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Bankruptcy: The Basics

When financial problems become overwhelming, many Americans get a fresh start by filing for bankruptcy. Filing for bankruptcy is nothing to be ashamed of and can help you alleviate the stress of unmanageable debt.

If you need to file for bankruptcy, you should talk to an attorney, but before you do, take a moment to get a better understanding of the basics:

What Is Bankruptcy?

Bankruptcy is a legal process that helps people who can no longer pay their debts get a fresh start. Depending on the type of bankruptcy you file, you will pay off some or all of your debt by liquidating your assets or creating a repayment plan. Rest assured, filing for bankruptcy will not strip the clothes off your back. Even if you choose to liquidate your assets, you will get to keep the basics, including your household goods and furnishings, your clothing, your living space, and your car.

That being said, the specifics of your case will depend on your financial situation and whether or not you are also dealing with a foreclosure.

Types of Bankruptcy

In the United States, there are two (2) main forms of consumer bankruptcy. Chapter 7 bankruptcy allows you to sell your valuables, pay creditors as much as you can, and discharge your debts. While you will get to keep household goods, clothing, and the tools of your trade, you may have to sell certain assets, including family heirlooms, vacation homes, expensive vehicles or musical instruments, and investments. When you file, the court will appoint a trustee to your case, and the trustee will gather and liquidate (sell) your assets and use the money to pay your creditors.

Once this process is completed, the majority of your debts will be gone.

Another option – and the only option for individuals and families who make too much money to qualify for Chapter 7 bankruptcy – is Chapter 13 bankruptcy. Also known as a “wage earner’s plan,” Chapter 13 bankruptcy allows you to repay part or all of your debt over 3 to 5 years with more manageable payments. With Chapter 13 bankruptcy, you can save your home from foreclosure and keep priceless family heirlooms and other assets.

If you cannot pay all your debt throughout your repayment plan, the remaining balance will be discharged.

Does Bankruptcy Get Rid of All My Financial Obligations?

No. Filing for bankruptcy can help you save your home and discharge debts like medical bills, credit card bills, and unsecured debts, but you may not be able to discharge tax debts, student loans, child support payments, and other financial obligations.

Additionally, you will still be responsible for all the bills and expenses that come in after you file for bankruptcy.

Pros and Cons of Filing for Bankruptcy

Filing for bankruptcy can be beneficial if you don’t know how you’re going to get “back on your feet,” financially. The process can give you a fresh start and help you protect what’s important to you.

Nevertheless, a bankruptcy stays on your credit report for 7 to 10 years, which can create financial repercussions. People who have filed for bankruptcy sometimes have a harder time getting loans, mortgages, and credit cards – and bad credit can even make it difficult for you to rent an apartment.

At Glenn F. Russell Jr. & Associates P.C., many of our clients are already struggling with their credit by the time they file for bankruptcy. Filing for bankruptcy is a long-term solution that can help you prepare for a more successful financial future.

Before filing for bankruptcy, you should meet with an attorney and a financial advisor to discuss your rights and responsibilities and explore your legal options.

Our team aims to take the stress out of filing for bankruptcy, and our unique experience yields unparalleled results.

If you need debt relief, look no further than Glenn F. Russell Jr. & Associates P.C. Take control of your financial situation by calling us at (888) 400-9318 or contacting us online today.