Implications of filing for bankruptcy in the US
Filing for bankruptcy is a last resort option for those over their heads in debt. For some it does finally provide relief, but it is not the easy way out, although many consumers seem to have this idea. It is always best to try to find other ways to deal with debt before declaring bankruptcy, but clearing your debt obligations can sometimes become impossible, which is where bankruptcy comes into play. Of course, before you decide that filing for bankruptcy is the right option for you, it's important to take a closer look at the implications of filing for bankruptcy in the United States. Here is a look at the types of bankruptcy, how it's filed, and the pros and cons of filing for bankruptcy.
Two Types of Bankruptcy for Individuals
First of all, you need to realize that there are two different types of bankruptcy for individuals. You have the option of going with Chapter 7 bankruptcy or with Chapter 13 Bankruptcy. The two options are quite different. When you go with Chapter 7 bankruptcy, it works by clearing your debt obligations. Your debt is totally discharged, but in most cases you won't get to keep any of the property you have. The other option is Chapter 13 bankruptcy. With this type of bankruptcy you are given a repayment plan that is affordable to you. You work to pay on this plan for 3-5 years, and then the remaining debt that is not repaid is then discharged. However, with Chapter 13 bankruptcy you are able to keep your assets, such as a home, while still paying less than the amount that you owe to your creditors.
Do You Need an Attorney?
When you are filing for bankruptcy, one important thing to consider is whether or not you need an attorney. Most people do hire a good attorney to help them out with the entire process, since it can be a rather complicated one. While you can file bankruptcy without having an attorney, it is not always a great idea. Sure, it can save you some money, but you have to be very careful whenever you fill out all the forms for the bankruptcy. Simply filling out something wrong on the forms or failing to include something important could have the case thrown out and you may not be able to file again. For this reason, having professional help from an attorney is an important choice when going through bankruptcy proceedings.
Bankruptcy Filing Process
Once you decide to hire an attorney, or even if you decide to go it alone, there are some steps that you are going to have to go through when filing for bankruptcy. First of all, you have to go through a program for debt counseling, which must be one that the US Trustee approves. Next you list all the debts that you owe, including all of those debts that show up on your credit report. Then you'll need to come up with documentation of your income and expenses. This can include tax returns, paystubs, utility bills, bank statements, and more. Once you do calculations for means testing, then you can file all the paperwork for either the Chapter 7 or the Chapter 13 bankruptcy. The next step is to attend the court hearing, and then you will get a decision on the bankruptcy from the court trustee. This is definitely a process that is long and quite complex, but it definitely can help with clearing your debt obligations and helping you to get out of that oppressive debt you've been dealing with.
The Pros and Cons
Before filing for bankruptcy, it is very important that you are fully aware of both the pros and cons. You'll want to take a good look at the pros and cons and decide whether or not the pros outweigh the cons in your specific situation. Here is a look at both the pros and cons you should consider.
The Pros: First of all, you will find that there are some definitely pros to going through bankruptcy proceedings. When you file, the creditors have to stop any collection actions that are against you. This can stop all those harassing phone calls that you have been getting. In many cases it results in clearing your debt obligations, essentially allowing you to start all over again without all that debt, and you may be able to keep some of your assets so you can avoid going through bankruptcy again in the future.
The Cons: There are definitely some cons to consider as well when filing for bankruptcy. One of the main cons is that this is going to negatively effect your credit rating. Usually a bankruptcy will show up on your credit report for seven years, which is a long time to have this following you around. You will be less likely to get credit, which affects your ability to purchase a car, a home, or get any credit cards.
Now that you are aware of the pros and cons and all that goes into filing for bankruptcy, it's up to you to make the right choice for your needs. Think it over carefully, get legal help, and then make the decision that is right for you.