future.
Chapter 13
A Chapter 13 is also known as a reorganization bankruptcy and you are basically saying you will repay your debts within 3-5 years. Filing a chapter 13 can be useful if you fall behind on a car payment and want to keep the original agreement.
First take a course on bankruptcy before filing down at the court. Talk with a lawyer to learn the proper steps. Creditors may not proceed with any legal action once you file bankruptcy, everything is stopped. You must sign a statement of intent on your secured property such as a vehicle. If you don't, the file is stopped and your creditors can take legal action. This is very hard on a family so you may want to think about what you are doing before filing. Within 3 months your debts should be clear and you will have a clean slate to start over with. You are only eligible to file bankruptcy if you haven't filed in the past 6 years.
Remember, filing bankruptcy may get rid of all those creditors but it will stay on your credit report for 10 years. If you plan on buying a house during that time, it will be the one major reason they say no. If you filed bankruptcy, you have now become a bigger credit risk to most companies.
Posted by jonathan on December 22, 2005 at 06:29 PM