Personal bankruptcy stays on your credit report for 10 years. While you may be able to qualify for credit during that time, the terms may be undesirable. Generally, bankruptcy should be considered as a last-ditch solution. If you can’t possibly pay what you owe, you should consider hiring a lawyer to help you make key decisions about the bankruptcy that may affect the outcome.
Legal FAQs: Bankruptcy
There’s a tendency to panic over huge bills, but it’s important to face your situation honestly and seek help from a professional you trust. Become fully familiar with the debt-settlement options, and select what seems like the best alternative for your situation. Most importantly, don’t hide from creditors. If you are being harassed there are laws to protect you.
Chapter 7 consumer bankruptcy can be a useful tool to relieve debt and help people eliminate debt to get a fresh start. It should not be done lightly. Your best bet is to talk to an attorney.
If you file, you’ll not only face higher interest rates on loans and find loans harder to get, but you’ll also have the bankruptcy on your credit score for 10 years. Talk to a lawyer who can explain your options. Don’t run up your credit card debt since charges made within 90 days of filing typically cannot be forgiven.
If you do file, let all your creditors know and provide them with the contact information of your attorney. The good news: most people who make the decision to file do find that within two or three years, their credit is much better than before.
There are four types of bankruptcy cases provided under the law. Chapter 7, known as "straight" bankruptcy or "liquidation,” requires a debtor to give up property which exceeds certain limits called "exemptions,” so the property can be sold to pay creditors. Chapter 11, known as "reorganization,” is used by businesses and a few individual debtors whose debts are very large. Chapter 12 is reserved for family farmers. Chapter 13, called "debt adjustment,” requires a debtor to file a plan to pay debts (or parts of debts) from current income.
Most people filing bankruptcy will want to file under either Chapter 7 or Chapter 13. Either type of case may be filed individually or by a married couple filing jointly. Your bankruptcy lawyer can help you decide which case is right for your situation.