The decision to file for bankruptcy can leave you wondering what it will mean for your financial future. Understanding what bankruptcy entails can help you determine what makes sense for your unique circumstances.
You Usually Have Two Options
Most people who declare personal bankruptcy Everett WA, choose between Chapters 7 and 13. Under Chapter 7, a trustee oversees the liquidation of assets to repay debts. This option is available for people with few resources. Chapter 13 bankruptcy is only available to wage earners and involves a plan to repay debt. Debt may be dischargeable under both forms of bankruptcy depending upon specific circumstances.
Bankruptcy Requires Extensive Paperwork
In addition to filing the appropriate forms, anyone who files for bankruptcy must prepare extensive lists that include all assets, debts, purchases and income sources. Mistakes or deliberate misinformation on bankruptcy paperwork can disqualify individuals for bankruptcy or subject them to federal charges.
You Must Pay a Bankruptcy Fee
Declaring bankruptcy usually involves a filing fee. In rare cases, the court might waive this fee for individuals without the resources to pay it. Still, anyone who seeks legal assistance during bankruptcy can expect to pay substantial fees.
Your Credit Will Take Years to Recover
It can be challenging to obtain credit following bankruptcy. For example, a Chapter 7 filing remains on your credit report for 10 years, and a Chapter 13 filing appears for seven years. Fortunately, it is possible to rebuild good credit, and many credit card companies extend small credit lines to bankrupt individuals, though they come with high interest rates.
Some Debts Are Not Dischargeable
Most people who file Chapter 7 or 13 bankruptcy can expect the court to discharge most of their debt after meeting the court’s requirements. Debts that do not qualify for discharge under either form of bankruptcy, including student loans, taxes, child support, alimony or debt resulting from wrongful activities.
Bankruptcy can provide relief for overwhelming debt though it is a complicated solution that requires extensive consideration.