When you are in financial shambles, there’s a lot that goes through your mind. Some of it is good, and some of it is not wise at all. But when it comes down to it, and you are in over your head with debt that you need to file for bankruptcy, you need to be smart about it.
You don’t just walk into bankruptcy as you did in your debt; you need to grasp its idea fully. Take your time to understand as much as you can about bankruptcy before you file. Please find out how it will affect you and your income from then on.
Here are a few tips you need to look at before you file for bankruptcy.
Types of Bankruptcy
There are three types of bankruptcies that you can file for, and all are distinct.
- Chapter 7 – this is also known as liquidation and the simpler one to file. It also has the advantage of being easy to complete. This is the popular type of bankruptcy that most people file today.
One of the reasons this type of bankruptcy is popular is that it can wipe out all your unsecured debt. You won’t necessarily have to pay your credit card debt, medical bills under this type of bankruptcy. Some of your property will have to be sold off to pay your creditors, though.
If you have little or no assets, Chapter 7 bankruptcy will work best for you.
- Chapter 13 is the longest type of bankruptcy to complete, and it isn’t as easy to file as chapter 7. Another thing, this type of bankruptcy isn’t for those with regular income and a way to pay off their debt through a plan.
In this type of bankruptcy, you can keep all your assets, provided that you’ll have to pay all creditors the value of a non-exempt property. Some of the non-exempt properties are boats and cars.
This is an ideal type of bankruptcy if you are behind on your car or house payment.
- Chapter 11 – this is the type of bankruptcy that is used to reorganize a business. If you are a high-income person, you can also use this type of bankruptcy too. It is the most complex type of bankruptcy and can drag on in court for years.
The ideal type of bankruptcy that you and most people need to look at is either Chapter 7 or Chapter 13.
Do You Need a Lawyer?
Bankruptcy is quite sensitive and can be a bit complex if you have no prior training. It isn’t a requirement to hire a lawyer, but it’s good practice to have one. There’s a lot that the lawyer knows and can help you out with.
If you’re facing foreclosure, especially, you need to hire a lawyer. A foreclosure defense lawyer will ensure you have all the documents filed on time and have your case thrown out. Some cases will be a bit complex, and the lawyer will know how to deal with them.
It would help if you also had a lawyer, as it would give you some breathing room; your creditors will stop calling you; they’ll contact the lawyer instead.
Bankruptcy and Your Employment
A big worry before you file for bankruptcy when you are employed is being fired because of it. The truth is, legally, your employer can’t fire you when you file for bankruptcy. Some will see you as a person who isn’t afraid to admit it when overwhelmed.
That said, your chances for promotions or getting a new post may be affected, though. If the new post sees you handle money, you won’t get the post. Your current job, though, you will easily keep it.
Timeframe for Bankruptcy
Contrary to what you may be assuming at this point, bankruptcy takes a little bit longer than you think. You have two types of bankruptcy you should file; each one takes a different timeframe.
Chapter 7 bankruptcy can take up to six months to be finalized. The fastest time it can take for this type of bankruptcy to be complete is four months. Chapter 13 bankruptcy, on the other hand, will take much longer as it will have to be approved by the court.
In some cases, Chapter 13 bankruptcy can drag out for, sometimes, up to five years. You are, in some cases, allowed to keep up payment for unsecured property such as a car and home. You will be making the payments, in this case, under chapter 13 bankruptcy.
When you are thinking of filing for bankruptcy, you need to look at all the avenues. Here are a few tips you need to look at before you can file for bankruptcy.