Bankruptcy was put into place for people that were not able to meet their financial obligations. It protects them from the creditors contacting them to pay the bills they are unable to.
When trying to determine whether bankruptcy is right for you, there are 5 things you need to know about filing for bankruptcy.
1. There are three types of bankruptcy, Chapter 7, Chapter 13, and Chapter 11. Chapter 7 bankruptcy is the most common type to file for personal debt. With this type, you are required to turn over specific assets to the trustee to liquidate. You are able to keep certain possessions and assets and the debt will be cleared, except for the debts that are excluded. Chapter 13 bankruptcy is more of a debt restructuring or adjustment. The debtor is able to keep his/her possessions as liquidation is not involved. Finally, Chapter 11 bankruptcy is a type of bankruptcy that is for businesses and corporations.
2. Bankruptcy is a process that has to go through the courts. It is not as simple as filling a few papers and sending them in. You have to go to court to complete the process.
3. It is a popular belief that all debts are forgiven when bankruptcy is filed but that is not the case. Under Chapter 13 bankruptcy, the courts can require you to set up a payment plan based on your disposable income in order for you to pay back some of your debts that you owe
4. Chapter 7 bankruptcy will wipe out all of the debt that you owe your creditors if your income is low enough. This will legally protect you from creditors trying to contact you in regards to the past debts.
5. Bankruptcy will stay on your credit report for 10 years after filing. This will negatively effect you opening lines of credit, renting or purchasing a home.
Clark & Washington has the resources and the knowledge to teach you so much more about bankruptcy. If you are in financial distress and need some guidance, do not hesitate to call.
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