Any decision of declaring bankruptcy may seem like a traumatic event, but it is often the most logical choice to deal with problem debts. As it is a very personal decision, therefore one should take time and understand all the facts before making any move in this.
Bankruptcy has not been designed as an “easy way out” of debt. It is meant for all those who have no way of repaying their debt or protect their assets. All those who do not have assets may not benefit from it. All those who are suffering due to their mounting debts and are being pestered by the lenders day after day may find that declaring bankruptcy can give the freedom from stress as they rebuild life.
Some people can definitely consider declaring bankruptcy to get rid of their debts. All those whose wages have been garnished can consider bankruptcy, as they can get some money back into their pockets to take care of their families. All those with unsecured credit (credit cards, personal loans, etc) may benefit from bankruptcy. Bankruptcy can also be a option if collection agencies are breathing down your neck and many debtors have filed lawsuits against you due to the money you own them.
All those who are planning to declare bankruptcy should know that it will impact their credit score for a period of time but that it is relatively easy to rebuild credit again quickly.
All those who cannot pay their debts and have not been able to do so since long should not worry on this count, because their credit score is already very low. In any case, bankruptcy will stay there on the credit report for full seven or ten years. So it is not something worth jumping into if you are facing just temporary difficulties.
Facts you should know before declaring bankruptcy
Chapter 7 Bankruptcy
The Chapter 7 bankruptcy is the most preferred option as it gives fastest results and can be filed by married partners, individuals, partnerships and corporations.
Once filed, your debts can be discharged within a few months and you will be able to concentrate on your new fresh start.
Chapter 13 Bankruptcy
In this bankruptcy option, filer get a option to repay debts within a period of two to five years. It is best for people who are interested in saving their non-exempt properties and provide them with opportunity to restructure their loan terms which they cannot meet as per their contract with lender. A Chapter 13 bankruptcy is best for all those who have predictable revenue that allows them financing flexibility to repay their debts in coming years.
Do you quality for declaring bankruptcy?
Yes, there are few qualifications that should be met before you can file for bankruptcy. First, you cannot file for bankruptcy if you have declared it previously within past 8 years. However, if you’d filed under Chapter 7 earlier, you can file within this eight year period for Chapter 13 bankruptcy.
The debt that won’t be discharged under bankruptcy;
• domestic support payments
• Criminal restitution
• taxes for returns that were filed late or never filed (within 2 years of the petition date)
• Drunk driving injuries
• Student loans
• Civil damages or restitutions awarded for malicious or willful personal actions that cause death or personal injuries
• debt for trust fund taxes
Rebuilding Your Credit After Declaring Bankruptcy
Once you are successfully discharged from your debts after declaring bankruptcy, you can start rebuilding your credit. In fact, bankruptcy providers you a second chance to rebound after getting entangled in financial mess. By declaring bankruptcy, and your subsequent discharge from your financial obligations, you can get lasting debt relief within five to eight months and you can say good by to the harassment from lenders and collection agencies.
Your credit score will improve with time and bankers will start working with you again. Therefore, you should set your financial circumstances in order and re-enter the marketplace with additional experience that bankruptcy will provide.