Statistics show that over 1 million people declared bankruptcy by the end of fiscal year 2008. Millions of debt-burdened Americans are filing for bankruptcy in the hopes of relieving them of mounting debt. If you have been laid-off, suffered a pay cut or are simply over burdened with debt, you may be wondering if declaring bankruptcy is something that could help you. If it is, you will need to know when to file bankruptcy and how to declare bankruptcy, each of which the team at Blutter & Blutter can assist you with.
Is bankruptcy the right choice for me?
Seeking bankruptcy is the best choice for many debtors, however many are hesitant to file for bankruptcy for many reasons including the fear of the social stigma and how it affects their credit. Despite these common misconceptions, bankruptcy can actually be an extremely beneficial move for someone currently under a mountain of debt. For example, some believe that declaring bankruptcy can keep them from ever obtaining credit again. While bankruptcy does affect your credit, it will only stay on your credit report for 10 years. Despite this, you will likely be able to obtain credit again before the end of the 10 years. Know that many factors contribute to gaining credit including your pre-filing payment history, current income and debt-to-income ratio.
An experienced Long Island bankruptcy attorney will look at your individual situation and help you determine if bankruptcy is the right option for you. If it is, your attorney can ensure you file properly and get the start at a bright financial future.
How do I choose the right type of bankruptcy?
There are many chapters of bankruptcy protection, so choosing the best one for your particular financial situation can be confusing and stressful. However, an experienced Long Island bankruptcy attorney can help you determine which chapter works best for you.
Both individuals and businesses have the ability to file for bankruptcy. The two most common types of bankruptcy include:
- Chapter 7 for Individuals – This is the most common type of bankruptcy filed for individual debtors. When an individual files Chapter 7, they will be able to discharge many of their debts while many of their assets. Chapter 7 is considered a liquidation type of bankruptcy. This means that assets that were secured by the debt can be sold to repay at least a portion of the debt. The debtor can keep a few assets depending on the exemption statutes. Your attorney will help you identify the assets you can keep when filing Chapter 7 bankruptcy.
- Chapter 7 for Businesses – Chapter 7 is different for individuals and businesses. A business cannot discharge debts. Rather, all assets are liquidated and repaid to creditors.
- Chapter 11 – When filing under Chapter 11, an individual and business is given time to maintain control of all assets. This gives them time to try and get back on their feet before assets are liquidated. The debtor or company will work with the bankruptcy court on a payment plan that the creditors will then vote on. Due to the complex nature of Chapter 11 bankruptcy, this plan may take up to a year to craft. You will certainly need the help of an experienced bankruptcy attorney when successfully crafting such a plan.
- Chapter 13 – This type of bankruptcy allows individuals to maintain ownership of their assets with the promise that they allow a portion of their future earnings to be taken to repay their creditors. The amount of debt that the debtor will be required to repay and the length of time they will have to pay it are determined by the debtor’s assets, their income and their expenses. This type of plan can take three to five years to complete, but the debtor will retain all assets.
It is important to note that both secured debts, like your mortgage, and unsecured debts, like credit cards and medical bills, are both included in bankruptcy filings. A few types of debts, like student loans and back taxes, cannot be discharged. Your attorney can explain which types of debts you can include and not include.
What are the pros and cons to filing for bankruptcy?
Declaring bankruptcy is a stressful choice that will definitely affect your credit. However, it can remove even more stress, improve your quality of life, and even keep you from losing your home, car and other important assets. Due to the long-lasting effects of bankruptcy, it is usually considered a last resort. It is not something you should do unless it is the best or only option. It is important to consider both the pros and cons of filing for bankruptcy with your attorney before choosing this route.
Pros of filing for bankruptcy:
- When you file for bankruptcy, all collection actions by creditors are legally halted. This includes harassing phone calls, foreclosures, garnishment of wages and even repossessions.
- You often get to keep important assets like your home and car
- The sooner you file, the quicker you can get begin rebuilding your financial life
Cons of filing for bankruptcy:
- You will likely lose all luxury possessions
- You will lose all of your credit cards
- Getting a mortgage will be nearly impossible for about five years until you rebuild your credit
- The bankruptcy will stay on your credit report for 10 years. This can effect obtaining credit, a home, a vehicle, life insurance and even a job
- Some people may be embarrassed to file for bankruptcy because your name appears in court records and is reported to the newspaper
An attorney from Blutter & Blutter can help you weigh the pros and cons of filing for bankruptcy. With their experience and legal knowledge, your team at Blutter & Blutter can offer you sound advice for your best options.