Being in great debt can be a scary thing. When you can’t repay all your outstanding debts, you’re more likely experiencing bankruptcy. You’ll receive a bulk of collection calls that can give you anxiety. In this situation, it’s best to consider the idea of filing for bankruptcy if you want to get out of too many financial worries. However, you have to understand that the process can be very complicated. That’s because bankruptcy law has changed over the years.
If declaring bankruptcy is your best financial option, here’s everything you need to know about the bankruptcy law.
- Bankruptcy is a time-consuming process.
Whether you believe it or not, bankruptcy can be a time-consuming process. If you’re inexperienced with how bankruptcy laws operate, the first thing to do is to understand your options. Here are some bankruptcy options to consider:
- Chapter 7 Bankruptcy – This is the most common bankruptcy option for individuals that release most of their personal unsecured debt, such as credit cards and personal loans. This process will more likely last for about three to four months.
- Chapter 13 Bankruptcy – This option will give you the opportunity to set up a new repayment plan and oblige you to pay your creditors back over time. While no property is needed to be liquidated, the process may last for about three to five years.
If you’re looking to have a fresh start on your finances, it’s essential to understand the difference between Chapter 7 and 13 bankruptcy and stick with the right choice. That way, you’ll be able to make your financial life much better afterward.
- Filing for bankruptcy requires complete disclosure and honesty.
When it comes to bankruptcy cases, you need to be completely honest with your finances. This means that you should write down all your debts, properties, and creditors. If you’re found to be guilty of dishonesty, you may possibly face a serious federal crime that may affect your chances of getting a bankruptcy discharge.
- Filing for bankruptcy is costly.
Due to the complexity of bankruptcy laws, filing for bankruptcy may also require you to spend a significant amount of money. The amount depends on whether you need to hire a bankruptcy lawyer or not. Having an attorney on your side can be of great help to you, but it might also cost you hundreds to thousands of dollars. On the other hand, filing a bankruptcy case on your own requires you to set aside money for the filing fees. So, whichever way to go, going through the process of bankruptcy will never be cheap.
- A bankruptcy case can impact your credit standing for years.
In most cases, filing for bankruptcy can affect your ability to get credit. That’s because a bankruptcy record gives a creditor every reason to shut you out. Not only that but recovering from bankruptcy usually takes at least two years. If you’re looking to improve your credit score slowly, you need to make small amounts of credit and strictly repay them based on their terms and conditions.
- Filing for bankruptcy exposes your financial life to the public.
Whether you like it or not, the bankruptcy law may reqire you to open your finances to public scrutiny. There are instances that you need to file extensive paperwork listing down all your income, expenses, and current financial transactions. Moreover, you also have to attend the meeting of creditors as part of a bankruptcy proceeding. There, any of your creditors may question you in a public room. Even if the bankruptcy trustees strive hard to keep the proceedings as confidential as possible, the meeting will always be a public one. So, prepare yourself to expose your financial mistakes to the public.
- The bankruptcy discharge only protects you.
While the primary goal of filing for bankruptcy is the discharge, you can’t expect that the entire debt will be eliminated. That’s because a bankruptcy discharge is a personal one; thereby, it only protects you.
For example, even if you file for bankruptcy, but you’re a co-maker on a home loan, the case you’ve filed doesn’t wipe out the debt itself. The lender can still go after the other co-maker on loan.
Filing for bankruptcy will not fix everything. As much as you want a fresh start for all your finances, the entire process will never be an easy one. Apart from figuring out why you ended up in that kind of situation, it’s also important to know whether bankruptcy is the right solution for you. So, keep this information in mind to make sure you’ll not get a record of going bankrupt more than once.