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Facts About Filing Bankruptcy

By Edited May 14, 2015 0 0

When you consider that personal bankruptcy is one of the most common options for debt relief around the world, there certainly are a lot of misconceptions about it. People often make the assumption that filing a claim is a simple way to eliminate debts and they rarely recognize the serious consequences that are associated with the process. Because of these misconceptions, borrowers tend to fall into the trap of filing on their own without the assistance of a financial advisor or bankruptcy attorney. This often leads to critical errors and eventual fatigue as they realize that they simply don't have the resources or knowledge to proceed on their own. If you're currently thinking about filing a claim, but aren't quite sure what it all means in terms of the work and preparation that's required, then the following article should be of use to you. In it we will discuss some of the facts about filing bankruptcy, including the differences between the two most common bankruptcy options – Chapter 7 and Chapter 13.

Filing bankruptcy can be an extremely stressful time for borrowers and can include some hefty consequences that people should be aware of prior to filing. Listed below are some of the most important things you should know about the process –

• Claiming Bankruptcy Takes Time - filing a claim can take an enormous amount of time if you decide to file on your own. You will be required to collect detailed information about your financial history including a look at your debts, assets and current household income. You will also be required to fill out many different forms before your claim can be reviewed by the bankruptcy courts.
• You Must Qualify – many people don't know that you must qualify for filing based on your complete financial picture, which is why the information you provide to the bankruptcy courts is so important. The qualification process is meant to week out would-be scammers that seek to use the system to avoid their debt obligations.
• Chapter 7 vs. Chapter 13 – there are major differences between the two most common forms of personal bankruptcy protection. Chapter 7 is most common and involves the liquidation of assets to pay back creditors. Once the borrower's assets have been used up, the remaining debt is discharged. Chapter 13 is meant for borrowers that wish to retain their assets. Under Chapter 13, a repayment plan in initiated and the borrower must make regular payments to address their debt issues.
• There are Major Consequences – you won't get off easy when filing bankruptcy. In fact, your credit will take a serious hit that will make it nearly impossible to secure any form of desirable credit for up to 10 years. Because many employers check the credit scores of prospective employees, it may also be hard for you to seek employment.

Now that you know some of the facts about filing bankruptcy it's important to consult with an experienced and reputable financial advisor to discuss your options. While bankruptcy can be an effective way to address your debt, there may be alternative options that make more sense.


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