A couple generations in the past, bankruptcy was looked upon with a much heavier eye than it is today. The technology era brought about an exponential influx of financial disparity among Americans, and bankruptcy quickly became a much more common event. In 2015, nearly one million citizens filed bankruptcy in the United States.
The most important aspect of filing bankruptcy you should understand is that it doesn’t mean your whole life is ruined. There is ample opportunity to rebound from this sort of financial crisis, and you should arm yourself with knowledge.
Here is a quick overview of a few things you should know about filing bankruptcy.
Understand the different bankruptcy options
There are more than five different types of bankruptcy available on the books, but most people only ever have to worry about two or three of them.
Chapter 7 – Chapter 7 bankruptcy is the most common form of filing for those experiencing financial distress. In 2015, more than 65 percent of all filings were chapter 7 cases.
When you file Chapter 7 bankruptcy, you are typically permitted to keep most of your property. Property such as your car, your home, Social Security checks, your pension, vet benefits, and more are all no-no’s for the court when you file this type of bankruptcy.
Chapter 11 – Chapter 11 bankruptcy is designed for business owners. It offers the opportunity for the business to remain open, while financial restructuring works to repay the debts owed.
Chapter 13 – Chapter 13 is for individuals who wish to repay a portion of their debts and have the remainder forgiven. If you don’t want to forfeit any of your property, you can opt for Chapter 13 bankruptcy.
Decide whether or not you need a lawyer
Depending on the type of financial crisis you are working to relieve, you may need legal assistance to file all of the necessary paperwork. You may also need a lawyer to make sure you don’t get the shaft in the courts.
The aftermath of filing bankruptcy
Before you file bankruptcy, it helps to fully understand the lasting repercussions of the decision. Given that the outcome of filing will be a bit different depending on the chapter you choose to file, there are some things that are true across the board.
When you file bankruptcy, it will stay as a blemish on your credit report for 7 to 10 years. It won’t stop you from living, but it will make it very difficult to make any large purchases without a wad of cash.
Dispelling the myths surrounding bankruptcy
Bankruptcy won’t ruin your life. Believe it, or not. There is life after bankruptcy, and it doesn’t have to be of a low quality. The stain of bankruptcy doesn’t last forever, and you’ll have plenty of time to recenter your idea of money management.