Having debts that you’re unable to pay can be a stressful experience. For some people, there’s simply no money to get those bills paid. It can be very disheartening to have creditors calling and mailing statements to attempt to get money when they know they don’t have any.
For some, filing bankruptcy is the most effective way to handle their debts. If you’re considering this course of action, there are several things you should remember.
Do know what chapter to file under
Filers must determine whether they need to file Chapter 7 or Chapter 13. In a Chapter 7 bankruptcy, available non-exempt assets are liquidated and the proceeds are divided among creditors. In a Chapter 13, the filer must pay regular payments to the bankruptcy court to cover debts.
Don’t try to hide assets
The bankruptcy process has very specific laws and guidelines that must be followed precisely. As part of this, you will list all your debts and assets. You shouldn’t try to hide your assets before you file for bankruptcy. Hiding assets can lead to criminal charges and other penalties. You also can’t pay off specific debts, such as loans from family members, once you decide you’re going to file for bankruptcy.
Do understand the automatic stay
The court will issue the automatic stay when you file for bankruptcy. This prevents creditors from being able to contact you in an attempt to collect debts. While this gives you some relief, the purpose is actually to keep the creditor payoff process equitable for all creditors. It’s highly unlikely that any creditor will receive full payment. By forcing them to go through the court instead of trying to collect from you, it ensures they only get their share of what’s being paid.
Don’t try to take on more credit
Once you file for bankruptcy, you can’t try to get new credit extended to you. The bankruptcy will be entered on your credit report. It will be difficult to obtain new lines of credit until you start to prove your creditworthiness again.
Learning about your rights and responsibilities when you’re considering bankruptcy is crucial. Working with someone who understands your situation may help you to determine the best course of action to get you started with a fresh financial start.