Filing for bankruptcy is something many people turn to when their debt is too much, and they just don't have enough income coming in to handle it. Before you rush into this decision, there are some important things to be aware of.
There Are Different Types of Bankruptcy
The first thing to think about is what type of bankruptcy you want to file. There are different types of bankruptcy based on if you are an individual or business, and exactly what you want to accomplish by filing. A popular type of bankruptcy is called chapter 7, which allows you to discharge the majority of your debt. While there will still be some debt not included, it helps to liquidate your assets and deal with most of your debt, stopping calls from creditors. Your income and assets also play a role in the decision. You may also file for chapter 13, which helps you come up with a payment plan to pay back your creditors. If you have business debt, you might want to file chapter 11 bankruptcy.
Not All Debts Can Be Cleared With Bankruptcy
Bankruptcy can handle a lot of your debt, but there are some forms of debt that are excluded. For example, if you have back taxes you haven't paid, you will still be responsible for that debt, even after bankruptcy. This also doesn't help with debt related to alimony or child support. There may also be other exclusions, such as certain types of loans and lines of credit that won't go anywhere when you file. Before filing for bankruptcy, also consider if any of the debt can be handled with payment arrangements, credit counseling, or loan refinancing.
The Bankruptcy Must Be Approved by the Courts
One thing many people don't realize is that bankruptcy is not as simple as filling out an application, then having your debts erased. You need to prove that you are in need of bankruptcy, showing the amount of debt you have compared to how many assets and how much income you have coming in. The court will look over your financial situation and application, then decide if you will be approved or not. If they don't approve it, you will need to figure out another option for dealing with your creditors. It is highly recommended that you get a bankruptcy attorney before you start filing. They will discuss your options, help you fill out the application, and communicate with the court to help get it approved. Contact a business, such as Michael D Hart PC, for more information.