You’ve finally realized that you have no other choice but to file for bankruptcy and have even found a good lawyer. The process is a complicated and emotional experience. Here are seven of the most often asked questions about the process:
1) What is the difference between Chapter 7 and Chapter 13? With a Chapter 7, the debtor gives up all allowable assets in exchange for having their debt erased. This process is sometimes called a “straight” bankruptcy, because it is simple and over with in less than six months.
A Chapter 13 is a bit more complicated. This is more of a reorganization of the debts and allows the person to still pay everything off, but over an extended time period. The aim is for the debts to be paid off in less than five years.
2) How long will the bankruptcy stay on a person’s credit record? It will stay on the credit bureaus’ records for ten years.
3) What are the most common reasons for someone to declare bankruptcy? Unemployment, large medical bills, overwhelming debt, and divorce.
4) Is a bankruptcy public or private? It will be available in public records, but your neighbors will most likely not be looking.
5) Will you ever be able to get credit again such as a mortgage? Many credit cards allow a secured credit card, which means that there is some sort of collateral backing it up, such as money in the bank. If overwhelming credit card debt was the reason for a filing, getting even a secured card may not be such a great idea. It might be the time to start living a “cash only” existence. Two years after filing, a mortgage may be applied for, although a substantial down payment will likely be required.
6) Will tax debts and student loans be erased, as well? Neither tax debts nor student loans are often blotted out by bankruptcy. This is money owed to the government and they don’t take kindly to default.
7) When will the bill collectors stop their harassment? Once a Chapter 7 or Chapter 13 is filed, creditors are required to stop their harassment. This should happen immediately. If you have any problems with them, let your lawyer know and he or she will be happy to assist you.
With a good lawyer on your side, you will soon be on your way to a fresh start. Relax and get ready to climb out of this stressful situation and to begin again.