Seven Things You Need To Know Before Filing For Personal Bankruptcy

Though bankruptcy looks like a scary thing. However, it is true that many people tend to have a heavy heart during bankruptcy, mostly due to a feeling of having lost social status. And if you are someone who is planning to file for bankruptcy but does not have a clue as to what it is all about, the following points should prove very useful.

1. Types Of Bankruptcy

There are two types of personal bankruptcy that you can file for – Chapter 7 and Chapter 13 bankruptcy. Chapter 7 bankruptcy will discharge all your unsecured debt. This includes things like credit card debts and personal loans. Those who file Chapter 7 are able to keep most of their assets barring a few. The process takes about three to four months to complete. Chapter 13 bankruptcy does not dissolve any of your debt. Instead, it reorganizes your debt in a way that it can easily be paid in monthly installments. Property is never involved or even considered for liquidation. The whole process can last anywhere up to five years. So, make sure to hire good Bankruptcy Attorneys In Dallas to handle your filing.

2. Impact On Credit History

Once you file for bankruptcy and it is approved, the information will stay in your credit history for about ten years. As such, you will have great difficulty in securing any additional debt after bankruptcy, at least for the first few years.  You may have to resort to less traditional lenders and will probably have to pay exorbitant interest rates. The good news is that bankruptcy won’t have much of a say as the years pass by. So, if you don’t plan on taking any new debt for three or four years after bankruptcy, then this is not something you need to worry about.

3. Cost Of Bankruptcy

The irony of filing a bankruptcy is that it is very expensive. Though the actual costs of a bankruptcy filing will vary depending on the lawyer, you can expect to pay about $2500 for a Chapter 7 filing and $4000 for a Chapter 13 filing. On the upside, you don’t have to make the payment at one go. Since Chapter 13 can take anywhere up to five years to be resolved, you can spread the payment of $4000 over these five years. 

4. Liquidation Of Assets

Though assets may be liquidated during bankruptcy, not everything you own will be taken away from you. There are assets which are exempted and will never be considered for liquidation. These include things like home furnishings, electronics, and other personal property. And in some cases, you will even be able to keep assets like a car or a home. This will primarily depend on the type of bankruptcy you file, the state of your finances, and the local laws.

5. Co-Signer Liability

If you have taken loans with a co-signer, you need to know that bankruptcy only ends your financial obligation. The co-signer will continue being liable for the debt. For example, suppose that you and a relative took a loan of $30,000 to start a business. If you file for bankruptcy, then you will be exempted from the debt. But your relative will still be liable to pay the debt. Instead of being jointly responsible for the debt, your relative will now become individually responsible for the entire debt. 

6. Public Access

You should prepare yourself to lose some privacy when you are filing for bankruptcy. The filings are usually available for unrestricted public access. As such, any person who wants to look up your bankruptcy can easily do it. In addition, the fact that you have been bankrupt will be published in all the leading local newspapers and online portals. So, everyone who knows you and lives in your locality is likely to know about your financial status. 

7. Debts That Cannot Be Discharged

A bankruptcy will not discharge all your debts. There are some debts that you will still be liable for despite filing for bankruptcy. These include things like back taxes, child support etc. You will be required to pay off these debts without fail. The best thing to do when faced with such undischarged debts is to consult a good credit counselor. They will help you to restructure your finances in a way that you will be able to pay these debts over several months or years. You will be required to change your spending habits for this.