I’m Considering Personal Bankruptcy, What Should I Know?

There is no doubt that filing for personal bankruptcy protection is a big decision. In some cases it is not the best solution, but in many other situations it is the right choice. In many other instances it would be the right choice, but a lack of information about the process might make a person fearful of filing. So what are some of the important things to consider when considering bankruptcy?

First, a bankruptcy attorney really can make all the difference. Some people think that “going it alone” can save them money, but the truth is that bankruptcy costs money whether or not you pay attorney fees. There are certain costs associated with filing that apply to everyone, but bankruptcy is one of the most complex legal processes and failing to have professional assistance can cost much money in the long run.

The second thing to know is that there are two basic kinds of bankruptcy available to consumers. Chapter 7 involves the liquidation of personal assets but a large portion of debt is wiped out completely, excluding certain tax debts, student loans and child or spousal support. Chapter 13 is available to more people and involves the restructuring of debt. Which option is better is one of those decisions that should be made on a case-by-case basis with an attorney.

One of the biggest fears involving filing for bankruptcy is the fact that it goes on your credit report and will stay there for either seven or 10 years depending on the type of bankruptcy. What is also important to understand about your credit report is that while the bankruptcy may stay on the report, it doesn’t mean that a credit score can’t rapidly improve shortly after bankruptcy. Even though the bankruptcy is on a person’s credit report, they can still apply for new credit and obtain loans for things such as a car or a home during the same period.

Lastly, credit counseling and debt education is a part of the bankruptcy process. While they may sound a little frightening, the session may only last one or two hours. They also can provide useful information about your credit, managing money and developing a budget.

Source:KPTV, “Know these bankruptcy facts before you file,” Andrew Housser, April 15, 2013