Is your credit situation making you think about filing for bankruptcy? Filing bankruptcy is a “last-resort” option for individuals who are experiencing trouble paying their bills.
Frequently, someone who files for bankruptcy has many bad credit marks on their credit report. They often have been rejected for credit recently, have creditors calling them and have multiple bills which they pay late or not at all.
It is common for there will be a home or vehicle which has been repossessed, or under the threat of repossession.
If you have debt problems such as these, then you must be looking for relief. Not being able to pay your bills is stressful and truly difficult position.
If you are considering bankruptcy, it is absolutely critical that you discover the permanent ramifications of a bankruptcy.
Bankruptcy laws were made with you in mind. When you file for bankruptcy, most or all of your debts will be closed.
This happens after your assets are divided amongst your creditors. This is possible, through bankruptcy, even if your assets don’t pay all your debts.
This procedure is called liquidation, or Chapter Seven (7) bankruptcy. Chapter 7 bankruptcy is the most common type. A “trustee” takes care of all the administrative and supervisory duties of the proceedings.
Chapter 11, 12, or 13 Bankruptcy offer rehabilitation to your business, and the option of using future earnings to pay creditors. Once you initiate the bankruptcy proceedings, creditors can no longer attempt to collect your debts.
Also, you will not be able to transfer any assets that are part of the estate (so, forget about hiding your savings account or gold coin collection with a trusted relative or friend!) Further, transferring ownership of assets prior to filing bankruptcy typically does not work, and many are invalidated.
Recently, the U.S. Supreme Court ruled that retirement accounts do not have to be included in your assets that are liquidated.
Regardless of which bankruptcy you choose, it will likely be on your credit reports for 7 or 10 years. Filing for bankruptcy frees you from your existing lenders, but not from any future lenders.
If you do go through with a bankruptcy, it will narrow your credit options considerably. Good credit is not impossible to restore, but it will take some time and considerable patience.
Things to remember:
1. Any bad credit item can potentially be removed from your credit report.
2. New, current good credit will cause your score to improve.
3. Old, bad credit falling off your report will also boost your score over time.
4. You must monitor your credit reports regularly - and dispute questionable negative items such as charge offs, collection items, and late pays.
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