Bankruptcy guide: Essentials you should be aware of
Most people are terrified by the prospect of declaring themselves bankrupt, but in some cases it can be a good thing. If youâ€™ve really been struggling under the burden of debt and you just donâ€™t feel you can cope anymore, it can resolve the situation and give you back your peace of mind. Itâ€™s there to protect you from destitution and set you on the road to recovering control of your finances.
How does bankruptcy work?
In the US, citizens have the option of filing for bankruptcy every eight years. That is not recommended of course and not every kind of debt can be cleared by bankruptcy â€“ you will still be responsible for any alimony or child support payments, the payment of fines for breaches of the law, secured loans and some other kinds of loans and taxes â€“ but you could end up in a much better position than you were in to begin with. Each state takes a slightly different position on exactly what can be included. A lawyer can help you work out whether or not itâ€™s the best option for you, considering the restrictions. Bankruptcy will stay on your credit record for as long as ten years, so it may limit your financial options in future, but on the other hand it could make your immediate financial situation much easier to cope with.
Two kinds of bankruptcy
For private individuals, there are two main forms of bankruptcy: Chapter 7 and Chapter 13. To file for Chapter 7 bankruptcy you must be unwaged or on a very low income. If you own property, it may be liquidated to pay off your debt, but the trustee assessing your situation will usually leave you somewhere to live and will let you keep your car if itâ€™s essential for getting to work or accessing medical treatment. Chapter 13 bankruptcy, for which you must normally be earning a regular wage, grants you some protection from this by letting you propose a plan whereby you can pay back your creditors within three to five years, usually in installments. You will have to owe less than $383,175 in unsecured debt and $1,149,525 in secured debt to be eligible. There are other forms of bankruptcy designed for businesses and other private institutions.
Getting legal support
Getting the right legal representation can make a big difference to your bankruptcy claim. When youâ€™re struggling for money, you may wonder if you can afford a lawyer, but itâ€™s something you should think of as an investment â€“ youâ€™re likely to end up with less money at the end of the process if you try to do without. Suzzanne Uhland attorney specializes in bankruptcies. She has a degree from Yale and has been acclaimed one of the best lawyers in Orange County. Her approach is to explore the options around restructuring debt so that it can be made manageable and everybody can come out of the situation as well as possible.
What happens next?
After declaring bankruptcy you will be required to receive credit counseling and education in how to avoid getting into debt in future. This might seem like a chore but it can actually be really empowering, and many people say that it makes them aware of pitfalls they didnâ€™t previously realize were there. You will still be able to take out loans and credit cards after making your declaration, so the emphasis must be on doing so carefully. You might even remain eligible for an FHA home loan if you need one. Every year you can receive one copy of your credit record free, so keep checking it and make sure there are no errors complicating your situation. Over time, youâ€™ll be able to watch it recover.