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Many people think filing bankruptcy is the easiest way out. Actually you should avoid bankruptcy at all costs as it is the worst thing you can do to your credit. It can remain on your credit report up to ten years. Credit grantors will consider it when evaluating you for a personal loan. You may receive credit but only if a predetermined amount of time has passed, or if the filing is no longer on your credit report. Attaining a loan after you file is difficult and could cost you more in interest rates and fees.
There are two categories: reorganization (chapter 11, chapter 12, and chapter 13) and liquidation (chapter 7). In a chapter 7, a trustee collects your non-exempt property, sells it, and distributes the proceeds to your creditors. You may use future earnings to pay creditors in a chapter 11 bankruptcy, chapter 12, or chapter 13. There are differences between filing a chapter 13 bankruptcy and a Chapter 7. Chapter 13 enables a debtor to retain certain assets that would otherwise be liquidated in Chapter 7.
The process begins when you file a petition in Federal court. You must file a statement of assets and liabilities as well as schedules listing creditors. Once you have finished filing, your creditors are prohibited from taking any action to collect discharged debts.
There are other negatives. In chapter 13 you may end up paying back 50% or more. If you miss a payment during chapter 13 you could end up in breach of court and forced to pay all the debt. Filing BK limits your personal spending to items that the court considers essential. Also, the majority of debtors don’t complete their Chapter 13 repayment plans. Although most people filing chapter 13 assume they'll complete their plan, only about one third do. A chapter 7 may stay on your credit longer than a chapter 13 bankruptcy. Here you would be paying nothing back to your creditors. If you own a home with significant equity, have assets to protect, or have co-signers to a loan, you probably cannot file chapter 7. If passed, recent law proposals will make filing even more difficult.
In some cases filing may be necessary. However, you should avoid bankruptcy if at all possible. A competent debt reduction company can help reduce your debts to an affordable level so you can avoid filing. To receive your free consultation from knockoutdebt.com simply fill out the form to your right. For more bankruptcy information, you may want to contact an attorney in your area or research it online.
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