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As one piles up debts, the might be the temptation to file for bankruptcy. The decision or feeling might leave one feeling hopeless or scared. There are however some options before one decides to declare that they are bankrupt. While filing for bankruptcy will allow one to start afresh, it should not be taken lightly. This is owing to the fact that it comes with some serious consequences. In consideration of filing for bankruptcy CA residents should know what is involved.
There are various type of bankruptcy that one can qualify for. They all have their restrictions and final outcome will also be different. Chapter 7 bankruptcy is called liquidation. This is whereby after filing for it, they are allowed to discharge majority of their debts. The debtor will be required to sell or liquidate assets that they have so that they are able to pay off what they owe.
The other common one is chapter 13. It allows people to organize their debts again and make payments to creditors over a period of time. It is a process that lasts some 3 to 5 years. Assets of the debtor will not be liquidated and if there is any additional debt that is owed after the required payments, they will be discharged. It is important to note that not everything will be discharged. Even when one files for chapter 7, not everything will be forgiven. There are some debts that cannot be discharged.
The types of debts which are not discharged include child support, student loans, real estate liens and majority of taxes. There is also possibility that a debtor might oppose discharge of their debts. If this is allowed, then the debtor will still owe the money. The income of a person is very critical when it comes to filing for bankruptcy.
While all people can file that they are bankrupt, income could disqualify one or affect what they can file for. For instance, some people cannot file for chapter 7 owing to what they earn. For people who file for chapter 13, their income will influence and determine how debt restructuring is done. It is also not free to file. One will need to hire an attorney to oversee the process, further adding to the costs. The fees of attorneys might be added to the bankruptcy filing. Chapter 13 filing is costlier since the process takes much longer.
Bankruptcy destroys credit. Payment history will determine 35 percent of credit score. Deciding to file that one is bankrupt will have long lasting effects on ability to secure loans or utilize credit. Bankruptcies stay on credit for as long as 10 years. During the period, getting credit cards or landing some jobs will be hard. The filing also becomes public record.
When one files for bankruptcy, it will not eliminate all their problems. Whereas it helps in restructuring, if there were bad financial decisions, they will still have an effect on the person. The process does not cure problems that one had.
There are various options that one can go for. You could renegotiate debts with creditors or create a payoff plan. For some people, consolidation is a good option, where they consolidate high-interest debts into a loan with less interest.
There are various type of bankruptcy that one can qualify for. They all have their restrictions and final outcome will also be different. Chapter 7 bankruptcy is called liquidation. This is whereby after filing for it, they are allowed to discharge majority of their debts. The debtor will be required to sell or liquidate assets that they have so that they are able to pay off what they owe.
The other common one is chapter 13. It allows people to organize their debts again and make payments to creditors over a period of time. It is a process that lasts some 3 to 5 years. Assets of the debtor will not be liquidated and if there is any additional debt that is owed after the required payments, they will be discharged. It is important to note that not everything will be discharged. Even when one files for chapter 7, not everything will be forgiven. There are some debts that cannot be discharged.
The types of debts which are not discharged include child support, student loans, real estate liens and majority of taxes. There is also possibility that a debtor might oppose discharge of their debts. If this is allowed, then the debtor will still owe the money. The income of a person is very critical when it comes to filing for bankruptcy.
While all people can file that they are bankrupt, income could disqualify one or affect what they can file for. For instance, some people cannot file for chapter 7 owing to what they earn. For people who file for chapter 13, their income will influence and determine how debt restructuring is done. It is also not free to file. One will need to hire an attorney to oversee the process, further adding to the costs. The fees of attorneys might be added to the bankruptcy filing. Chapter 13 filing is costlier since the process takes much longer.
Bankruptcy destroys credit. Payment history will determine 35 percent of credit score. Deciding to file that one is bankrupt will have long lasting effects on ability to secure loans or utilize credit. Bankruptcies stay on credit for as long as 10 years. During the period, getting credit cards or landing some jobs will be hard. The filing also becomes public record.
When one files for bankruptcy, it will not eliminate all their problems. Whereas it helps in restructuring, if there were bad financial decisions, they will still have an effect on the person. The process does not cure problems that one had.
There are various options that one can go for. You could renegotiate debts with creditors or create a payoff plan. For some people, consolidation is a good option, where they consolidate high-interest debts into a loan with less interest.
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