Most Frequent Asked Questions Regarding Bankruptcy
Some of the most frequent asked questions regarding bankruptcy, when answered, can put the consumer’s mind at ease. Understanding the bankruptcy process makes it easier for consumers to determine if bankruptcy is a good choice. It also makes it easier to understand how to go about filing for bankruptcy. Here are some of the most common questions every consumer has about bankruptcy and filing.
Question 1: How is bankruptcy defined?
Bankruptcy is a process where a court allows for a consumer to get a brand new start via debt elimination or, at minimum, gives the consumer a chance to reorganize debt obligations within a convenient payment plan. There are several methods of filing for bankruptcy, each with its own set of rules and qualifications.
Question 2: What bankruptcy options are available?
When it comes to bankruptcy, there are several options to choose from. The most common bankruptcy options include Chapter 7, Chapter 11 and Chapter 13, but there are also other types of bankruptcy filing options like Chapter 9 and Chapter 12, as well. Read more about “Choose the Right Bankruptcy Option for Your Needs.”
Question 3: How can a person file for bankruptcy?
The easiest method is to contact a lawyer skilled in bankruptcy law. It is possible to file for bankruptcy via do-it-yourself methods, but this can prove complicated for individuals not familiar with bankruptcy law. You gather up your debts and have a consultation with an attorney who can then advise you on what chapter to file. You will be responsible for court filing fees, attorney fees, and any payments that are in association with specific chapter filings (example: chapter 13 payment structures). An attorney can ready a bankruptcy petition for you, file it with the court, and be by your side during the proceedings. The attorney can also put a call into creditors to ensure that all collections and other actions cease during the filing process. Once the petition has been filed, you will have to attend a meeting consisting of your creditors if you are filing chapter 7. When filing chapter 13 you can anticipate several appearances in court in some instances. A judge decides your case, if your petition is accepted, and under what terms your petition is accepted.
Question 4: How do Chapter 7 and Chapter 13 bankruptcy differ?
There are significant differences between Chapter 7 bankruptcy and Chapter 13 bankruptcy filings. First off, when you file for Chapter 7 bankruptcy, you can eliminate most of your debt, providing that the debt is eligible for discharge. When it comes to Chapter 13 filings, your debt is not completely eliminated; rather, your debt is minimized to a fraction of what you would have paid. You are then set up on a special repayment plan where you are required to pay a trustee each month until you reach the conclusion of the repayment plan. With Chapter 7, you will lose many of your major assets; with Chapter 13 you can successfully retain many of your assets like your home or car. Another difference between both forms of bankruptcy is the amount of time each one takes to complete; Chapter 13 can take several years to conclude, while Chapter 7 is finished within a matter of several months.
Question 5: What impact does filing have on one’s credit rating?
Whether you are filing chapter 7 or 13, your credit report will definitely be negatively affected. Chapter 7 filings result in a ten year listing on your report and chapter 13 will result in a seven year listing on your report. This, of course, does not mean that there are not ways of restoring your credit in the future. Applying for secure credit lines, getting a loan with a cosigner or perhaps with collateral and paying off the loans or lines of credit, and paying all bills on time will allow a consumer to eventually reestablish a positive credit status.
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