Filing personal bankruptcy is a somewhat complex process. Bankruptcies come in different types; what you choose is subject to your financial situation and the kind of debts that you have. Prior to filing your petition, you really need to gain an understanding of how personal bankruptcies work. The following tips will help put you on the right path.
Personal Bankruptcy
Individuals often seek to file for personal bankruptcy protection if their debts exceed their ability to repay them. If this is the case for you, you should begin to investigate the legislation in your state. Each state has its own laws regarding personal bankruptcy. Some states may protect you home, and some may not. Know what the laws are in your state before filing.
If you are considering using credit cards to pay your taxes and then file for bankruptcy, you may want to rethink that. In most states, you will still owe money to the IRS and have to take care of the interest of your credit cards. In most cases, you can use the adage that “a dischargeable tax is a dischargeable debt.” So using your credit card to pay off your tax obligations, then filing for bankruptcy, can actually hurt you instead of help you.
When you document your financial records, it is vital that you are 100% truthful in order to have a successful resolution to your bankruptcy process. Not only is hiding income and assets wrong, it is also a crime.
Hire a lawyer if you plan on filing for bankruptcy. Bankruptcy is complicated, and having someone to help you navigate the process is crucial. Personal bankruptcy attorneys can help make sure everything is done properly.
Chapter 7
The two main kinds of bankruptcy are Chapter 7 and Chapter 13. Make sure you understand them so you know what is best for you. Chapter 7 bankruptcy completely wipes out your debt. With very few exceptions, the connections between you and your creditors will be severed. Chapter 13 bankruptcy though will make you work out a payment plan that takes 60 months to work with until the debts go away. It’s crucial that you know the differences between all of the various kinds of bankruptcies so that you may choose the best option for your situation.
Make sure bankruptcy is truely your only option before filing. Find out if you can receive a reduced interest rate or altered repayment plan instead of bankruptcy filing. Various loan plans out there can be a lifesaver if you’re facing a foreclosure. Sometimes your lender will work with you to help pay off your debt by giving you a lower interest rate, forgiving late fees, or extending the time period of your loan. At the end of the day, creditors want to get paid, and sometimes a debt repayment plan is preferable to dealing with a bankrupt debtor.
Before filing for bankruptcy under Chapter 7, make sure that you consider the implications this will have on any of your co-debtor, who are usually family members, close friends or business associates. Debts which you shared with another will not be your responsibility any longer if you file for personal bankruptcy under Chapter 7. Although filing for bankruptcy excludes your from financial responsibility, co-signers will still be expected to pay the loan amount in full.
Prior to filing for bankruptcy, purge from your vocabulary the word “shame”. Many people feel guilty, embarrassed and unworthy when dealing with bankruptcy. These feelings, however, are of no benefit to anyone, and they can be detrimental to your mental health. Keeping a positive attitude during worrisome financial trouble is the smartest way to deal with a bankruptcy.
Be certain you are totally aware of the laws of bankruptcy before you file. There are often laws prohibiting the transfer of money from the filer for a certain period preceding the bankruptcy filing. Additionally, it is against the law for any filer to boost up the debt amount they carry on any credit cards just before filing.
As you can see, you should give bankruptcy a lot of thought before deciding whether or not you should file. Ultimately, if bankruptcy seems like the best choice for you and your finances, you may want to seek out a bankruptcy attorney. They’ll be able to guide you through the stages of bankruptcy, ensuring your fresh start is a great one.
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