Filing for bankruptcy may seem like a great option for those struggling to make ends meet and pay bills. But understanding bankruptcy is not only about making life easier. Knowing what effects filing for bankruptcy may have on your finances and stability as well as understanding how the process works is an important first step in securing your future.
Bankruptcy is a legal status for those in debt who find themselves unable to pay back debt and other bills. In bankruptcy proceedings, the individual must provide documentation of assets- anything from liquid assets in bank accounts and other savings, clothing and other owned materials, cars and home. To apply, an individual must do so within the state jurisdiction they live and must not apply in more than one state as this is considered bankruptcy fraud. After the paperwork is filed, the individual goes through a court process to determine if they are truly bankrupt. Formal proceedings can often take time so make sure you are aware of what the court and filing proceedings involve.
In the US, there are 6 types of bankruptcy- chapter 7 bankruptcy is the most common and basic for individuals. There are also chapter 9, 11, 12, 13 and 15 bankruptcy with chapters 11 and 13 also being useful for individuals looking to file bankruptcy cases. Chapter 13, is a rehabilitation plan for individuals who have a consistent income allowing them to make a workable and feasible budget to pay back some or part of what they owe within a specified timeframe.
Also note that all types of bankruptcy claims depend on your income and a court will take this under consideration when you file. Making sure to present the proper documentation and facts will be less stressful and proceedings are likely to go by quicker.
Also note that federal student loan debt is not eligible to file for bankruptcy in all 50 states. Still accordingly, each jurisdiction has specific policies and terms on how and when to apply as well as for what. Make sure you become familiar with the policies in your state and ask yourself whether filing is the right choice for you. Understanding bankruptcy is an important first step in making the best choice that may or may not be right for you.
Image credit: nmfinanciallaw.com