What You Need To Know Before Filing for Bankruptcy

If you are drowning in debt and feel like there’s no relief, bankruptcy may offer the relief you seek. Due to the nature of bankruptcy, it is not the best option in all situations. Contacting an attorney can help you look at all your options to see if bankruptcy is right for you. Here’s a brief overview of what to expect.

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Bankruptcy Types

There is more than one type of bankruptcy. Chapter 7 discharges most of the unsecured debt you’ve accrued including credit cards and personal loans. Lasting as long as four months, Chapter 7 requires passing a means test and potentially selling off non-exempt assets. Chapter 11 bankruptcy applies to certain creditors and requires repayment. Chapter 12 only applies to farmers and fishermen. Chapter 13 uses a repayment plan allowing you to repay your creditors over a certain period of time. A Rockville bankruptcy lawyer can help you decide which is the best option for you.

Eligibility Requirements

The type of bankruptcy you can apply for depends on how much money you make and your assets. The two most common forms are Chapter 7 and 13. You must meet certain income restrictions to file for the clean state bankruptcy known as Chapter 7. If you want to keep certain assets, Chapter 13 may be the better option.

Credit Report

Bankruptcy negatively affects your credit and can stay on your report for a decade. A bankruptcy can affect your ability to obtain a loan because it lowers your credit score substantially. Regardless of when you file for bankruptcy, the law requires you declare it on many official forms, medical forms and to future employers. Bankruptcy is often seen as a last option for many due to the negative effects.

If you have decided to file for bankruptcy, speak to an attorney specializing in bankruptcy to see all your options. Bankruptcy may not be the financial boon you wish it to be. Between public filings and upfront costs, bankruptcy is not right for everyone or every situation.