Bankruptcy Facts
"Bankruptcy does
not wipe your credit slate clean and give you a fresh start.
Bankruptcy should be a last resort to solving financial problems
-- when the mountain of debt is so great and the creditors so
unrelenting that no other accommodation can be reached."
- Terry Savage, Award-winning Journalist
Consider these facts:
- Bankruptcy stays on your credit
report for up to ten years.
- You will have difficulty getting
future credit such as mortgage loans.
- Any credit you get will probably
cost you more in terms of interest rates and fees charged.
- Alimony, child support, and
most taxes survive bankruptcy and will still be owed.
Types of Bankruptcy
There are two types of bankruptcy available to most people, Chapter
7 and Chapter 13.
Chapter 7
Chapter 7 bankruptcy is referred to as "straight bankruptcy"
or "liquidation," because the debtor's unprotected
assets are converted to cash and disbursed to the debtor's creditors
to repay part of the debt owed.
Any person, partnership and most
corporations can file Chapter 7.
Chapter 13
Chapter 13 bankruptcy affords the debtor the opportunity to repay
all or part of his debts over an extended time period. This plan
requires that the debtor have a consistent income to make future
payments for the duration of the plan.
Chapter 13 is designed for consumers
who need relief from their creditors and collection activity
to reorganize their debts and devise a plan to repay them.
The debtor is allowed to keep
all of his assets, including those not exempt and not mortgaged.
Both types of bankruptcy may get rid of debts where creditors
have no specific rights to property, and may stop foreclosures,
repossessions, garnishments, utility shut-offs and debt collection
activities.
How to Find an Attorney
If you need legal advice on filing bankruptcy, here are some
basic tips in helping you find an attorney:
- Contact your local bar association
for a referral.
- If you can't afford an attorney,
contact legal aid services, a university law school with a legal
assistance program, or your local bar association for a referral
to an attorney who can help you free of charge.
- Look for an attorney who is
state-certified or certified in bankruptcy practice.
Alternatives to Bankruptcy
Think about bankruptcy as a last resort. Here are a number of
alternative ways to fix your finances without risking your credit
rating:
- Rather than trying to avoid
your creditors, talk to them.
- Let your creditors know that
you would like to work out a plan to begin paying off your debt.
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