At one time or another, anyone with many bills to pay has probably considered filing for bankruptcy. This is perhaps especially true now that everyone is stuck at home, thanks to the COVID-19 pandemic. The good news—if you can call it that—is you are not alone.
Bankruptcy is a legal provision that gives people who can’t pay their bills a way to wipe out debt and get a fresh start. It could be considered legal breathing room. Credit card debt problems are a leading cause of these situations, which is the reason for Credit card bankruptcy attorneys.
What You Should Know Before Filing for Bankruptcy
Bankruptcy doesn’t solve all debt problems. Further, it can be not only time-consuming but also costly. For these reasons, anyone considering filing for bankruptcy should consider these points.
1. There Are Two Primary Types Of Bankruptcy For Individuals
Most bankruptcies filed for people are one of two types: Chapter 7 or chapter 13. Anyone considering bankruptcy should consult with an attorney to determine which is best for them. A Chapter 7 bankruptcy is also known as liquidation and is easier to complete. Most people use this method because it wipes out most unsecured debt, such as medical bills and credit card debt, without paying back money through a repayment program.
A Chapter 13 bankruptcy is designed for people who have a regular income and have enough money to repay their debts with a repayment program. Chapter 13 is a good option if a debtor has fallen behind on their payments.
2. Consider Less-Drastic Options
Bankruptcy can be a great way to get breathing room from debts, but it can also be considered drastic. There are other less-extreme options to consider, such as credit counseling or taking out a loan against a 401(k) plan or another fund. Another option is the CARES Act, a government initiative that will suspend federal foreclosures and eviction activity.
3. Don’t Go Shopping
For many people, that period when they are anticipating filing for bankruptcy is all they need to go on a shopping spree. And why not? After all, a bankruptcy will cancel all debt and wipe the slate clean, right? Yes and no. Creditors can use this spree and the ensuing debt to claim fraud against a bankruptcy filer.
4. Bankruptcy Won’t Shake Off All Debt
Many people believe that filing for bankruptcy will free them permanently from all their debts. This isn’t true. Certain types of debt, such as child support and taxes, aren’t discharged with bankruptcy. Student loans are also difficult to get rid of with a bankruptcy. This is another area where a bankruptcy attorney can be of immense help to determine whether filing is right for you.
5. Losing Some Property, But Not All
Certain property types, such as exempt property, can be kept by a debtor in bankruptcy. Exempt property includes the equity that a debtor has in their home. Nonexempt property, however, can be sold to help satisfy debts. Unfortunately, what is considered exempt and nonexempt changes from state to state, so check with an attorney for specifics.
The laws governing bankruptcy vary widely. Before filing for bankruptcy, it is best to consult with an attorney to determine what is best in any given situation. Bankruptcy can be helpful, but it has to be used optimally.
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