If you’re in debt and considering filing for bankruptcy, you’re likely experiencing a great deal of stress and anxiety thinking about the next steps to take. Dealing with the burden of a large amount of debt is difficult enough without having to think about what you’ll do going into the future. Many wonder things like, “Can I file for bankruptcy and keep my car?” Others worry about having to discuss personal matters openly.
If you’ve thought about filing for bankruptcy, here are some things to keep in mind.
Chapter 7
Filing for Chapter 7 bankruptcy, also known as liquidation bankruptcy, means that your property and other assets will be sold off so you can discharge the cost of your debts. Chapter 7 bankruptcy is the most common type of bankruptcy and can usually take up to six months. Filing for Chapter 7 bankruptcy is typically best for people who know they won’t be able to pay off debt going forward.
Chapter 13
Those filing for Chapter 13 bankruptcy can keep their assets and instead have their debts reorganized. With Chapter 13 bankruptcy, debtors are allowed to make monthly payments to pay off their debts. Filing Chapter 13 bankruptcy takes longer than Chapter 7, because debtors are paying their debts off over time, and can take three to five years.
Not all debts can be discharged
Even if some of your debts are discharged when you file for bankruptcy, there is still a chance that not all of your debts will be. If you’ve used your credit card to make large purchases before you file for bankruptcy, you may end up still having to pay those off. In addition to credit card purchases, there are some other types of debts that can’t be discharged, such as student loans, auto loans, mortgages, child support, and spouse alimony. Some find that many of their debts are ones that aren’t able to be discharged and seek other options instead.
Bankruptcy can lower your credit score
You won’t know exactly how much bankruptcy will affect your credit score until it happens, but many claim that it lowers it around 200 points. After you declare bankruptcy, it will be difficult to build your credit back up. When you do get a credit card after, it will most likely have a very high-interest rate. A bankruptcy will also show on your credit report for ten years after and permanently on your public file.
Filing for bankruptcy is expensive
If you’re considering filing for bankruptcy, the last thing you want is to take on another expense. Unfortunately, the cost of filing for bankruptcy isn’t cheap. Forms for bankruptcy are complicated and require a lot of attention on a very important matter. Because of the risk of making a mistake, many chose to get an attorney to help them with forms and the ongoing process. Hiring a bankruptcy attorney can be expensive, but even choosing to go through it on your own still comes with a large cost. The cost to get bankruptcy forms alone is over $300.