If you’re considering bankruptcy, you already know that it’s a big decision that shouldn’t be taken lightly. With so much involved, though, it can be difficult to know where to start or if working on credit repair alone may be enough to help you out of your situation.
Before you declare bankruptcy, here’s a list of seven things you need to consider:
Chapter 7 or Chapter 11
There are two kinds of bankruptcy: Chapter 7 and Chapter 11. Chapter 7 bankruptcy is sometimes called “fresh start” bankruptcy. You can read a full description of Chapter 7 bankruptcy on uscourts.gov. The long and short of it, though, is that you will be free of debt, but your debtors will be able to seize some of your property as compensation of that debt. Chapter 13 bankruptcy on the other hand, allows you to set up a payment plan to pay your debts back over the course of three to five years, depending on your situation.
Cost of Bankruptcy Filings
You will be charged a fee when filing for bankruptcy. If you are filing for Chapter 7, that fee will be $200. The fee for Chapter 13 filings is $185. These fees cannot be waived. However, you do not need to pay them immediately upon filing for bankruptcy; instead, a payment plan for the fee can be created. If you use an attorney, you will have additional costs to pay, which brings us to the next issue.
Use of an Attorney
While you are not required to use an attorney, it would probably be a good idea, because using one will greatly increase the likelihood of your filing being successful.
Property You Can Keep
As explained previously, you can keep all of your property if you file for Chapter 13. When you file for Chapter 7 bankruptcy, you will be able to keep “exempt” property such as food, clothing, and furniture. You should consult laws in your state to determine what property is considered exempt where you live, but it is typically property that is essential to your livelihood. Food and clothing are exempt, whereas the pinball machine you bought for the basement game room probably isn’t.
Debts that Can’t Be Discharged
There are some kinds of debt that cannot be discharged. For Chapter 7 filings, some of the most common are taxes and tax liens, student loans, alimony, child support, and debts obtained through fraud.
The list of debts that can’t be discharged is similar for Chapter 13 filings. Added to that list are unscheduled debts, interest owed on nondischargeable debts, and debts incurred after you file your case.
Going to Court
You will probably not need to spend a lot of time in court, but you will need to make at least one appearance there for a “meeting of creditors.” You will be asked to answer a few questions from the court trustee, including if you have had a bankruptcy discharge before and how long you have lived at your current location. Your creditors may also ask you questions, although they may not be abusive.
Credit Repair Instead
If Chapter 7 and Chapter 13 bankruptcy don’t sound like options you want to pursue, consider Ovation for credit repair instead. You may be able to get out of your debt situation through a combination of budgeting and having errors on your credit report fixed, as well as other valuable tools we offer. We will give you a complimentary consultation to determine if credit repair is in your best interest and discuss how we can be of assistance as you begin rebuilding your credit.