Bankruptcy for Dummies
When we say “dummies,” we don’t mean it in a literal, or insulting way at all. Bankruptcy is quite a complex subject, how could we possibly expect you to have common knowledge based on this subject? Bankruptcy usually becomes a reality when a person, business or family has dug themselves so far into a hole (ie, debt), that they can’t even see the light of day any longer.
When all efforts to halt the acclamation of debt become futile, bankruptcy usually steps in as the only other option. By law, it’s basically a way to start fresh. Of course, it’s not as painless and easy as this article makes it sound, but it really can help in the long run.
Once you go through a bankruptcy proceeding, in most cases, you won’t be responsible for the majority of previous debts owed. There are five potential results of filing for bankruptcy. The first, as mentioned above, is the fact that it can wipe away all previous money that you owe to creditors. This process is known as discharging. You should understand though that all debts cannot simply be discharged. A nice side benefit is the fact it will stop the hassling calls from creditors in the meantime.
Secondly, bankruptcy can also help stop wage attachments, or when a creditor places a hold on your paycheck in order to pay off debt. This is done by getting legal order to take a chunk of your usual paychecks to help pay back the money you owe. Finally, bankruptcy also can help protect your future interests, including any money or new property you acquire in the future.
As we previously mentioned, not all debts can be completely discharged. Unsecured debt is something that can be discharged though, usually nine out of ten times. This includes debt not backed by property, like credit card statements, or phone bills. However, on the flip side, secured debt, such as home mortgages or car loans, can usually be repossessed by the creditor, depending on the value and how much you owe. This means you simply can’t claim bankruptcy and keep their product, like your house or car. Other debts that cannot be wiped completely clean are child support, student loans, alimony, debts resulting from fraud, or most taxes.
You may be thinking, “if I’m going to lose my house and most likely my car, why even file in the first place and have it happen faster?” In a lot of cases, most people do get to keep their car, if they’ve paid enough of it off, or the car is older, and has a lower blue book value. Most individuals also get to keep most of their individual property, including furniture, household items, most jewelry, clothes and work tools. You’re also able to keep up to $20,200 in home equity, or $10,775 in personal property if you don’t own a home.
Bankruptcy is certainly not without its downsides though. While it lowers your credit score, it is also included in your file for up to 10 years. This makes it extremely tough to get any kind of loans within the near future. Although, it’s ultimately up to the lender, so if you can be persuasive enough, it is possible.
Before you’re allowed to file for bankruptcy, you are required by law to have enlisted yourself in a credit counseling service before you can actually file. You’ll also need to consult such an organization after you declare bankruptcy as well. This ensures you’re on the right path, and hopefully never go through this process again. In addition, it’s a good idea to know the most up to date laws surrounding filing for bankruptcy, which is why we recommend that you get a bankruptcy lawyer who knows his or her stuff.
There’s a lot of paperwork and a few fees involved, so being prepared with the help of an attorney is vital. Make sure to carefully consider all of your options before filing for bankruptcy, as it is a huge decision in your life. Can you pick up a second job, or even a third, to help get by for awhile? If you can think of anything to help, go for it. Otherwise, lawyer up and get it over with so you can start anew.
When all efforts to halt the acclamation of debt become futile, bankruptcy usually steps in as the only other option. By law, it’s basically a way to start fresh. Of course, it’s not as painless and easy as this article makes it sound, but it really can help in the long run.
Once you go through a bankruptcy proceeding, in most cases, you won’t be responsible for the majority of previous debts owed. There are five potential results of filing for bankruptcy. The first, as mentioned above, is the fact that it can wipe away all previous money that you owe to creditors. This process is known as discharging. You should understand though that all debts cannot simply be discharged. A nice side benefit is the fact it will stop the hassling calls from creditors in the meantime.
Secondly, bankruptcy can also help stop wage attachments, or when a creditor places a hold on your paycheck in order to pay off debt. This is done by getting legal order to take a chunk of your usual paychecks to help pay back the money you owe. Finally, bankruptcy also can help protect your future interests, including any money or new property you acquire in the future.
As we previously mentioned, not all debts can be completely discharged. Unsecured debt is something that can be discharged though, usually nine out of ten times. This includes debt not backed by property, like credit card statements, or phone bills. However, on the flip side, secured debt, such as home mortgages or car loans, can usually be repossessed by the creditor, depending on the value and how much you owe. This means you simply can’t claim bankruptcy and keep their product, like your house or car. Other debts that cannot be wiped completely clean are child support, student loans, alimony, debts resulting from fraud, or most taxes.
You may be thinking, “if I’m going to lose my house and most likely my car, why even file in the first place and have it happen faster?” In a lot of cases, most people do get to keep their car, if they’ve paid enough of it off, or the car is older, and has a lower blue book value. Most individuals also get to keep most of their individual property, including furniture, household items, most jewelry, clothes and work tools. You’re also able to keep up to $20,200 in home equity, or $10,775 in personal property if you don’t own a home.
Bankruptcy is certainly not without its downsides though. While it lowers your credit score, it is also included in your file for up to 10 years. This makes it extremely tough to get any kind of loans within the near future. Although, it’s ultimately up to the lender, so if you can be persuasive enough, it is possible.
Before you’re allowed to file for bankruptcy, you are required by law to have enlisted yourself in a credit counseling service before you can actually file. You’ll also need to consult such an organization after you declare bankruptcy as well. This ensures you’re on the right path, and hopefully never go through this process again. In addition, it’s a good idea to know the most up to date laws surrounding filing for bankruptcy, which is why we recommend that you get a bankruptcy lawyer who knows his or her stuff.
There’s a lot of paperwork and a few fees involved, so being prepared with the help of an attorney is vital. Make sure to carefully consider all of your options before filing for bankruptcy, as it is a huge decision in your life. Can you pick up a second job, or even a third, to help get by for awhile? If you can think of anything to help, go for it. Otherwise, lawyer up and get it over with so you can start anew.
