When To Declare Bankrupt

When your faced with mounting debts you are unable to repay or when you are behind with the mortgage and foreclosure is looking or the phone calls from people looking for payment never stops, declaring yourself bankrupt may be a solution. Or is it? Read on to learn more.

If the key is the elimination or reduction of debts bankruptcy may permit you to keep the bill collectors away and save your residence but there are serious things to take into account. You may find it tough to get a loan in the future because of the negative impact on your credit score as well as increased insurance rates and in certain circumstances can make obtaining a job fraught with difficulty. Consider the following:

• You can escape overwhelming debt by a declaration of bankruptcy, but the results of those actions may last many years
• Chapter 13 and Chapter 7 bankruptcy remain on your credit history for seven and ten years
• You may want to contact those you owe monies too prior to filing for bankruptcy to see if there is room for negotiation. For example, there are often programs offered by lenders for those who fall behind on mortgage payments

Bankruptcy Types

• Chapter 7 bankruptcy also known as a liquidation or straight bankruptcy. A court appointed trustee may sell some of your property and pays those you owe from the creditors and then the debts are discharged. There are exceptions from liquidation, for example, your clothing, your vehicle, the tools of your job, your household property, equity in your home and pensions.
• Chapter 13 bankruptcy is where a plan approved by a court to make repayments on all or a part of your debt owed over a time period of three to five years. It is also possible to get some debts discharged. You may keep your home as asset liquidation is not mandatory, but payments on the home must be maintained.
• With both kinds of bankruptcy some debts cannot be discharged, Examples include alimony, certain tax payments, student loans and child support.

Bankruptcy Consequences

You can only file for bankruptcy during certain periods, For example, Chapter 7 bankruptcy can only be filed once every eight years if you have had your debts discharged. It can also have an extremely negative impact on your credit score.

Do You Need A Lawyer?

You can file for bankruptcy without the services of a lawyer. However, it is not a simple process and most people commend the services of a lawyer to help navigate the intricacies of the process.

When To File?

Bankruptcy offers a fresh start, but a good ending is by no means a certainty. Make sure you explore all other avenues of approach before committing to the process. By using credit with caution in the future and ensuring bills are paid before or when they are due, you can restart the building of your credit once more.

Source: https://www.investopedia.com/articles/personal-finance/100714/when-declare-bankruptcy.asp