If you are struggling to pay off your debts, filing for bankruptcy may be your only solution. It enables you to eliminate your debt and start afresh or provides you with a court-approved plan to repay your debt in a given period. Declaring bankruptcy prevents debtors from harassing you, demanding payments, taking legal action against you and halts any foreclosures. It is a giant step that allows you to breathe and reorganize your financial situation. However, it may not solve all your problems, and there are some important considerations to think about.

Chapter 7 vs. chapter 13 bankruptcy

When filing for bankruptcy, you have to decide the most viable solution for your financial situation between chapter 7 and 13 bankruptcy. You may want to enlist the help of a bankruptcy attorney to help you make an informed decision here.

In chapter 7 bankruptcy, also called liquidation, a trustee sells some of your property and distributes the cash to your creditors. Some of your property, such as your household items, tools of work, can be exempted based on certain conditions. Many people prefer this type of bankruptcy since it allows them to eliminate most unsecured debt like credit cards without the need to pay back the money owed through a repayment plan. But you must meet specific income requirements.

With chapter 13 bankruptcy, you can secure your property with a court-approved plan to repay your debt in 3-5years. It is a good option if you are behind on many of your debt payments and want to catch up without losing your property. Therefore you can continue working without debtors harassing you as you repay your debts.

Do you have any other options?

Before filing for bankruptcy, find out if you have any other options to handle your financial situation. For instance, the CARES Act can suspend eviction activity and foreclosure. You can also consider mortgage loan forbearance programs and other government initiatives that can help keep your head above the water until you stabilize your financial crisis.

Bankruptcy can be complicated and expensive.

The reason you need to hire a bankruptcy attorney when declaring bankruptcy is that bankruptcy can be complicated. You don’t want your case dismissed by the court because you filled the forms incorrectly. You might also end up losing the property you thought you could keep if you don’t have anyone to offer you legal advice.

You also need to think about bankruptcy retainer charges and the costs associated with the filing. Some bankruptcy lawyers charge a flat fee, while others charge an hourly fee. Basically, the retainer fee should reflect the attorney fees and a projection of the bankruptcy fees you need to pay.

You must be truthful about your income, assets and debts.

When filing for bankruptcy, you have to be completely honest about your debts, income and assets. You need to certify under penalty of perjury that your bankruptcy forms are as accurate as filed. You may face severe criminal penalties if you try to hide property. The court may also dismiss your case for failing to disclose all your assets and income.

The final word

After filing for bankruptcy, your financial situation will be made public and it stays in your credit report for up to 10years, but there is a life after bankruptcy.

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