You’ve heard of bankruptcy before, and if your finances are in a bad enough spot, you might be considering declaring bankruptcy for yourself. It makes perfect sense, and it seems like a perfect opportunity to get out from under your debts when they’re at their most overwhelming.
However, as a bankruptcy lawyer like our friends at the Law Offices of Neil Crane can explain, bankruptcy isn’t the silver bullet that many people expect. While declaring bankruptcy can make a huge impact on your debt, there’s plenty to consider before you decide when – and how – you should declare bankruptcy.
Read on to learn a little more about what you should know about bankruptcy, and see how the right bankruptcy lawyer can help.
- There are Long-Lasting Consequences When You Declare Bankruptcy.
Unfortunately, many people assume that once they declare bankruptcy, they’ll automatically get a clean slate and an easy path out of debt. Sadly, that couldn’t be further from the truth. When you declare bankruptcy, you get a real relief from those crushing financial obligations, but the honeymoon period doesn’t last long. Expect your credit score to nosedive, and expect major difficulties applying for loans, housing, and even jobs in the future – in some cases, for up to ten years!
- There is a Right Way to Declare Bankruptcy.
Declaring bankruptcy is a major decision, and it shouldn’t be taken lightly. Whatever you decide will make a serious impact on how you live the next several years of your life, and it’s important to discuss your options with a qualified professional. Bankruptcy lawyers are an essential resource to have on hand if you’re thinking of declaring bankruptcy, and they can steer you in the right direction if you’re financially adrift.
- There are Two Major Options You Can Choose.
When it’s time to declare bankruptcy, you’ll have to decide which option is best – or possible – for you. You may have heard of different chapters of bankruptcy, and if you read the news chances are you’ve heard plenty of talk about Chapter 11 bankruptcy. Chapter 11 applies to businesses, so when it comes to personal finances, you’ll have to choose between Chapter 7 and Chapter 13.
- Chapter 7 Bankruptcy Means Liquidation.
If you decide to declare Chapter 7 bankruptcy, it means you’re pulling out all the stops in an attempt to get that much-needed clean start. Chapter 7 bankruptcy involves liquidating all (or most of) your assets in order to pay off your creditors. This means you’ll have to sell off your properties, your cars, collections, and even family heirlooms to cover your debt. It’s a drastic step, but fortunately some assets are protected when it comes to liquidation. The right lawyer can walk you through the full list of exemptions, but possessions like wedding rings and your primary residence are generally safe.
- Chapter 13 Bankruptcy Means Reorganization.
When you declare Chapter 13 bankruptcy, you aren’t resorting to liquidation. Instead, you’re committing to a court-mandated repayment plan. Unlike Chapter 7 bankruptcy, your assets won’t be sold off – but you will have to make regular payments to satisfy your creditors. This can last as long as is needed to fully pay off your debts, and it can make a real dent in your monthly earnings and expenses. But, many people prefer Chapter 13 because it means avoiding liquidation.
- You Still Need to Pay Your Taxes When You Declare Bankruptcy.
Many people assume that when they declare bankruptcy (especially Chapter 7 bankruptcy) they won’t have to pay off their taxes or certain loans. Unfortunately, certain payments are a fact of life, whether you’ve declared bankruptcy or not. Taxes, student loans, spousal support, and any kind of fines you may owe the government will still need to be paid off, but a qualified bankruptcy lawyer can help prove certain circumstances that may get you out of paying certain taxes.
It always pays to contact the pros when you’re considering declaring bankruptcy. Get in touch with a bankruptcy lawyer today and see how the right legal team can make all the difference.