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Declaring Bankruptcy: 4 Facts to Help You Understand the Process

Apr 23, 2018

Bankruptcy is a legal measure used to discharge debts when people find themselves in circumstances in which they are unable to pay them. Anyone can experience a devastating financial problem, due to divorce, catastrophic illness or long-term joblessness. Using this legal remedy can provide an opportunity to rebuild your finances and put you and your family back on stable footing. You should keep in mind a number of basic facts about bankruptcy and its ramifications.

Bankruptcy Is a Lengthy Procedure

The bankruptcy process is not a simple one or two day affair, like filing a small claims procedure in court. The process requires a number of court appearances, over time, with a significant amount of paperwork to file the case, review the debts and discharge the case.

In addition, income limits and exemptions regarding bankruptcy vary from state to state, so you should contact an experienced attorney that specializes in bankruptcy cases to help you understand the laws that apply to you and to facilitate your case.

There Are Different Types of Bankruptcy

A number of different types of bankruptcy are available for consumers. The Chapter 7 proceeding liquidates debts and sells assets to pay them. Chapter 13 restructures debts, allowing the individual to pay them off over time.

The process allows money for basic needs of the individual, but uses some assets to pay off the debts. Chapter 13 bankruptcy stays on the individual’s record for the repayment period, plus seven years.

Some Assets Can Be Sheltered during Bankruptcy Proceedings

Your home, car or other assets may be exempted from the bankruptcy process, depending on the laws in your state. You may be allowed to re-finance your car or have the balance discharged under the bankruptcy. An attorney can help you determine if this is beneficial for your needs.

Bankruptcy Will Affect Your Credit for Several Years

Before going into bankruptcy, consumers should consider that it will affect your ability to get credit for a number of years. A Chapter 7 bankruptcy stays on the individual’s record for 10 years. A Chapter 13 bankruptcy stays on the individual’s credit record for the period of repayment, plus 7 years.

Bankruptcy can be a lengthy and expensive procedure. It’s always advisable to try to repair your financial problems without resorting to this legal measure. However, it can be the right choice when you need a fresh start after catastrophic circumstances.

You should carefully consider the consequences of bankruptcy before deciding to use this significant legal measure and consult with an attorney who can answer your questions.

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