6th Nov 2014
Bankruptcy is not something that should be taken lightly. There are many factors that go into declaring bankruptcy, before making this decision it is important that you completely understand what filing for bankruptcy means, and how it will affect your life.
There are two main types of bankruptcy that can be filed. While we may have all heard the terms, many people do not know the difference between these two. Become familiar with the differences, and what each will mean for your future after bankruptcy has been filed:
- Chapter 7 – This is also known as liquidation. It will take about four to six months from the time you file to the final discharge. This type of bankruptcy can only be filed once in a six year period. It will allow you to give up your assets in exchange for the discharge of debt that is held against you. This is an option for those who have little income, few assets, and a lot of debt. When filing for Chapter 7 bankruptcy it will stay on your credit score for ten years.
- Chapter 13 – This is known as debt adjustment. It will allow a person to halt their foreclosures and collection actions, giving them the chance to create a plan to repay their debt over a period of time. This amount of payment will not be determined by what you owe, but rather how much you make. This allows you to reschedule debts over a period of time. This type of debt differentiates between secured debts, unsecured debts, and priority debts. This bankruptcy will stay on your credit score for seven years.
There are two other types of bankruptcy (Chapter 11 and 12) both of which are similar to Chapter 13. Make sure you know beforehand the advantages and disadvantages to filing, and better determine what will be the best choice for you.
Before making the final decision, you must first assess the situation to better determine what you should do. There are a few critical questions you must ask yourself, including:
- Do you have bill collectors contacting you on a regular basis?
- Are you only making the minimum payments on your credit cards?
- Do you need your credit cards to pay for the necessities?
- Are you thinking about debt consolidation?
- Does thinking about your finances stress you out?
- Are you uncertain about exactly how much you owe?
Think through these questions carefully, if you answer yes to a few of them or more, it may be time to look into your bankruptcy options. Contact Christensen Young & Associates. We can offer you a free consultation to start guiding you through the process, ensuring your finances are taken care of.