Filing a bankruptcy might sound easy but the truth is there are criterias you have to meet. And if you think your debt will just magically go away after bankruptcy, you’re wrong.
- So, here’s a list of things you need to know before applying for a bankruptcy. 1. Your can’t fully wipe out your debts.
- Let’s get one thing straight first. Bankruptcy will not fully eliminate all your debts. If you have debts that categorize into priority obligations, then it will be harder to dispute it with the banks. Examples of this are student loans, alimony, maintenance, or support.But if you have unsecured claims, you can expect an easier discharge for it. Unsecured loans are credit card obligations, medical bills, and personal loans. If you hope to wipe out debts here, bankruptcy will help you with that.
2. You have to know what kind of bankruptcy you should file.
- Chapter 7- This involves no repayment of debts. This will wipe out most of your unsecured debts like credit cards and medical bills. However, you have to meet some criteria to qualify.The chapter also grants your creditors to sell your properties that are secured by loans. You can appeal this, however. And, you and your lenders can come up with an agreement.
Chapter 13- This is a program designed for people who have the means to pay a large sum of debts. Most of these are aimed to repay large secured loans.
- You have to meet criterias.
- If you’re only looking for an easy way out, prepared to be disappointed if court denied you a bankruptcy. Being tired and frustrated on paying your debt will simply can’t cut it.
- Financial institutions laid out eligibility requirements that you have to pass to successfully declare bankruptcy. This is called the “Means Test.” You have to determine whether your monthly income is lower than or greater than your state’s median monthly income for a family of your size.If you have low monthly income or have no disposable income to repay debts, you will be qualified to apply for Chapter 7. If you have higher income, you will be asked to repay your debts with assistance.
4. You can be exempted from lawsuits.
- Stopping your payment to your loans can be grounds for a lawsuit. Especially, if you owed a large amount of money. Your creditors can bring this matter to court. So, if you feel you will be subjected into this, you can take refuge under the bankruptcy laws.5. Your properties can be foreclosed.
- This is a matter of what chapter you filed.For Chapter 7 bankruptcy
- A bankruptcy trustee has the authority to sell any of your assets. They can use these to use the proceeds to pay back your creditors.For Chapter 13 bankruptcy Your property will be out of the bank’s control. But, you have to pay all your unsecured loans such as credit card balances, medical bills, and personal loans.
- Your creditor can file a charge against your bankruptcy claim.
If you have unquestionable reason to file a bankruptcy, your lenders can file a complaint to dispute the charge and request your debts to be nondischargeable.
- Filing a bankruptcy can damage your credit score.
- Don’t be shocked when after you filed a bankruptcy, you can not apply for loans anymore. But there are ways of getting around this issue. You can check an article about rebuilding credit after bankruptcy for beginners if you’re still not sure on the possible backlashes.
Further credit after filing can also void your claim. After 60-90 days, you can’t get credit for high-valued or luxury goods and services. You can’t also request large cash advances.