When your debts become unmanageable, it’s tempting to consider filing for bankruptcy. Additionally, it helps to prevent the foreclosure of your home. Even though filing for bankruptcy might seem easy and a chance for a fresh start, the process is complicated. Some of the significant consequences you get from foiling for bankruptcy is that it will remain on your credit report, which might make it hard to access financial assistance. Additionally, your insurance rates might be higher, affecting your ability to rent or get a new job. However, if you think it’s your only option, you need to research other options available. This article will outline Things you should know before filing for bankruptcy.
1. Types of Bankruptcy
When you are planning to file for bankruptcy, you need to choose which type of bankruptcy to choose. To make better decisions, it’s essential to research the lawyers in New York and ensure you choose a specialized one in bankruptcy. This will help as they will guide you effectively on the facts and recommend the option to choose. The two available types of bankruptcy are chapter 7 or Chapter 13. When filing for bankruptcy, most people have to choose between the two chapters of the Bankruptcy Code. Chapter 7, known as liquidation, is simpler to file because you can wipe out most of your unsecured loan. This takes less time, but most of your property will be sold by a trustee to pay all your creditors. This is often ideal when you have fewer assets. However, you must meet some income requirements by undergoing a means test to ensure you are not a higher earner.
The higher earners will have to file for chapter 13 bankruptcy. With this type, you can keep all your property by your will and have a scheduled plan to pay your creditors the value of your non-exempt property, such as a boat.
2. Available Options Before Filing for Bankruptcy
It’s essential to look for other options before filing for bankruptcy. You can go for credit counselling, which is a requirement before you file for bankruptcy. You need to look for an approved credit counseling agency that might help give you more available options. Many available government initiatives can help to provide relief until you can stabilize your financial situation. The CARES Act also helps to suspend any eviction activity and some federal foreclosure.
3. Bankruptcy Will not Eliminate All your Debts
It’s crucial to note that bankruptcy will not eliminate all debts. Some debts, such as child support and taxes, cannot be eliminated in bankruptcy. So, know what you qualify for before filing for bankruptcy. Unsecured debts are wiped off but you will need to sell part of your properties to pay secured debts.
4. It Takes A Lot of Time
Filing for bankruptcy is not the best solution to clear your debts. This is because filling out might require a lot of paperwork. Additionally, you must be approved by the court before filing for bankruptcy, which can take a while. Those filing for chapter 7 bankruptcy can take up to six months to complete, while those filing for chapter 13 will take longer. You will also need a lawyer to help you fill out the paperwork required, which might take months before competition and evaluation.
5. Overspending Might Drain Your Retirement Account
Most people are tempted to spend all their money and drain their retirement accounts. This is bad as it can lead to new debts during the70- 90-day period before filing for bankruptcy. The bankruptcy trustee can set aside certain transfers you have made within 90 days to recover money and property. Additionally, you can be charged with bankruptcy fraud by creditors, which can object to your request for bankruptcy. The trustee can also be an able security interest that we have not done correctly. Also, some prefilling such as transferring your property to another family member can be treated as a fraudulent conveyance. Avoid draining your retirement account before you file for bankruptcy. Retirement money is protected in bankruptcy. Using it to pay your bills is not wise, as some debts can be wiped away by bankruptcy.
Wrapping Up:
The above are things you need to know before filing for bankruptcy. Ensure you hire an experienced bankruptcy lawyer to help you with filing for bankruptcy. It’s always wise to consider other available options before deciding to file for bankruptcy.
