Bankruptcy can be a smart financial decision. If you are only able to make the minimum payment on high-interest loans and credit cards, then those debts will follow you into retirement. For example, assume you have a credit card with a $5,000 balance and 18 percent interest rate. If you pay $125 monthly, it will take you nearly 23 years to repay that one debt. Moreover, you probably owe significantly more than $5,000.
Types of Bankruptcy
There are two types of bankruptcy. Consider Chapter 7 if you cannot even make minimum payments to your creditors. Chapter 7 requests a complete dismissal of the debts included in the filing. If you are in temporary dire straits but expect your income to improve, then consider filing Chapter 13. It's basically a repayment plan covering a period of three to five years duration.
Decide Which Debts to Include
You are not required to include all your debts when filing bankruptcy. It might actually be a good thing to keep the smaller balances out of the filing. Bankruptcy lowers your credit score significantly. However, if you have several small accounts that are current and in good standing, their positive ratings will raise your score.
Secured Debts
A secured debt has a tangible object that can be seized if the obligation becomes delinquent. Common examples include car repossession and home foreclosure. Your creditors can try to reclaim these possessions if you include them in the filing. Have a backup plan for getting to work or renting a home if you declare bankruptcy on secured debts.
What You Cannot Include
Federal law prohibits some debts from not being paid. They include delinquent child support payments, income tax, and federally-insured school loans. There are some exceptions for school loans so consult with a bankruptcy attorney when making this decision.
Marriage and Bankruptcy
Married couples can file together or one can opt out of filing. If you live in a community property state, however, the non-filing spouse might still be responsible for the bankrupt spouse's debts. If you do not live in a community property state but hold real estate, boats, vehicles, and other possessions jointly, then definitely seek the advice of an experienced lawyer like Legal Clinic Of Jerry Paeth. They will guide you through the maze of legal requirements and exemptions.
How to Begin
Lawyers specialize in different areas of law, similar to doctors choosing a specialty. Bankruptcy attorneys understand the complex web of regulations and exceptions regarding bankruptcy law. You have the right to keep some of your possessions, but your creditors are not under any obligation to inform you of your rights. You need an experienced lawyer to protect your rights and represent you in court.
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