6 Facts About Bankruptcy To Consider Before Declaring

Filing for bankruptcy is not usually at the top of the list for many people. However, if you find yourself in the unfortunate situation of needing to file, it is important to know the ins and outs of what bankruptcy means and how it may affect your life, whether it may be positively or negatively. We’ve collected some facts for you to consider before you take the next step in filing.

1. Causes Of Bankruptcy

Most cases filed before the last 20 years have been attributed to outstanding medical conditions. These were mostly by people who didn’t have adequate medical insurance if any. Only around 5% of cases were due to overspending or lack of budget control. Since 2005, the reasons have changed with many filing due to loss of earnings or credit debt, something that has been exacerbated since the Covid pandemic. Before you consider filing, contact an attorney firm like Chapter 13 Bankruptcy Lawyers who will be able to advise on your personal situation.

2. It Should Not Be A Repeatable Situation

Studies have shown that around 8% of people who have filed for bankruptcy have already done so before. Whilst it is a legitimate way to expunge yourself of debt and start over, filing multiple times should not be a quick fix to debt solution.

3. You Won’t Magically Get Rid Of All Of Your Debt

Many people think that declaring bankruptcy will magically absolve them of all of their debts and they won’t have to pay any money once their debts have been paid off. Certain loans such as college loans are not included in this, so you will still have to pay those back along with any alimony or child support you are required to pay.

4. You Will Cause Significant And Lasting Damage To Your Credit Score

Most people spend their whole lives trying to gain good credit, and filing will definitely undo all of that hard work. Your filing will stay on record and may stop you from being able to own a business, get a mortgage or apply for credit cards and loans. Things that may have a serious impact on your future.

5. You May Lose Everything

If you choose to file under Chapter 7 of Federal Law, you will likely lose a life that you have worked hard to build. Once you have declared yourself bankrupt, an appointed agent can sell your properties and belongings to pay off your existing debts. This can include not only physical possessions such as your home and your car but also your pension and investments.

6. There Are Several Types Of Bankruptcy

If you do not want to sell everything you own under a Chapter 7 filing, you can choose another type of bankruptcy. A Chapter 13 filing is for individuals who are given a plan by the courts to pay off all of their debt over a certain amount of years. This is a preferential form of bankruptcy as it should enable you to keep your home and possessions as long as you keep up with the payments you have been set.

Have you filed for bankruptcy? Share your experiences in the comments to help others.

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