Filing for bankruptcy used to have a negative stigma attached to it where you lost everything to lawyers and creditors. However, this legal choice isn’t meant to strip you of your belongings. It’s designed to help you start out fresh with little to no debt. In most cases, you can keep certain assets that are in good standing, such as a car or home. Milestones in life occur all of the time, including job loss, so get to know a few facts about bankruptcy to ease your concerns.
1. Student Debt Cannot be Discharged
Going to college is an exciting time in life, but it can also be expensive. Thousands of dollars might be borrowed during the four years, which must be paid back. Although you may have a huge debt in the form of student loans, you cannot discharge these obligations through bankruptcy, reports Forbes. It’s imperative to pay them back over the course of your career.
2. There Are Two Bankruptcy Choices
Choose between Chapter 7 or 13 bankruptcy types. Chapter 7 allows you to discharge or dissolve certain debts and start fresh. In contrast, Chapter 13 creates a payback plan for your debts. They aren’t discharged because you may have income that can support a monthly payment.
3. Credit Counseling Required
The Federal Trade Commission confirms that you will be required to take credit counseling. This counseling is usually split between your filing and paperwork completion. It essentially teaches you about smart, money management so that another bankruptcy doesn’t occur in the future.
4. Lawyer Paid in Full Before Starting the Process
Most lawyers require your case to be paid in full before the filing process begins. This rule is often met with frustration because you’re struggling to pay your debts and now you have another one. Prioritize the attorney’s payment because you want to declare bankruptcy as quickly as possible. Once it’s completed, you’ll have a serious mark on your credit report. You want time to quickly pass by so that the bankruptcy can be cleared within a seven-year period.
5. Court Appearances are Short
The idea of a court appearance may seem daunting, but bankruptcy types are incredibly short and uneventful. A judge looks over your case so that it’s properly filed and handled. There might be a few questions, and then you complete the bankruptcy process.
The bankruptcy world can be a difficult one to maneuver through so use your lawyer’s experience to keep you updated on the best pathway for your financial situation. There might be specific laws that pertain to your situation, which are beneficial in the long run. Be aware of your rights as you move forward to a new life without debt.