If you’re considering filing for bankruptcy, you’re not alone. Hundreds of thousands of Americans file for bankruptcy every year. People who file range from those with low to moderate income struggling to make ends meet to people with significant income and/or assets and multi-million corporations
Bankruptcy can be a difficult decision, but it may be the right choice for you if you’re struggling to make ends meet. Before you take this step, however, it’s important to understand all of your options and what bankruptcy entails.
Here are five important questions to ask yourself before you file for bankruptcy.
Filing for bankruptcy is a serious decision that shouldn’t be taken lightly. By asking yourself these questions, you can make sure that you’re making the best decision for your financial future.
Bankruptcy is typically divided into two types: Chapter 7 and Chapter 13.
Chapter 7 bankruptcies are also known as “liquidation bankruptcies” because they involve the liquidation, or sale, of your assets to pay off your debts.
Chapter 13 bankruptcies are also known as “reorganization bankruptcies.” This is because they involve reorganizing your debts and creating a repayment plan that spans three-to-five years.
Your credit score will be impacted by bankruptcy regardless of which type you choose to file. However, the extent of the impact depends on several factors, including your credit history and how well you manage your finances after declaring bankruptcy.
In general, though, you can expect your score to drop anywhere from 130 to 240 points if you file for Chapter 7 bankruptcy, and anywhere from 70 to 160 points if you file for Chapter 13 bankruptcy.
Alternative options include debt settlement, debt consolidation, and consumer proposals.
With debt settlement, you negotiate with your creditors to agree on a lump-sum payment that’s less than what you actually owe.
Debt consolidation involves taking out a new loan to pay off your existing debts; this option is only available if you have good credit.
And finally, a consumer proposal is an agreement between you and your creditors that outlines a new payment plan. This option is only available if you owe less than a certain amount and can make monthly payments over a period not exceeding 60 months.
The length of the process depends on several factors but usually takes between six months and five years from start to finish. Which chapter bankruptcy you choose plays a significant role in how long the process takes.
After declaring bankruptcy, all qualifying debts are discharged. However, this doesn’t mean that you’ll never have to worry about money again. You’ll still need to budget carefully and make smart financial decisions going forward to prevent yourself from falling back into debt.
Filing for bankruptcy can give you a fresh start financially. However, it’s not a decision that should be made lightly. Asking yourself a few questions before proceeding with any kind of bankruptcy action can save you a lot of headaches.
To learn more or to schedule a consultation, contact R. Flay Cabiness, II, P.C. at (912) 417-5041 (Brunswick, GA); (912) 809-2141 (Hazlehurst, GA) or; (912) 324-3176 (Jesup, GA) to schedule a consultation.
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