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Major Considerations About Bankruptcy

November 21, 2019

Buried in debt and can’t see away out? Before filing chapter 7 or 13, here are some bankruptcy facts and the top things to know about filing.

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Filing bankruptcy is a major decision.

In 2018, over a quarter of a million Americans were forced to file bankruptcy and make  big changes to their financial lives.

If you’re at the end of your financial rope and think bankruptcy might be your only option, it’s important to fully understand what you’ll get yourself into.

Read on for a closer at some important bankruptcy facts that you’ll want to consider before committing.

Two Bankruptcy Types

There are two major types of bankruptcy: Chapter 13 and Chapter 7.

  • Chapter 13 helps you reorganize and pay your debts. If your goal is simply to get out of a financial jam and get your life back on track, this might be your best option. Chapter 13 is often used by businesses and occasionally by individuals.
  • Chapter 7, on the other hand, typically involves the liquidation of assets to help pay debts. This type is more common for individuals.

Since bankruptcy laws vary from state to state, make sure you understand local requirements and seek help from an experienced legal professional.

Not a Simple Process

It’s also important to realize the process isn’t simple. You can’t just file a form and make your debts disappear.

A Chapter 7 bankruptcy may take four to six months to resolve. Other types can take significantly longer.

Some Debts Remain

Bankruptcy isn’t a magic debt eraser. While many debts can be discharged, some can’t.

Typically, mortgage and car loans can’t be. Child support, alimony or spousal support, many student loans and some tax debt often can’t be eliminated.

If you consider bankruptcy, review your debts with your attorney to see if bankruptcy is the right path for you.

Under a Microscope

Filing bankruptcy will put your finances — and life — under very strict scrutiny. Your financial decisions will be displayed to everyone involved in the process.

If your salary and finances are tough to discuss with friends and family, be ready for discomfort if you file bankruptcy. You must provide detailed financial records and publicly discuss your personal finances.

If this sounds uncomfortable, you’re not alone. But if bankruptcy is your only option, be prepared to get personal.

You Must be Honest

If you decide that bankruptcy is the best path for you, you must be prepared to be completely transparent with your financial situation.

You absolutely must disclose all of your debts and any financial information that’s relevant to your case and filing.

Any attempt to be dishonest with the court or anyone else involved will send a clear message that you are not an honest debtor.

Plus, falsifying information in a bankruptcy case is a serious crime that could put you in a much worse situation than overwhelming debt.

Forms are Complex

Since the bulk of bankruptcy proceedings are handled through paper forms, it’s easy to assume that the process is relatively simple.

But like most governmental financial forms, bankruptcy forms are incredibly complex. Many of the questions are confusing and require more than simply checking a box.

Be prepared for difficult questions that require careful thinking.  If you want to see how long and complicated these forms can be, you can download the entire individual Chapter 7 Bankruptcy filing packet from the Nebraska Bankruptcy Court.  You’ll be good and ready to call a lawyer after spending just 5 minutes looking at this packet!

Bankruptcy Has Costs

A common misconception about bankruptcy is that it relieves all your financial problems once you complete a few forms.

Like any other legal proceeding, bankruptcy requires money to file and work through. Even if you decide to file on your own, the filing fees are substantial.

Although a bankruptcy attorney will add to your costs, the likelihood of getting the best financial outcome increases dramatically.

Your Credit Is Affected

Once the paperwork is filed and your case is complete, don’t expect a clean, unblemished credit report. In most bankruptcy cases, the debtor’s credit is affected for years after the case concludes.

We’ve said it already, but it’s worth repeating: Bankruptcy is not a magic reset for your credit or your financial problems. Bankruptcy is a last resort for those who made a few missteps or suffered unfortunate difficulties.

With most Americans drowning in more than $16,000 in credit card debt, your best option is to learn to carefully manage your money and avoid debt if possible.

Rebuild Your Credit

After you complete the legal process and enough time has passed, you can borrow again. But you’ll need to rebuild your credit.

This process is best done in small steps and with small amounts. Get a credit card you only use occasionally and always pay it off right away.

Don’t make the same sort of decisions that got you in trouble to begin with. Take it slow and only borrow again if you absolutely must.

Many bankrupts can borrow again after two years or so, but don’t expect the best terms. For major loans like a mortgage, expect to wait five years or more.

Put It All Together

Bankruptcy can be a tough process. It’s not the right answer for everyone. But if you’re in a tough financial spot, it may be the only solution.

If you need to explore filing for bankruptcy, call us at (402) 415-2525 today!

Filed Under: Chapter 13 Bankruptcy, Chapter 7 Bankruptcy

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West Omaha Husker Law
1055 N 115th St
Ste 302
Omaha, NE 68154
Phone: 402-415-2525
Fax: 402-415-2551

— Practice Areas

• Divorce

• Family Law

• Bankruptcy