Between layoffs, foreclosures and other common occurrences today, the financial picture for many people is grim. As a result, more people are turning to bankruptcy to get out from under the debt and restart with a clean slate. If you are considering bankruptcy, familiarize yourself with the terms and basics before you find an attorney who specializes in these matters.
This type of bankruptcy is generally used for those with little to no income and high debt. Under Chapter 7, you may lose assets such as your home or car.
This type of bankruptcy helps those who are behind on home or car payments to restructure their debt in such a way that will help them catch up more quickly.
- You must prove that your expenses exceed your income and you must show how you got into dire financial straits.
- You must meet with a credit counselor within six months before you file your petition.
- You must attend a debtor education seminar after you file.
Tips and Warnings
- When researching bankruptcy, debt consolidation or other financial relief, consider your sources. If any solution seems too good to be true, it probably is. Consult an expert before making any decisions.
- Don’t wait till the day your house is foreclosed on to file for bankruptcy. Give yourself several months to research your options and go through any necessary legal proceedings.
- Bankruptcy does not affect all debts. Back taxes, student loans, child support and other financial obligations must still be paid after you’ve filed.
- As with any legal matter, find an attorney who can clearly explain your options. He or she will be able to navigate the federal and state laws to help you decide whether bankruptcy is for you.
- Bankruptcy will stay on your credit report for at least 10 years, taking your rating down. With work, you can build it back up over time, but it may be difficult.
- Once your finances are back on track, put together a budget and savings plan. Experts recommend putting aside three to six months’ worth of living expenses for emergency purposes.