Accidents, unforeseen job layoffs and natural catastrophes can destroy a person's home, automobile and their job. As more people find themselves becoming unable to pay their debts, they are forced to undergo bankruptcy.
Unfortunately there are many myths involving the whole bankruptcy process but in this article many of the more common questions will be answered. Hopefully you will find the information and help you are searching for and so desperately need.
What types of bankruptcy are there?
There are four types of bankruptcy within the United States judicial system. Chapters 7, 11, 12 and 13, with each chapter covered under different guidelines and laws. The general breakdown of each chapter is all dependent upon the particular situation of the debtor.
Businesses typically file Chapter 11 whereas farm owners will file for Chapter 12. Under Chapters 11, 12 and 13 the debtor agrees to a plan where he or she will repay a portion of the debts back to the creditor. Chapter 7 is a complete liquidation and any assets obtained through secured debts are repossessed and sold. The remainder of the debt is discharged.
Is my home going to be foreclosed and sold?
When a person takes out a mortgage on a home it is considered a secured debt. That means if you cannot make the payments the bank can seize the property and then sell it. If you own your home without any mortgage, it is considered an asset and can also be seized by the courts as a way to repay part of your debts to your collectors.
Homes are most often the first thing sold as they are generally worth more and can repay more of the debt that is owed. There are ways to protect your home from being foreclosed but you have to seek the advice of an experienced bankruptcy attorney for help.
How long will my bankruptcy be on my credit report?
Bankruptcy can remain on your credit report for up to ten years from the date of filing. Once the bankruptcy has been discharged all of the reported debts will show as zero. It will have an impact on your credit score but not nearly as bad as it was before.
This is a golden opportunity to learn from your mistakes and learn how to manage your debts better. You will eventually be out from under the looming bankruptcy but staying out of trouble is an entirely different story. Many people do not learn from their bankruptcy mistakes and find themselves in the same situation repeatedly.
How do I deal with credit collectors?
Well... unfortunately ignoring credit collectors is not an option. Credit collectors can employ sneaky, underhanded methods of trying to collect their debts. They get paid when you pay your debt. If you have begun the process of filing for bankruptcy and have met with your attorney, any calls or letters you receive from a collection agency need to be directed to your attorney.
Once the bankruptcy process has been filed, debt collectors are not allowed to continue their threatening tactics. If they continue to do so you will need to file suit against them. New debt collection laws are in your favor if you are filing for bankruptcy. The laws do not apply if you are only considering the process.
Can a bankruptcy affect my job or future employment?
An employer cannot deny you a job based on the fact that you filed for bankruptcy. Many employers are now using credit scores and reports to make a decision on whether or not to hire a certain employee. Is this fair?
No, it is not but employers do have a say when setting forth their hiring criteria. If you feel that you have been denied a job based on your credit score or history of bankruptcy, you can file a complaint with the Labor board of your state.
Because of a number of problems that can arise, many people find themselves in a financial situation where their debt load is so heavy, there seems to be no way for them to repay all that they owe. Filing for bankruptcy may be their only hope for rectifying their financial condition and gaining a fresh start.
Certainly, filing a claim form when being broke is a step that is considered to be the last resort and one that is never taken lightly. When people are in a deep mire of debt and they do not have sufficient income to be able to make even the minimum payments, there are other steps that they can take before taking the drastic step. There is credit counseling available when people are overwhelmed with debt and sometimes they even take on an additional job to help make the payments.
Unfortunately, there are many instances in which these approaches are simply not enough and people are left with the last alternative and find themselves in need of legal bankruptcy relief. Even though there are significant negative ramifications when people file bankrupt, at the same time it is a legal step that does indeed provide relief from creditors and provides them with an opportunity to wipe their financial slate clean and new start anew.
One should never decide about filing for bankruptcy until they have had an opportunity to consult with a bankruptcy lawyer, or a credit counseling service at the very least. Many people try to save on the lawyer expense by attempting to do a self bankruptcy, but if anything is overlooked, they can find themselves in a bigger mess than before, since it can be thrown out of court if not properly handled. This is why it is so strongly urged that people should pay for the proper help with being broke, so they can rest assured it will be done correctly.
Filing for legal relief is a matter of Federal law, which governs the entire process and it is the Federal courts where the claim form and all paperwork is filed. Under United States Federal bankruptcy law, there are three types of it that can be filed.
You can file a Chapter 7, a Chapter 11 or a Chapter 13 bankruptcy. Each type of filing has different requirements and this is where it is very helpful to secure professional help with being broke, so that you will be sure you are filing for the right type.
After filing, your creditors must stop making any attempts at collecting on debts that are included in the bankruptcy filing. Also, they cannot pursue any type of legal action or lawsuits against you once they have been notified that you have filed a claim form. When the bankruptcy in complete and has been discharged, the debts have essentially be rendered null and void and your creditors have no power to make collection demands on you.
Filing for bankruptcy will definitely leave telltale negative marks on your credit report for many years to come. Due to this fact, it is advisable to avoid hunting for a job or renting new living quarters once the process has started. Therefore, it is best to have secure employment and housing first, if at all possible.
Once the bankruptcy has been completed and is discharged, then you can start the process of restoring your credit record. Eventually, even though it will remain on your credit report for ten years, you will be able to have a good credit score once again. In many instances, people have better credit scores within a couple years after the bankruptcy than they ever did before, because they became better money managers.
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