To File or Not to File Bankruptcy – The Top Tips
No one plans on filing bankruptcy, but, if you are considering filing, there are some important factors to consider. Here are 14 bankruptcy tips that can help you make an informed decision.
14 Important Bankruptcy Tips
- Know your options by educating yourself on the two different types of personal bankruptcy. The two main types of personal bankruptcy are Chapter 7 and Chapter 13. Chapter 7 allows the filer to walk away from all debt. This option is used by those with a very low income or very high amount of debt. Chapter 13 allows filers to repay some or all of the debt over a three to five year period.
- Bankruptcy should be considered in the event a major life event takes place. Divorce, unemployment or medical expenses are common reasons to file bankruptcy. Bankruptcy can halt collection attempts, even if it is temporary.
- Bankruptcy rules vary greatly by state. The decision to file and whether you will qualify for Chapter 7 will depend on your location.
- You can keep some possessions when filing bankruptcy. Personal property, clothing, furniture, and electronics are yours to keep. Depending on your state, your finances and the type of bankruptcy you file, cars and homes may be retained as well.
- Write down your financial situation to decide which bankruptcy option is best for your financial situation. If you were behind on mortgage payments and can now pay them, Chapter 13 is the best choice. If you do not own real estate and have mounting medical bills, Chapter 7 is the better option for this scenario.
- You must qualify for Chapter 7 by showing their income is below the state median or can’t pay their debts. Since filing Chapter 7 bankruptcy is a last resort decision, people intent on filing typically have no problem qualifying.
- Ironically, as you are trying to get on your feet financially, bankruptcy is costly. Costs will vary depending on your attorney and filing Chapter 13 is considerably more expensive than filing Chapter 7.
- Some attorneys may offer low-cost options for filing bankruptcy or they may offer to do pro bono work.
- Bankruptcy stays on your credit history for 10 years!
- Even though it stays on your credit history, filing bankruptcy could potentially improve your credit after one year. Credit agencies will see you making payments which will better your chances for approval when applying for credit.
- If you have a joint account holder, they will still be responsible for any debt even if bankruptcy dissolves your debt. Before a divorce or filing bankruptcy, pay off bills or have debt in one name or the other.
- Bankruptcy is public information even if it is about your personal finances. Anyone, if interested, can see your financial situation.
- There is a required 90-minute credit counseling class you must take before filing for bankruptcy.
- Get advice early when you begin having debt issues or are just beginning to consider filing for bankruptcy.
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Great American Credit Repair provides credit repair counseling and repair. We can help when bankruptcy is a possibility.
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