Facts about bankruptcy

You can give a fresh start to your finances if you file bankruptcy. However, majority of the debtors try out other bankruptcy alternatives to get out of debt. The other bankruptcy alternatives include debt consolidation, debt settlement, debt management plan etc. It is important to have a legal representation if you are planning to file bankruptcy. And prior to filing bankruptcy thorough information about bankruptcy should be gathered.

Why do debtors avoid filing bankruptcy?

Debtors usually avoid filing bankruptcy because it leaves a scar in your credit report for a period of 7 to 10 years. Moreover, if you file bankruptcy, you are not able to enjoy many financial benefits. For instance, if you apply for a job, you may not get recruited at a place of your choice as employers are reluctant in recruiting candidates that have filed bankruptcy.

Similarly, if you want to buy an insurance policy or stay on rent, the insurance carrier and the landlord respectively may not be willing to offer you benefits as per your choice. And getting a fresh loan on favorable terms is practically a far cry. You can get extensive information about bankruptcy from an attorney who is well versed and will be able to guide you in taking the bankruptcy procedure to completion effectively.

What are your options?

You can file Chapter 7 or Chapter 13 bankruptcy depending on your financial condition. Filing for bankruptcy has become harder following the introduction of the new federal bankruptcy laws. The new federal bankruptcy laws were introduced to minimize the number of bankruptcy filings.

As per the new bankruptcy laws, you have to take a Means test if you want to file Chapter 7 bankruptcy. When you take a means test, your income is compared to the median income of a household in the state in which you are residing. If it is found that your income is below the state median income, you qualify for Chapter 7 bankruptcy.

Alternatively, you can file Chapter 13 bankruptcy. In case of Chapter 7 bankruptcy, a trustee appointed by the court will liquidate your non-exempt assets to pay off creditors. And if you are filing Chapter 13 bankruptcy, you will be required to make payments as per a repayment plan that is worked out. So, even if bankruptcy is leaving a scar in your credit report, you will get ample opportunity to repair your credit once again. You need to be financially responsible.