What to expect when you consider filing for bankruptcy

When it comes to filing for bankruptcy, some Los Angeles residents may think it is a very easy process — as if someone can just up and file without much hassle. Other residents may think it is more complicated than it actually is, and thus incorrectly decide that bankruptcy is not the route for them.

The truth is that filing for bankruptcy is somewhere between these two schools of thought. Bankruptcy is complicated; but it also does not have to be the major issue that it is often portrayed to be. And, ultimately, it can be very beneficial for the filer.

So let’s cover a few ground rules regarding bankruptcy to help those who are considering filing. First, the two prominent types of bankruptcy are Chapter 7 and Chapter 13. The former is the “widely accepted” form of bankruptcy, which usually sees the filer liquidate some of their assets to pay off debts; the latter, meanwhile, is a reorganization plan that can help a filer repay his or her debts in a more efficient way.

Neither is particularly easy. You have to pass a test to file for Chapter 7 (one that shows whether you are actually incapable of paying your debts or not) and such a filing will not wipe away debts like student debt, alimony payments and some tax debts. Chapter 13, meanwhile, holds a person to a strict repayment plan; and deviating from it can spell serious trouble for the filer.

Another thing to consider here is your credit score. No matter which filing you choose, your score is certain to nosedive. Your bankruptcy will stay on your credit history for many years (7 for a Chapter 13 filing; 10 for a Chapter 7 filing).

Ultimately, no matter which route you choose, you are going to have a lot of questions and need some help going through the process. That is where an experienced bankruptcy attorney can be very helpful. They can help protect your rights during the process and connect you with the necessary people to complete the bankruptcy.

Source: WTXF, “Know these bankruptcy facts before you file,” Andrew Housser, April 15, 2013

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