4 Common Questions About Filing For Bankruptcy

Posted on: 13 November 2014

If you're drowning in debt and feel like there is no way out, you may want to consider resetting your financial responsibilities by filing for bankruptcy. Here are 4 common questions you may have regarding the process.

When Should I File For Bankruptcy?

If your income is not high enough to pay your debts, bankruptcy might be the solution to help you get back on track financially. This can often happen if you have gone through a recent divorce, have outstanding medical bills, or have lost your job and cannot pay for your mortgage.  

Filing for bankruptcy can help save your house if you are in danger of losing it, as it will prevent a foreclosure from happening. Bankruptcy can be a way to give you time to find a new job and start making payments again.

What Is The Difference Between Chapter 7 And Chapter 13?

Filing for chapter 7 bankruptcy will completely get rid of all your debts, but your credit rating will be severely damaged. You may find it impossible to get a loan in the future, and if you do, the interest rates will be extravagant.

Chapter 13 bankruptcy will protect your credit rating, but you still need to repay your debts. You will work with a bankruptcy attorney from a site like http://howardgoodmanlaw.com/index.html and the courts to come up with a plan to repay your debts over 3-5 years.

Do I Have To Give Up All My Possessions If I File For Bankruptcy?

It is a misconception that all your possessions will be repossessed when filing for bankruptcy. Personal property, which included clothing, furniture, and electronic devices, are exempt from being taken away from you.

Depending on the kind of bankruptcy filed, your financial situation, and laws in your state, you may be able to keep your home and car. Consider working with a bankruptcy attorney if keeping these items are important to you.

How Long Will A Bankruptcy Impact My Credit Rating?

Filing under chapter 7 will keep the bankruptcy on your credit report for 10 years. Chapter 13 will only be visible for 7 years. Since you are paying back your debt with a chapter 13 bankruptcy, it might not affect your credit as much as you think. After a few years have gone by, creditors will look more positively on a chapter 13 than a chapter 7 bankruptcy.

Keep in mind that if you need bankruptcy to save your finances, your credit rating is not exactly in the best shape to begin with.

By knowing the answers to these common questions, you can decide if bankruptcy is right for you.