What Is Bankruptcy Really? Five Things You Didn’t Know About This Option
We’ve all heard of bankruptcy, whether we’ve seen it in a movie or read about in the newspapers. Bankruptcy is a means to resolve the issue of a debtor being unable to repay his or her debts. You may not know anyone who’s been through the bankruptcy process, but the fact of the matter is it can happen to anyone. Here are some things about filing for bankruptcy that you may not have known.
1. You don’t necessarily need to give away your assets
Not all types of bankruptcy involve giving away your assets like most people believe. One type of bankruptcy lets you keep them, specifically Chapter 13 bankruptcy. Chapter 13 bankruptcy involves creating a repayment plan so that you’ll be able to repay your creditors without giving up the assets you require.
2. Bankruptcy does not release you from all debt obligations
There are certain types of debt that are impossible to discharge through bankruptcy. The most commonly known type is student loan debt, but those who’ve been through divorces also won’t be able to discharge payments to spouses or children of spouses. Some types of money owed to the government, like fines or recent back taxes, also must be paid regardless of bankruptcy status.
3. Filing for bankruptcy requires credit counseling
The 2005 Bankruptcy Abuse Prevention and Consumer Protection Act requires everyone filing for bankruptcy to receive credit counseling. The organization providing the counseling must be approved by the government, and individuals must have taken part in such counseling in the six months before they file for bankruptcy. For those dealing with bankruptcy, bankruptcy specialists like us might be able to help.
4. Getting credit after a bankruptcy won’t be as difficult as you think
Most people believe getting credit after filing for bankruptcy is nearly impossible. As it turns out, many lenders will let you take out loans just six months after a bankruptcy if a down payment is provided, and credit cards companies are generally also willing to issue cards with which you can rebuild your credit after you file. The reason for this is that once you file for bankruptcy, you won’t be able to file again for four to seven years.
5. You can repay some of your debt, but not all types of bankruptcies require it
It’s not necessary to repay any of your debt through Chapter 7 bankruptcy, though it requires you to liquidate all your assets. With Chapter 13 bankruptcy, however, you’re required to repay some of your debt.
Most people who live within their means and don’t need to borrow enormous amounts of money with a risk of losing all or part of their income will not need to worry about bankruptcy. But for those with no other options, bankruptcy can be a means to solve the problem with advantages and disadvantages that many people aren’t aware of.