If creditors are hounding you and you aren’t sure what to do, no doubt bankruptcy is an option that you need to consider. Before you do, it’s important to know your options along with their advantages and disadvantages.
Qualifying for Bankruptcy (Chapter 7 vs Chapter 13)
Depending on your situation, you can file either Chapter 7 (liquidation) or Chapter 13 (reorganization) bankruptcy. For Chapter 13 bankruptcy, there are caps on the amount of debt you can have and you will need to repay your creditors. Chapter 13 has many advantages, such as the ability to retain property assets. For Chapter 7 bankruptcy, most debt is wiped clean but your income must fall under a minimum amount.
Advantages of Filing Bankruptcy
In spite of the drawbacks, bankruptcy is often the right decision.
- You can eliminate delinquent payments, stop repossessions, cancel loan defaults and avoid lawsuits.
- In addition to an exemption for your primary home, property that you buy after the bankruptcy is also exempt.
- If credit cards caused your financial woes, you will now avoid the temptation to overspend.
- Bankruptcy provides you with an opportunity to rebuild your credit.
- Despite challenges in obtaining a future home loan, some lenders specialize in working with clients who have filed bankruptcy.
Disadvantages of Filing Bankruptcy
Before filing bankruptcy, know that:
- You may lose all of your credit cards.
- You may lose some luxury items.
- You may lose property that is not protected – although your primary home is likely exempt.
- The bankruptcy will negatively affect your credit for up to 10 years.
- You may not be able to obtain a mortgage until you rebuild your credit.
- Bankruptcy often does not free you from student loan debt, child support or alimony.
When to File Bankruptcy
In many situations, bankruptcy is the answer. Some of them are when:
- You are facing a lawsuit, wage garnishment or lien
- You are facing repossession or foreclosure
- You cannot make the minimum payments on your credit cards and struggle to pay for necessities, such as utilities and food
- You do not own multiple real estate properties.
Before filing for bankruptcy, make sure to consult an experienced and qualified attorney so that you know your rights and how a bankruptcy will personally affect you. One of the most expensive mistakes made by those facing bankruptcy is to hire a shady, discount lawyer that’s looking to make a quick dollar off you.
Larry Bellomo is a 5 star Orange County bankruptcy attorney offering discounted personal bankruptcy packages from just $695*. This will get you the top tier service Larry has been offering Orange County residents for decades, at a significantly reduced cost. Get in touch with us today and find your relief.