For some people, filing personal bankruptcy is the
only way they can find their way out of overwhelming debt. Whether your
debt is the result of not being able to pay your bills because you were
laid off work or the result of poor financial decisions, there are a
variety of things to consider before actually filing personal
bankruptcy. For some people, filing personal bankruptcy is the only way
they can find their way out of overwhelming debt. Whether your debt is
the result of not being able to pay your bills because you were laid
off work or the result of poor financial decisions, there are a variety
of things to consider before actually filing personal bankruptcy. When
you first consider to file bankruptcy, you will need to decide if
Chapter 7 or Chapter 13 bankruptcy will fit your needs better. As well,
there are a variety of debts that cannot be included in your bankruptcy
settlement.
Chapter 7 bankruptcy requires that a bankruptcy trustee sell off your
nonexempt assets so that your debt can then be repaid. With Chapter 7
bankruptcy, there is the risk of losing your home, along with a
majority of your other personal items. Therefore, before filing Chapter
7 bankruptcy, it is important you have a full understanding how Chapter
7 works. When it is all said and done, if you file Chapter 7
bankruptcy, you will no longer have your overwhelming debt.
Chapter 13 bankruptcy varies quite a bit from Chapter 7 bankruptcy.
Chapter 13 bankruptcy requires that a portion or all of your unsecured
debt is repaid. A repayment plan is established through the bankruptcy
court. Payments can be made over a period of 36 months to 60 months,
depending on the amount of the debt. The repayment amount is equal to
or greater than the amount would be should you have chosen to go with
Chapter 7 bankruptcy and liquidated your assets.
Although personal bankruptcy may seem like a great way to break free of
your overwhelming debt, there are some types of debt that cannot be
included when filing bankruptcy. Debt that occurs from student loans,
taxes, child support, spousal support, criminal fees and charges made
on a credit card 40 days before filing bankruptcy cannot be included in
personal bankruptcy.
It is important that you realize filing personal bankruptcy will have a
negative effect on your credit rating. This effect will last for
approximately seven to ten years, depending on what type of bankruptcy
you file. Although your credit score will be affected, you can still
obtain credit after you have filed bankruptcy. However, the credit that
you will be able to obtain will carry a higher interest rate than it
would if you didn’t have a bankruptcy on your credit.
Filing bankruptcy can also have other negative effects. For instance,
if you would need to obtain life insurance you may have a harder time
obtaining a policy. Many car insurance companies are now charging a
higher premium if you have a bad credit score. Many employees are now
running credit checks. Therefore, if you have a bankruptcy on your
credit, it may be harder to obtain a job. You may also experience
psychological effects, such as depression.
For many, debt is a way of life. However, there are instances when the
debt becomes more than you can handle. Personal bankruptcy is a way to
help you deal with debt that you can no longer pay. If you are looking
to file bankruptcy, it is important that you have a full understanding
of the way it works, as well as the lasting effects bankruptcy can have.
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