If you are having trouble paying your bills, it may be a good idea to consider filing for bankruptcy. While it should be a last resort after you have exhausted all other options, it can either reduce your debt or make it easier to repay what you currently owe. Here’s the ultimate guide to whether or not you should file for bankruptcy.
What Are My Options When Filing For Bankruptcy?
If you have few assets, a poor credit score, and mostly unsecured debt, it may be a good idea to file for Chapter 7 bankruptcy. This is called a liquidation bankruptcy because your assets are liquidated and the proceeds are given to your creditors. However, if you don’t have any assets, you don’t owe anything to creditors. Assets such as equity in a home or a vehicle needed to get to work may be exempted in your case.
If you have mostly secured debt, decent credit, and assets that you want to protect, Chapter 13 bankruptcy may be best for you. In a Chapter 13 case, your debts are reorganized and repaid over a period of three or five years. During the repayment period, creditors cannot move to foreclose on a home or repossess your car.
What About Business Debts?
Business debts are generally discharged through Chapter 7 bankruptcy or through Chapter 11 if your company is a corporation. In a Chapter 11 case, you work with your creditors to create a custom plan to repay existing debts. It may be possible to renegotiate existing contracts or avoid paying certain creditors if it hinders the corporation’s effort to get out of debt. During a Chapter 11 case, the company continues to operate as normal.
Who Is Eligible For Bankruptcy
Almost everyone is eligible to file for bankruptcy. However, you may need to pass a Means Test to qualify for Chapter 7 protection from creditors. You may also be ineligible for Chapter 7 protection if you have previously filed in the past decade.
Prior to filing for bankruptcy, you will need to take an approved credit counseling course. This ensures that you don’t have any option other than to file for bankruptcy to get out from your debt problem. It also ensures that you understand the impact that bankruptcy will have on your finances.
What Is The Financial Impact Of Bankruptcy?
If you file for Chapter 13 bankruptcy, it will stay on your credit report for seven years. Chapter 7 filings stay on a credit report for up to ten years. Your credit score is likely to drop by 100 to 200 points, but the exact impact depends on your score and credit history when you file.
Since you are free from some or all of your previous debts, lenders may be willing to extend credit immediately after your case is resolved. However, if you file for Chapter 13 bankruptcy, you may need court approval to take on new debt during your repayment period. Depending on where you seek financing, you may be allowed to get a mortgage within two years of your case being resolved.
Are All Debts Discharged During Bankruptcy?
You may still have debts remaining after your bankruptcy case is completed. In most cases, you cannot discharge tax debt or credit card balances that were used to pay the tax debt. Student loan debts are rarely discharged in bankruptcy while child support obligations will generally remain even after a bankruptcy case is resolved regardless of what type of case you file.
If you are struggling to repay your debts and need help filing for bankruptcy, contact The Law Offices Of Patrick L. Cordero today at (305) 445-4855 for a free, no-obligation consultation.