Answers to Bankruptcy Questions
The decision to file for bankruptcy can be a long, agonizing one. In fact, more than a million and a half Americans make the decision to file for bankruptcy every year. In order to determine whether filing for bankruptcy is right for you, you need to take many things into consideration. Following are some answers to bankruptcy questions that people frequently have when considering whether to file.
What is the difference between Chapter 7 and Chapter 13 bankruptcy?
Also known as liquidation bankruptcy, Chapter 7 bankruptcy generally means most or all of your debts will be discharged. This means you won’t have to pay your debts back. There’s little chance of losing your property, though, if you do have considerable assets, you may be required to sell the nonessential items to pay some of your debt. A chapter 7 bankruptcy is usually discharged within three to six months of filing.
On the other hand, Chapter 13 bankruptcy requires you pay back either some or even all of your debt to creditors over a three to five year period. An assigned trustee will help you prepare a budget that will allow you to pay back your debt.
You must meet certain requirements to file for Chapter 13, or the “wage earner’s plan.” Those who are not employed or who do not have a steady income are ineligible as are those with $871,550 or more in secured debt and/or $290,525 of unsecured debt.
Will I lose my home?
This is the #1 bankruptcy question that most people have. If you are up-to-date and remain current on your payments, in all likelihood, you will be able to keep your house. If you are not current on your payments, then it’s highly likely you’ll lose your home if you’re filing for Chapter 7. However, if you are filing for Chapter 13 and are behind on your payments, you may be able to keep your home provided you make all of the back payments and start paying your mortgage again.
Will I lose my car?
Like with your home, if you are current with your payments, you should be able to keep your car. Even if you are not current, you might still be able to keep your car provided the creditor agrees to reaffirm the loan, and you pay all back payments and begin to pay on time again.
Who will know if I file for bankruptcy?
Obviously your bankruptcy is going to be listed on your credit report, so creditors and anyone else who has to access your report is going to know you filed bankruptcy. However, the good news is, no one else has to know unless you choose to tell them.
Some companies require a credit check before offering employment. If you find yourself in such a situation, the best approach is to simply be honest. However, this is a personal decision only you can make.
Will I be able to get credit again after bankruptcy?
Believe it or not, within six months—sometimes sooner—of your bankruptcy, you’re going to start receiving credit card offers in the mail. Even with bankruptcy listed on your credit report, you are a much better credit risk now than you were before you filed for bankruptcy.
Before signing on the dotted line of a credit card offer, make sure you read over the terms and conditions carefully. Are there any fees you must pay? Is the interest rate reasonable? (If it’s outrageous, take a pass. You’ll get plenty more offers.) Many car dealerships also offer special financing for those who have filed bankruptcy.
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