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What You Should Know Before Filing For Bankruptcy

What You Should Know Before Filing For Bankruptcy
"""You may believe that you have no other options. Perhaps you owe a number of people money, your credit is at its limit, and you are falling deeper into debt, so you begin to consider declaring bankruptcy. You thought you'd never do it, but you've heard about it and maybe even know someone who's done it. The query you have is when you should do it. There are various forms of bankruptcy, including chapters for businesses, individuals, and even farmers and fishermen.First, recognize that there are two primary categories of bankruptcy for individuals:
Chapter 7 is a straight or liquidation bankruptcy, which means the debtor's nonexempt assets are liquidated to pay off creditors. Because of the means test, it is more difficult to file for this form of bankruptcy.

Chapter 13 is a repayment plan for individuals, enabling them typically 3 to 5 years to repay their debts.
Chapter 7 bankruptcy accounts for nearly two-thirds of all petitions for bankruptcy. For those seeking a fresh start more quickly, Chapter 7 bankruptcy may be preferable to Chapter 13. Typically, the case is resolved within six months, and no minimum debt is required. In addition, Chapter 7 allows debtors to sign a ""Reaffirmation Agreement"" that allows them to retain certain assets, such as a vehicle or home, while continuing to make loan or mortgage payments. A disadvantage of Chapter 7 bankruptcy is that loan co-signers may be responsible for your debt unless they also file for bankruptcy.Filing Chapter 7 bankruptcy is permissible if you: Have completed required credit counseling.

Are prepared to liquidate nonexempt assets and distribute the proceeds to your creditors.

You will be able to start over financially once you have sold all of your remaining property to pay off your debt.
If you want to retain valuable property or have too much income to file for Chapter 7 bankruptcy, Chapter 13 may be a more suitable option. With Chapter 13, you can reduce your debts and have more time to repay the debts that cannot be discharged in Chapter 7 or Chapter 13 bankruptcy. This type of bankruptcy allows you to separate creditors who receive various percentages of payment, allowing you to treat debts with a co-debtor differently than your own debts. Chapter 13 bankruptcy disadvantages include having to use post-bankruptcy income to pay off debts, incurring higher legal fees because filing Chapter 13 is more complex, being ineligible to file if you are a stock or commodity broker, and being required to participate in the bankruptcy court process for as long as it takes to pay off your debts (typically 3 to 5 years).Filing Chapter 13 bankruptcy is permissible if you: Have completed required credit counseling.

Have a consistent income but require time to pay off debts.

Meet the debt limit. The maximum debt allowed for a Chapter 13 bankruptcy varies, but is typically around $1 million. Unsecured debts must not exceed $300,000, while secured debts must not exceed $700,000.

Not filing a corporation or partnership formation.

Want co-signors to be exempt from collection efforts if a complete payment plan is in place.
Now that you are aware of the different types of bankruptcy filings and have an idea of which type may be ideal for you, don't stop there. Most likely, you have additional concerns that require answers. Here are some of the most frequent:
What impact will bankruptcy have on my credit rating? Keep in mind that a bankruptcy will remain on your credit report for up to ten years, even if your credit history is already poor. Credit can certainly be reestablished.

Will my colleagues, neighbors, and friends be informed of my bankruptcy filing? Employers and landlords will not be notified of your bankruptcy, but because it is a matter of public record, anyone can learn that you have filed. If a potential employer runs a credit check, bankruptcy filings will appear on the report, making it appear as if you have poor credit even years after the bankruptcy was filed.

Will bankruptcy prohibit my wages from being garnished? Chapter 7 and Chapter 13 both provide protection from wage garnishment and creditor collection.

What does bankruptcy protect?

Credit card obligations

Medical expenses

Unguaranteed loans

What kinds of debts are not discharged in bankruptcy?

Student loans

Alimony and maintenance

Debts from fraud

Alcohol-related driving compensation

Tax invoices

Contact the organizations associated with these categories of debts in order to collaborate directly with them.In bankruptcy, income taxes may be discharged under certain conditions. Typically, taxes must be at least three years old, assessed at least 240 days prior to the bankruptcy petition, and voluntarily filed at least two years ago. Consult a tax professional for specifics. In Chapter 13 bankruptcy, tax payment arrangements are frequently possible.There are additional options for addressing financial difficulties. Consult with a qualified tax expert about your situation.""

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"What You Should Know Before Filing For Bankruptcy" was written by Mary under the Finance / Wealth category. It has been read 137 times and generated 0 comments. The article was created on and updated on 03 June 2023.
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