If you’ve come to a point where you feel the need to file bankruptcy, there are several things to keep in mind. Bankruptcy may seem like the best way to get out from under the financial debt and stressors you’re dealing with. Before taking the final step in filing, you should make sure you have done everything you can in working with your creditors. While some may work with you on payment arrangements, many won’t. If your negotiations with them have not worked and your liabilities are more than your assets, you may want to move forward with filing.
The United States Constitution has granted individuals the right to declare bankruptcy. This will allow you to resolve your current financial hardships and start to rebuild a good credit. There are two types of bankruptcy that you may file as an individual. They are Chapter 7 and Chapter 13. Chapter 7 allows you to clear the majority of your debts other than government loans. You may have some exempt items, such as your home and vehicle. Chapter 13 bankruptcy works with your creditors by setting a payment plan in a certain time frame, usually three to five years. When filing Chapter 13, you will need to repay some or the entire amount owed to creditors.
Negative Effects of Bankruptcy
There are some negative effects when an individual files bankruptcy. Here are some important things to keep in mind when one files either Chapter 7 or Chapter 13 bankruptcy:
- It is very important to remember that even though you are filing bankruptcy, there are some debts that cannot and will not be dismissed. These include liens, support orders, several kinds of tax debts, fines and student loans. These types of debt are considered non-dischargeable.
- In some instances your tax refunds from any government, be it local, state or federal, could be denied due to your bankruptcy.
- Credit ratings have become prevalent in almost all areas of life. You may be denied housing, work or insurance due to your recent bankruptcy.
- There are certain items that are exempt when you file bankruptcy. If you cannot exempt your personal property or real estate that you may have, it will be seized by the court. It will then be sold in order to pay creditors.
- Filing bankruptcy can affect your ability to obtain loans or a mortgage for many years. If you are able to obtain a loan, the interest rates will probably be much higher.
- If you have filed bankruptcy on credit cards, the credit card company will most likely cancel your card. After you have filed, you may be able to obtain a high interest card. You will most likely have to look at obtaining a secure card. With secure credit cards, you must have a security deposit for the amount of the credit requested for the same amount of credit you have requested.
- If you have chosen to file Chapter 13 bankruptcy, it is imperative that you may all payments to any creditor on time.
- Either bankruptcy will stay on your credit record for a period of seven to ten years.
Filing bankruptcy can reduce your financial burden and the stress of it. Be aware that you will probably still have some stressors due to the fact that after you file, you will now be dealing with banks and financial institutions to rebuild credit. It can be done, but it will take time and perseverance on your part.