If you are overwhelmed with debt, you may be thinking about filing for bankruptcy. The legal process can help you wipe out a lot of debt, giving you a financial fresh start. However, before you actually declare bankruptcy, take some time to learn more about the process.
Here are a few important things you should know before declaring bankruptcy.
Bankruptcy Won’t Get Rid of All Your Debts
While bankruptcy can clear a lot of your debt, it won’t eliminate all of it. There are certain kinds of debts that can’t be discharged through bankruptcy, including student loans, child support and taxes. You will still be responsible for paying these debts after you complete your bankruptcy.
There Are Two Types of Bankruptcy
Individuals can file either Chapter 7 or Chapter 13 bankruptcy. Chapter 7 bankruptcy wipes out most of your unsecured debts and doesn’t require a repayment plan. Chapter 13 bankruptcy, on the other hand, does come with a repayment plan. Chapter 7 is aimed for people with lower incomes while Chapter 13 is best for those who have enough money to repay their debts.
Bankruptcy Can Take a Long Time
Although it would be nice if bankruptcy offered a quick solution, it does not work that way. Chapter 7 bankruptcy can take between four and six months to complete while Chapter 13 bankruptcy takes anywhere from three to five years to finalize.
You Have to Be Truthful About Your Assets and Debts
When filling out bankruptcy paperwork, you will be required to disclose all of your assets and debts. It is important to be completely honest. If the court discovers that you tried to hide assets, your case could get dismissed and you may face criminal charges.
Bankruptcy is Complicated
There’s nothing simple about filing for bankruptcy, including the mountains of paperwork that comes with it. That is why it is worth it to hire an experienced bankruptcy lawyer to represent you. A lawyer will help you fill out paperwork accurately and guide you through the entire bankruptcy process.
Bankruptcy is Public
Before you decide to file for bankruptcy, understand that it will be public record. Anyone will be able to look up your income, assets and debts. If you are not comfortable with this, you may want to consider other options.