Bankruptcy Court Secrets

by Sonya Smith-Valentine on November 11, 2009

As the economy struggles to improve, the rate of bankruptcy filings have increased. Many Americans who were once financially successful are facing having to consider filing for bankruptcy. Feeling like bankruptcy will change their lives for the worst is the common fear that consumers experience. The following secrets about bankruptcy can help eliminate the fear and nervousness people might be facing when considering or making the decision about filing bankruptcy.

One misconception that people have is that bankruptcy was the only remaining option for low income households. The economical downslide has caused major jobless and real estate downfalls. This change in our financial economy has caused more middle class professionals to have to file for bankruptcy. With the decline in real estate sales and declining value of homes, real estate and mortgage brokers were also hit hard, leaving many having to file for bankruptcy.

Bankruptcy might be the only answer for some Americans who are unable to keep up with their finances. But filing for bankruptcy does not eliminate all types of debts. Debts such as student loans, child support, or alimony can not be erased by filing for bankruptcy. With bankruptcy, there are different types for different situations. If you do not have an income, Chapter 7 can be filed. With a Chapter 7 bankruptcy, your debts are exempt from repayment. These debts can include credit cards, medical bills, or loans. The downfall of Chapter 7 is that this procedure will not stop home foreclosures. A Chapter 7 bankruptcy can also raise havoc to your credit score until you can rebuild your credit. A Chapter 13 can be filed if you have a regular income. Chapter 13 allows you to repay your debts with a payment plan to your creditors. The time period to repay your debts range from three – five years. Your financial and income situation will determine what chapter of bankruptcy you can file for.

Even though bankruptcy can damage your credit score, it can be repaired over time. While a bankruptcy will show on your credit report for up to 10 years, your score will improve faster than having debts that are past due on your credit report. You can start repairing your credit after bankruptcy by obtaining credit cards or a car loan but you will have to pay higher interest rates in the beginning of the repair process.

Do not stop paying on debts that have a secured possession attached to that debt such as a vehicle or a house. If you plan on keeping a secured item, payments must be kept up to date and current.

Another essential factor is to save money for the bankruptcy filing fees. The fees for a Chapter 7 usually need to be paid up front. With a Chapter 13, the lawyer fees are included in your repayment agreement to the creditors.

Also do not pay back relatives, friends, or business partners before you file bankruptcy. The money that you pay back to personal members of your life can be recovered by the trustee. If the money is not returned, there can be a lawsuit. Another mistake is to transfer assets to family or friends before you file bankruptcy. All assets that have been sold or transferred two years prior to the bankruptcy must be listed on your bankruptcy petition.

Even though some Americans might not have any other option but to file for bankruptcy, they need to remember that they can rebuild there credit. The decision to file bankruptcy and the bankruptcy proceeding can be a stressful situation for an individual as well as for their whole entire family. Following bankruptcy guidelines can make your situation easier and less stressful if bankruptcy helps end a bad financial situation.

Comments on this entry are closed.

Previous post:

Next post: