3 Types of Bankruptcy
There are several different types of bankruptcy that an individual or business may file. Each type is designed to help debtors deal with their financial situation in the most beneficial way. Some of the most common types of bankruptcy include:
Chapter 7 bankruptcy
This type of bankruptcy is often filed by individuals or businesses and allows them to discharge most types of debt. In order to qualify for this type of bankruptcy, the filer must pass a means test and meet other eligibility requirements.
Chapter 11 bankruptcy
This type of bankruptcy is usually filed by businesses that are experiencing financial difficulty. However, some individuals may also be eligible for individuals. It allows them to restructure their debts and continue to operate their businesses while they pay off their debts over time.
Chapter 13 bankruptcy
This type of bankruptcy is usually filed by individuals and allows them to keep some or all of their property while reorganizing their debt payments into a payment plan that the court manages. In order to qualify for this type of bankruptcy, filers must have a steady income and pass a means test.
How much does it cost to file for bankruptcy?
Filing for bankruptcy can be a difficult but necessary process. It is also an expensive one, with filing fees that vary by state and the type of bankruptcy you choose to file. Some costs to consider include the following:
Depending on the complexity of your case and where you live, attorney’s fees for filing for bankruptcy can range from a few hundred dollars to several thousand. However, you may be able to find an attorney who will offer a reasonable payment plan or discount their fees based on your income.
These fees vary by state and type of bankruptcy, but they can cost upward of $1,000. Luckily, some fee payment plans are available, and some filers may be eligible to waive their fees.
In order to qualify for bankruptcy, you will need to complete a credit counseling course that typically costs between $25 and $50 per person. Some states require this course even before you file your petition, so do your research before filing.
How long does bankruptcy stay on your credit report?
Filing for bankruptcy may impact your credit score. In fact, most negative credit information will stay on your credit report for up to seven years from the date it was first reported. This is true both for Chapter 7 and Chapter 13 bankruptcies.
The effect of bankruptcy on your credit score varies depending on a number of factors, including how long you have had any existing accounts, your payment history with those accounts, and your overall credit history. A bankruptcy can have a significant impact on your credit score right away, but over time this may improve if you are able to start rebuilding your credit by paying bills on time and responsibly using new accounts that you open after filing for bankruptcy.
How often can you file for bankruptcy?
One of the most common questions about bankruptcy is how often they can file for bankruptcy. The answer to this depends on several factors, including which type of bankruptcy you are filing under, state laws, and current financial situation.
In most cases, you can only file for bankruptcy once every seven years. Under federal bankruptcy laws, you can file for Chapter 7 bankruptcy only once every eight years. If you want to file for Chapter 13 bankruptcy, you must wait at least four years after a previous filing.
However, some exceptions to these rules may allow you to file again sooner. For example, if your financial situation has changed significantly since your previous bankruptcy filing you may be able to file again sooner. You can also prove extenuating circumstances, such as a medical emergency or job loss that contributed to past financial issues. In that case, you may be able to file for bankruptcy again sooner.
What are the downsides of filing for bankruptcy?
While it is possible to eventually rebuild your credit after a bankruptcy, filing for bankruptcy may hurt your credit score. It will take some time, diligence, and a willingness to change your spending habits in order to repair the damage. Working with credit counselors or financial advisors to develop a plan for how you can improve your credit score over time can help you get started on the path toward rebuilding after bankruptcy.
Should I Consider Filing for Bankruptcy?
Bankruptcy, or simply the condition in which an individual is unable to compensate their debtors, is a common occurrence in America. From 1980 to 2005, more than two million bankruptcy cases have been filed by debtors across the country. In many cases, bankruptcy is not a matter of reckless spending, but it is a definite matter of financial hardship for many people who simply cannot afford to deal with sudden unexpectancies such as job loss and costly medical bills.
Truth be told, many financial experts will discourage filing for bankruptcy to escape your debt and getting mental health debt relief. Make sure you’re fully informed before going down this road.
Bankruptcy Law is on Your Side
Surprisingly, bankruptcy is an essential fabric in the United States Constitution. The American founders were fixated on creating a system in which individuals burdened with a massive debt could relieve themselves and build a fresh start. According to the U.S. Bankruptcy Code, here are ways people can choose to file bankruptcy.
- Liquidation – This is the basic chapter of bankruptcy. In this process, the court will assign a trustee to oversee the liquidation of all of your assets to pay your debtors. Though, this doesn’t necessarily pertain to your vital possessions, such as your primary residence or vehicle.
- Adjustment of Debts – For those who don’t apply to liquidation due to income constraints, this process entails paying off your debtors within three to five years, using your regular income and other assets.
- Reorganization – In this process, debtors are mandated by the court to submit a plan to reorganize their finances to pay back creditors in 120 days. This chapter allows individuals to pay back their debt and afford their living expenses.
What to do before filing for bankruptcy
As you can see, there are several options if you plan to file bankruptcy. To discover whether bankruptcy is the right course for you, or how to avoid bankruptcy contact Americor to learn all your options. Also, learn more about accelerated financial solutions and learn more about the current debt ceiling.