Bankruptcy
Insolvency is the only option in some situations. Take a few minutes to speak with one of our debt experts if you want guidance on whether declaring bankruptcy is the best route to achieving financial freedom. Perhaps you have more possibilities than you realize.
3 Types of Bankruptcy
An individual or business may declare bankruptcy under one of several different headings. Each type is intended to assist debtors in managing their financial circumstances in the most advantageous way possible. Among the most prevalent types of bankruptcy are:
Chapter 7 bankruptcy
People or corporations frequently file for this kind of bankruptcy, which entitles them to the discharge of the majority of debt. The debtor must pass a means test and fulfill other eligibility conditions in order to be eligible for this sort of bankruptcy.
Chapter 11 bankruptcy
Businesses that are having financial difficulties frequently file for this sort of bankruptcy. However, certain people can also qualify for individuals. It enables them to restructure their debts and carry on with running their businesses as they gradually pay off their bills.
Chapter 13 bankruptcy
Most often used by individuals, this type of bankruptcy enables them to keep part or all of their assets while rearranging their debt payments into a payment schedule that is overseen by the court. Filers must meet the requirements for this sort of bankruptcy, including maintaining a consistent income and passing a means test.
How much does it cost to file for bankruptcy?
Bankruptcy filing is a challenging but necessary process. With filing costs that vary by state and the form of bankruptcy you choose to file, it is also an expensive option. The following costs should be taken into account:
Attorney fees
These fees might cost more than $1,000 depending on the state and type of bankruptcy. Fortunately, there are certain cost payment options available, and some filers may qualify for fee waivers.
Credit counseling
In order to qualify for bankruptcy, you will need to complete a credit counseling course that typically costs between $25 and $50 per person. Some states require this course even before you file your petition, so do your research before filing.
How long does bankruptcy stay on your credit report?
Your credit score may be impacted if you file for bankruptcy. In actuality, the majority of bad credit records remain on your credit report for up to seven years from the time they were first reported. Both Chapter 7 and Chapter 13 bankruptcy cases fall under this.
The impact of bankruptcy on your credit score varies based on a variety of variables, such as how long you’ve had any active accounts, how consistently you’ve made payments on those accounts, and how long you’ve had active accounts overall. Your credit score may suffer immediately after filing for bankruptcy, but if you are able to start repairing it by making on-time payments on existing debts and managing new accounts properly, it may eventually recover.
How often can you file for bankruptcy?
How often someone can file for bankruptcy is one of the most often asked topics concerning bankruptcy. The answer to this question is based on a number of variables, such as the type of bankruptcy you are filing, local legislation, and your present financial status.
You are typically only permitted to file for bankruptcy once every seven years. You are only permitted to apply for Chapter 7 bankruptcy once every eight years under federal bankruptcy statutes. You must wait at least four years after a prior filing before you can petition for Chapter 13 bankruptcy.
You might be able to file again sooner if there are any exceptions to these restrictions. You might be allowed to file for bankruptcy sooner if, for instance, your financial condition has dramatically altered since your prior petition. Extenuating events that contributed to prior financial difficulties can also be demonstrated, such as a medical emergency or job loss. If so, you might be allowed to refile for bankruptcy sooner.
What are the downsides of filing for bankruptcy?
Despite the fact that you can eventually repair your credit after bankruptcy, declaring bankruptcy may lower your credit score. The damage will need to be repaired, and that will take time, attention, and a willingness to alter your spending patterns. You can begin the process of rebuilding following bankruptcy by working with credit counselors or financial advisors to create a plan for how you can gradually raise your credit score.
Should I Consider Filing for Bankruptcy?
In America, bankruptcy—or simply the situation in which a person is unable to pay their creditors—occurs frequently. More than two million bankruptcy cases were filed nationwide by debtors between 1980 and 2005. Bankruptcy is frequently not a result of careless spending, but rather of severe financial difficulties for many people who can’t afford to deal with unforeseen events like job loss and high medical costs.
Truth be told, many financial experts will discourage filing for bankruptcy to escape your debt and getting mental health debt relief. Make sure you’re fully informed before going down this road.
Bankruptcy Law is on Your Side
Surprisingly, bankruptcy is a foundational element of the US Constitution. The American founding fathers were adamant about developing a system that would allow people who were drowning in debt to get relief and start again. Here are some options for declaring bankruptcy that are permitted by the U.S. Bankruptcy Code.
- Liquidation –This is the fundamental bankruptcy chapter. The court will appoint a trustee to manage the sale of all of your assets in order to pay your creditors during this procedure. However, this may not necessarily apply to your most important belongings, like your principal property or car.
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Adjustment of Debts : This process comprises repaying your debtors within three to five years using your normal income and other assets, and it is only appropriate for individuals who are unable to petition for liquidation owing to income restrictions.
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Reorganization: The court requires debtors to present a plan to reorganize their finances in order to pay creditors in full within 120 days throughout this process. People can pay off their debt and cover their living expenditures thanks to this chapter.
What to do before filing for bankruptcy
As you can see, there are several options if you plan to file bankruptcy. To discover whether bankruptcy is the right course for you, or how to avoid bankruptcy contact Freshstartnow to learn all your options. Also, learn more about accelerated financial solutions and learn more about the current debt ceiling.
Bankruptcy FAQs
The best way for many debtors seeking relief from their creditors is to seek Chapter 7 bankruptcy assistance in order to take control of their mounting debt and obstinate collection tactics. When you file a petition for Chapter 7 bankruptcy, all debt collection actions automatically “stay” until the court has a chance to resolve your debts.
The legal system allows you to liquidate, or sell, your nonexempt property under Chapter 7 protection and then distribute the proceeds to your creditors to pay off your debts. The last chance for debtors to break the debt cycle they have become trapped in as a result of bills is frequently Chapter 7.
What you need to know about Chapter 7
In contrast to Chapter 13 protection, Chapter 7 bankruptcy exempts you from submitting a repayment plan. If: Chapter 7 bankruptcy may be the best option for you
- Your total debts equal more than half your annual income
- You do not have many assets
- The bulk of your debts are dischargeable
- Repaying your debt will take longer than five or six years
Not all debts, such as current taxes, student loans, and child support obligations, are forgiven under Chapter 7 bankruptcy.
Chapter 13 bankruptcy may be the best option for debtors facing escalating debts and a clear road out of debt (what is delinquent debt?). This would allow you to put your financial issues in the past.
With Chapter 13 bankruptcy protection, those with steady incomes are granted the time and protections to assist reorganize their obligations, and unlike Chapter 7 bankruptcy protection, if you go by all the bankruptcy court’s directives, you do not risk losing your possessions.
In many ways, receiving Chapter 13 assistance is similar to receiving a consolidation loan in which the Chapter 13 trustee is paid before the funds are distributed to your creditors.
What you need to know about Chapter 13
Reorganizing your debts is a great method to use Chapter 13 protection. Be ready to provide a lot of information to the bankruptcy trustee in order to satisfy him or her because receiving protection under the bankruptcy regulations is a procedure rather than an immediate occurrence.
What You need to Know about Chapter 13 Bankruptcy:
- A list of all creditors and the amount of money you owe
- Detailed accounting of your income including amount and frequency
- A list of all your property and assets
- A detailed list of monthly living expenses
- You can contact the Freshstartnow team to get your questions addressed if you have the resources to pay off your debts but simply need a little more time to restructure what you owe your creditors. Learn more about liens as you continue reading about mental health and money.
Although declaring bankruptcy may seem like the end of the world, in actuality, it can be the first step toward a life free of debt and allow you to put your worries to rest. You can overcome bankruptcy stronger than ever with the appropriate assistance.
What Do when filing for bankruptcy?
As you are probably aware, after you have requested protection under the bankruptcy laws of the country, the action will remain on your credit report for ten years after the ruling. But there are actions you can do to retake control of your credit, so you don’t have to sit around impatiently waiting for ten years. A bankruptcy “what to do” list is a terrific suggestion if you’re unsure of what to do if you’re bankrupt.
After filing for bankruptcy, there are a number of proactive actions you may take to aid in your recovery, and this bankruptcy “what to do” list will help.
Bankruptcy To Do List:
- Check credit score for discharged debt
- Reestablish credit as soon as possible
- Keep older cards active
- Do not apply for a flood of credit cards
As previously stated, filing for bankruptcy protection is not the end of the world; you can move forward with the remainder of your life.
Will Bankruptcy Affect My Credit?
Yes. However, bankruptcy offers at least the end of your financial problems within a decade of your filing, even though it has a negative impact on your credit score for a considerable amount of time. On the other hand, persistent litigation and collection actions will keep your credit rating from improving.
Your credit will be impacted by bankruptcy in a number of significant ways that could have both immediate and long-term effects.
How Bankruptcy affects my credit:
- It stays on your credit for 10 years
- Credit score drop of 160 to 220 points
- Difficulty reestablishing credit
- Negatively impact ability to rent
Although it may seem that way as you go through the process, bankruptcy is not the end of the world, and time is the best remedy for that.
Consumers now find it simpler to manage the numerous paper trails required to effectively file for protection under the country’s bankruptcy legislation thanks to changes in the bankruptcy laws. In fact, more than 10% of files, mostly Chapter 7 petitions, are made without any legal advice or assistance.
Every debtor’s circumstance is unique, though, so it may be a good idea to think about hiring a bankruptcy attorney for petitions that are challenging.
Filings that are complicated can involve having collateral loans, such as mortgages and vehicle loans, or attempting to reaffirm a debtor agreement in order to aid redeem the subject property. Consider seeking legal counsel if you own items other than the essential clothing, furniture, and household necessities.
Where can I find a Bankruptcy Attorney
You don’t want to take a chance choosing the incorrect attorney to defend you before the court trustee when something as crucial as your financial future is at stake. The majority of people looking for representation might not know where to begin, while those with a lawyer in the family won’t face this issue. Here are some excellent areas to look into when looking for a lawyer.
How to Find a Bankruptcy Attorney:
- Personal referrals
- National Association of Consumer Bankruptcy Attorneys
- Search Engines
- Online Referral Services
- Local Bar Association
You should think about contacting a bankruptcy attorney if you have received a subpoena, a garnishment, or any other type of legal threat.
How do I get help hiring a Bankruptcy Attorney?
The financial professionals at Freshstartnow are available to assist you in comprehending the bankruptcy procedure and the part a bankruptcy lawyer might play in it. Find out which debt relief strategy is appropriate for your particular circumstances and how crucial it is to have legal counsel on your side.