Bankruptcy

Bankruptcy

When to File Bankruptcy

Bankruptcy should be the last resort to fixing your credit problems. You should know what your options are before you make the decision to file. Filing for bankruptcy is a serious decision that you should think long and hard about.

Most of your debts can be removed from your credit record by filing for bankruptcy, but it can also have serious consequences. A bankruptcy will show on your credit reports for 10 years – and meantime, you’ll be unable to secure a loan except at a very high interest rate.

You should decide to file for bankruptcy only if you’ve exhausted other avenues for help and you are in a financial emergency. Those with consumer debts usually file a Chapter 7 type of bankruptcy, where the court issues an automatic stay which keeps creditors from contacting you during the bankruptcy procedures.

This liquidation type of bankruptcy requires that you present detailed reports about all of your assets, income, expenses and outstanding debts. A discharge of all debts usually occurs after three to six months and costs around $300 to file.

If you hire an attorney to help you through the paperwork maze, you’ll pay more. Even though a bankruptcy judgment will stay on your credit record for years, the decision is better than hurting your credit with missed payments, repossessions, defaults and lawsuits.

Bankruptcy is often easier to explain to a lender than having to explain each debt you defaulted on. Many things you own such as car, home and furniture will be exempt from bankruptcy procedures and anything you purchase after the bankruptcy is also free from seizure.

Your wages or salary is exempt, too. You’ll lose all of your credit cards (consumer debt) and you won’t likely be able to secure another mortgage. Lenders often consider bankruptcy customers as high risk, but you may be able to secure possessions after bankruptcy at much higher interest rates.

If you find yourself deep in debt again shortly after filing Chapter 7 bankruptcy, you might be able to file for Chapter 13 bankruptcy. Keep in mind, every filing of bankruptcy appears on your credit record and makes it more difficult for you to purchase things in the future.

Deciding to file bankruptcy is a major decision in your life. It will affect your future credit and lifestyle plans, self-esteem and your reputation. But it can also relieve the stress and angst that being deep in debt with no way out can bring to your life.

A local attorney can provide you with an initial claim review to discuss your situation and counsel you on the law involved in filing bankruptcy. This review is free and can help you make this monumental decision.