Bankruptcy Questions

Bankruptcy is a very complicated process. It is very likely that you will have questions. The following are some likely bankruptcy questions you may have when approaching bankruptcy and hopefully it will help you out.

Is bankruptcy your only choice?

Bankruptcy should only be used when absolutely necessary. Lawyers and other such people may say differently, but bankruptcy is not the only way out. It should be reserved for the most extreme situations such as when the debt arose out of no fault of your own, or there are unexpected reasons why you can't pay it off.

If you have wracked up credit card debt and are still charging, you need much more than just bankruptcy. If you declare bankruptcy, chances are when you get back to your regular life, you'll go back to your poor spending habits and continue building up more debt.

In some situations, bankruptcy is the best choice. You need to think carefully about your situation before going through with it and talk with a financial professional if necessary about your options.

There are many more than 2 chapters, but most of the other chapters are for businesses, corporations, farms, etc. For individuals, you will either file chapter 7 or chapter 13 bankruptcy.

This is a good bankruptcy question because most people believe when they declare bankruptcy, they will get all their debt wiped away and they can start fresh. That is not necessarily true. Most likely, they will get some sort of help, but not necessarily in that way.

Chapter 7 bankruptcy is the liquidation of debt. This means that the majority of the debt will be discharged. Discharged means you will not need to repay the debts. Once the debts have been discharged, creditors have 60 days to challenge the decision, and after that it is final.

Chapter 13 is the reorganization of debt. Instead of discharging the debt, the debt is reorganized and broken up so that it is more manageable to pay. It is similar to consolidation with the government.

Chapter 7 is much harder to file and much less common. You have to send in a petition, but you may be denied and forced to file chapter 13. Whichever you end up filing, your trustee will work to decide what assets you need to liquidate to pay some debt and which will be discharged. It is decided on an individual basis.

Will all your debts be discharged (eliminated)?

This bankruptcy question may determine if you even file for bankruptcy at all. If you are filing chapter 13, it is likely that none of your debts will be discharged. Even if you are filing chapter 7, no all your debts will be discharged. Your trustee will first decide which of your assets are able to be liquidated. If there are any, they will have you liquidate them and use that money to pay at least some of the debt.

Can you declare bankruptcy without a lawyer?

It is possible to declare bankruptcy without a lawyer. It will be cheaper, but not necessarily easier. A bankruptcy lawyer will know the process and will be able to help you through it a lot. They will help you organize your debt and track where you owe creditors. They will help you through the meeting of creditors when creditors ask you questions to ensure that you are being honest. Basically, a lawyer is invaluable in the case unless you know what you are doing.

Will creditors stop calling you if you declare bankruptcy?

Once you have sent in the petition for bankruptcy, you get automatic stay. This means that creditors are not allowed to call you. For many people, this is a huge relief. If they need to contact anyone, it has to be your lawyer. If you are declaring bankruptcy for the second time, you may or may not be granted automatic stay.

When you file for bankruptcy and send in your petition, you are given a trustee.  This trustee is in charge of your case.  They are present during the meeting of creditors and they are in charge of making most of the decisions.  They will go over your situation and your debt and assets.  They will determine which of your assets you will need to liquidate to pay debt and they will figure out a reorganization plan in the case that you file chapter 13 bankruptcy.

If you file bankruptcy, will your record be damaged forever?

This is another common bankruptcy question and a common fear among those looking to declare bankruptcy.  A bankruptcy will stay on your record and credit score for the 10 years after you file.  Ten years is a long time, but it is not forever and gives a certain amount of hope to people.  After you have gone through the whole process, it is going to take some work to repair your credit and get your money back in order.  I recommend seriously looking over your finances and learning how to correctly and effectively manage your money so you avoid this situation again in the future.