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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

You can obtain a new financial start with bankruptcy, but it is a matter to be taken seriously. Understanding the decisions, you make may have consequences is especially important before you commence bankruptcy.

Long Time Effects

When you apply for a loan of $150,000 or more, your bankruptcy will appear on your credit report for longer than the standard ten years. How this impacts your credit will be determined by your credit status prior to filing. If your credit was poor it will not matter as much, if it was good, it may cause a severe decline in your credit score.

Sometimes bankruptcy can help you improve your credit score more rapidly than people who do not file for bankruptcy. By addressing your debt to income ratio, paying bills on time, and developing a positive financial outlook as opposed to not filing and mounting up late payments, repossessions, and delinquencies.

Mortgage And Car Loans

You will have to wait for a while when you have filed bankruptcy to obtain a car loan or a mortgage and more than likely you will have higher interest rates to pay on the loan.

Bankruptcy Discharges

Usually:

• When completing a Chapter 7 Bankruptcy you cannot get another for eight years.
• When completing a Chapter 7 Bankruptcy you cannot obtain a Chapter 13 Bankruptcy for four years.
• When completing a Chapter 13 Bankruptcy you can’t get a Chapter 7 Bankruptcy for six years.
• When completing a Chapter 13 Bankruptcy you cannot get a Chapter 13 Bankruptcy for two years.

This may cause issues in the future. For example, if you declare Chapter 7 Bankruptcy and fall on hard times, you cannot file again until the time limits have expired.

Non-Dischargeable Dates

Not all debts can be discharged in bankruptcy, such as:

• Recent tax debts.
• Student Loans.
• Alimony
• Child Support.

Source: Nolo. What Is the Downside of Filing for Bankruptcy? 4 Sept. 2014, www.thebankruptcysite.org/resources/bankruptcy/filing-bankruptcy/what-is-the-downside-in-filing-for-bankruptcy.

While it may be thought that bankruptcy is the final stage before economic ruin, it is not always so – Chapter 13 of the federal bankruptcy code can ease some of the financial stress. If you can repay some or all of your creditors – it may be possible to avoid liquidation. And it is ideal if your primary issues are dealing for payment straight away from creditors versus having sufficient income. Another appealing aspect of Chapter 13 bankruptcy is you may not have to lose your home. Read on to learn more.

Chapter 13 bankruptcy permits individuals to have between three and five years to complete resolution of their debts by the means of applying all of their income that is considered disposable to the reduction of the debts. This option incorporates allowing an individual the option of eliminating the unsecured debts while they catch up of mortgage payments that were previously not met. Undoubtedly to many people keeping their home is of primary significance. But the downside is you will spend some years with a trustee appointed by the court, who will be responsible for collecting payments from you and then distributing them accordingly.

How does Chapter 13 Bankruptcy Work?

Chapter 11 bankruptcy (that applies to businesses) has some similarities to Chapter 12 bankruptcy. In both scenario’s the petitioner has to submit a financial plan of reorganization that safeguards assets from foreclosure or repossession and in normal circumstances requests forgiveness of other accrued debts. They both have little in common with Chapter 7 bankruptcy where all available assets are liquidated with the exception of certain assets that may have exemption from liquidation.

Not all debts are eliminated when a person files for bankruptcy. Payments that cannot be discharged include alimony payments as well as child support, taxes that have not been paid and outstanding student loans. However, Chapter 12 bankruptcy can eliminate other debts that may be outstanding, but it will be highly likely the individual has many issues with borrowing money in the future from financial institutions.

Here is a breakdown of the financial figures to be eligible for the filing of a Chapter 13 Bankruptcy. Note, these figures can change as they are adjusted from time to time to be in line with the current consumer price index figures.:

• A person may have no total amount greater than $394,725 in debt that is unsecured such as personal loans or credit card bills.
• An individual may have no total amount greater than $1,184,200 in debts that are secured including auto loans and mortgages.

Regarding your home, filing for Chapter 13 Bankruptcy puts a suspension on outstanding proceedings for foreclosure and payment of other debts that may be owed. This will obtain you time while your plan is under consideration from the courts. However, it does not mean the debt is automatically eliminated. Ideally, the plan for bankruptcy will make enough of your income available to make mortgage payments on a regular basis so you may retain your home.

The Chapter 13 Bankruptcy Process

The first order of business is to discover a bankruptcy attorney. They usually offer a free evaluation and an estimate of the costs to file and commence the process. There is a fee of $235 payable to the bankruptcy court for filing as well as $75 for administrative costs. The following is also required:

• A list of the claim amounts and the names of creditors.
• The debtors income and sources need to be disclosed.
• The debtors property needs to be listed as well as all leases and contracts held in the name of the debtor.
• The monthly living expenses of the debtor.
• The debtors most recently filed tax return as well as a statement if there are taxes that have not yet been paid.

A petitioner for Chapter 13 Bankruptcy cannot have had a dismissal of a bankruptcy petition dismissed within the previous 180 days before filing due to the unwillingness of them to make an appearance in court. The applicant must also go to an approved agency for credit counseling within 180 days of the petition being filed.

Very soon after, a repayment plan must be submitted by the debtor. An administrator or bankruptcy judge will instigate a heating and make a determination to decide if the plan is fair and meets the requirements of the bankruptcy code. There may be objections from creditors, but the final determination resides with the court.

Delinquent payments can be addressed by the debtor making the payments up over a period of time, but Chapter 13 rules state all new payments for mortgages at the time of filing for bankruptcy must be made on time, henceforth.

A trustee or mediator must also be worked with as they will be responsible for the distribution of monies owed to creditors. Under Chapter 13 Bankruptcy, it is not mandatory for a debtor to directly contact their creditors. And if all the agreement terms are being abided by, it is required by law that creditors stop efforts to recover the debt they are owed. That said you must never fall behind on mortgage payments. Late payments are not permitted on monies owed. You are permitted to increase your payments so the agreement may be discharged sooner. On the other hand, if your financial situation becomes worse, you need to let the trustee know and establish whether the plan can undergo a modification. If the terms of the agreement are not met may result in the bankruptcy claim being dismissed in court.

Qualifications For Chapter 13 Bankruptcy

If you can prove you have the income to address your debts, you meet eligibility to file. The individuals sources of income must be disclosed and submitted to the court within fourteen days of the petition being filed. Income can include payments from Social Security, pensions, royalties, money from a property sale or rents as well as compensation for unemployment. Your tax filings need to be current and you will have to show evidence of federal and state tax filings for the previous four years. When you cannot meet this, your case will be delayed until you meet this requirement and will be dismissed if you cannot produce the documentation.

From there, the bankruptcy court’s role is to overlook the income statements and debts, arrange meetings with people to who monies are owed and then decide on a hearing date with the purpose of ascertaining if the plan will be acceptable. On the completion of repayments, usually between three to five years, the Chapter 13 case can then be discharged, ending the process.

Source: https://www.debt.org/bankruptcy/chapter-13/