DebtHelp.com, One site, one solution
September 30th, 2009

Filing Bankruptcy: Seven Considerations

Adjust text size
smallmediumbig
Article Tools

email this article

Print This Post Print This Post

add bookmark

digg this

reddit

save to del.icio.us

If you’re considering filing bankruptcy, there are some things to consider before doing so. Planning ahead can help in avoiding “surprises.” Bankruptcy provides a legal way to gain shelter from insurmountable debt, but it does not protect you from paying debts secured by real property or merchandise, such as your home or car. Here’s more information about how bankruptcy works and what you should know before filing.

      1. Which bankruptcy option best suits your situation? There are two types of personal bankruptcy, Chapter 7 and Chapter 13. Chapter 7 “wipes out” most unsecured debt and is typically filed by those who are unemployed or otherwise have no hope of repaying their debts. Chapter 13 bankruptcy allows those with steady income to restructure their debt and repay it within three to five years. This option can work for those who have returned to work after a long period of unemployment, or who have experienced a reduction of income. Consulting a bankruptcy attorney before filing can help in determining which option matches your needs.
      2. Bankruptcy stays on your credit reports for 10 years: Although filing bankruptcy provides legal protection from creditors, and may eliminate or reduce debt, it stays on your credit record for ten years, and can severely lower your credit scores. Credit counseling can offer debt consolidation and affordable repayment plans as affordable alternatives to bankruptcy.
      3. Don’t try to shelter your assets: You may be tempted to transfer assets to relatives or friends before filing bankruptcy, or repay friends and family in advance of repaying creditors. Don’t go there! The bankruptcy trustee can sue to recover assets transferred this way. You may also be subject to prosecution for fraudulent transfer of assets.
      4. Certain assets are exempt from bankruptcy protection: You can’t file bankruptcy to avoid paying taxes, alimony, or child support. Most student loans are exempt from bankruptcy protection. Secured credit accounts including mortgages and auto loans are also not extinguished by filing bankruptcy, although payments can be temporarily delayed.
      5. Continue paying on secured accounts: If you want to keep your home and car, it’s best to continue making payments during bankruptcy. This prevents additional negative credit reporting and can help you avoid paying late charges.
      6. Bankruptcy attorneys require payment in advance: Any money you have after filing bankruptcy becomes part of your bankruptcy assets; attorneys expect payment up front. Filing bankruptcy can cost a few hundred to thousands of dollars depending on the complexity of your case and customary fees and costs in your area.
      7. Bankruptcy won’t solve underlying issues: If you got into trouble with credit card debt due to overspending or other financial mismanagement, it’s important to get help so you can avoid future financial problems.

      Filing bankruptcy is a major financial decision that can impact your life for years. Consider seeking credit counseling to learn more about bankruptcy and options that can help you avoid bankruptcy.

      Post written by Karen Lawson

      2 Responses to “Filing Bankruptcy: Seven Considerations”

      1. Bankruptcy Blog Says:
        January 14th, 2010 at 3:07 am

        This is some really information, I just finished my paper for school and think I should go re-edit it lol. You may have just made me a regular :)

      2. klawson Says:
        January 19th, 2010 at 4:05 pm

        Welcome!We hope to assist readers by offering easy-to-understand information that’s useful.

      Leave a Reply

      Welcome to the DebtHelp Blog
      • This blog covers a wide variety of debt consolidation and loan topics.

        We rely on a large network of financial experts and leading authors to write the content for the DebtHelp.com Blog.
      Recent Posts
      Like our Blog?
      Get the widget!

      Archives
      Our Authors

      • Chris Rocks is the Regional Director of the National Credit Federation (NCF). NCF is a nationwide membership-based organization that assists consumers recovering from a financial difficulty and those who need a significant increase in their credit score. Chris began his financial services career as a Financial Advisor helping young families with risk management and asset accumulation strategies. It was during that time that Chris realized that many of these young families also needed someone to guide their choices with regards to debt management. He made the transition into the mortgage industry where he first worked as a loan originator and later the Vice President of a small mortgage company. As Chris came across clients who had suffered through financial challenges and saw the difficulty they had in re-entering our credit driven economy, he discovered there was a real opportunity to leverage his unique background and help others. He can be contacted by visiting his personal site, GoodCreditLiving.com.

      • Francine L. Huff is the Publisher and Editorial Director of Super Savvy Publishing, LLC, which provides editorial and publishing services. She is a gifted author, freelance journalist, and motivational speaker who has entertained and motivated a variety of audiences through workshops, panels and keynote addresses. Francine is the author of The 25-Day Money Makeover for Women, which has inspired and motivated many readers to rein in poor financial habits, become good stewards over their money and work toward a debt-free life. She has appeared on a variety of TV and radio shows. Francine previously worked for the Wall Street Journal, where she was the spot news bureau chief, a news editor and a copy editor. She has interviewed a variety of financial professionals about financial issues and strives to present information about managing money in an easy-to-understand format that is accessible to people of all backgrounds and income levels.

      • Karen Lawson is a freelance writer with more than 15 years of experience working in mortgage banking and loan servicing. She holds BA and MA degrees in English from the University of Nevada, Reno.

      Category
      Subscribe to the DebtHelp Blog
      • You will receive a reminder when we post a new article to the DebtHelp Blog.