Filing for Bankruptcy
Bankruptcy is serious business for consumers. The consequences of bankruptcy last for years while you rebuild your credit history. If you’re considering bankruptcy, you need to think about how it will affect your future and whether it’s worth pursuing. Here are some things to know.
Two Types of Bankruptcy
In Chapter 13, you draft a plan to repay your debts over the next few years. This can help you save your house if you got a few months behind on your mortgage. It can also stall a foreclosure so that you can find employment again. Chapter 7 is where you walk away from your debts. Keep in mind that not every debt can be discharged through Chapter 7, so it pays to work with a bankruptcy lawyer who can help you figure out what the best solution is for your situation.
Bankruptcy Laws Differ by State
The rules for bankruptcy are determined at a state level, so where you live matters. Some assets are exempt from bankruptcy, your home and car, provided you can make the payments, and your personal clothes, household belongings, and electronics. You do have to qualify for a Chapter 7 bankruptcy. You will have to demonstrate that your income and expenses are such that you can’t pay the bills.
Bankruptcy Isn’t Free
Bankruptcy doesn’t come cheap, although you may be able to include the costs in your Chapter 13 plan to pay them out over your bankruptcy. Since you are discharging your debts in Chapter 7, you’ll have to come up with the fees. Many lawyers offer a free consultation for bankruptcy. Mention that money is an issue to learn what your options are.
Bankruptcy Doesn’t Let Co-Signers Off the Hook
In a bankruptcy, your obligation to your creditor is discharged. If there is another person on the account, such as a co-signer or joint account holder, the bill transfers to him or her alone. This is very common after a divorce. Be aware of your accounts and responsibilities. Some debts, such as student loans and taxes, cannot be discharged.
Bankruptcy Is Public
Your bankruptcy goes on the public record. Most people won’t care about your bankruptcy unless you’re someone famous, but it does pay to be aware that your situation will be available to anyone who wants to look you up. It also stays on your credit report for 10 years, but if you take care of your credit after a bankruptcy, a lender won’t care as much as the bankruptcy gets older.
The bottom line, a bankruptcy might make sense for you, but it might not. Talk to a Memphis, TN bankruptcy lawyer before you proceed to know where you stand.
Thanks to Darrell Castle & Associates, PLLC for their insight into bankruptcy law and when to consider bankruptcy.