Important information to consider before a bankruptcy filing

May 01, 2013 (Press-News.org) Important information to consider before a bankruptcy filing

Article provided by The Law Offices of Raymond J. Antonacci, LLC
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The decision to file for bankruptcy protection is an intensely personal one. Most people will try other methods of debt management, some of them more effective than others, before they consider filing for bankruptcy. Oftentimes, the longer a person waits to file, the more complex their financial issues become.

Before filing, though, it is important to consider all sides - all the pros and cons - of how bankruptcy works, what it can accomplish, what sorts of debt cannot be discharged in bankruptcy and what the long-term effects are. This information can be hard to find simply because of all the misinformation, misconceptions and outright myths that still persist about bankruptcy. If you are considering filing, contact a bankruptcyattorney in your area to learn the truth about what bankruptcy really entails.

Similarities between different consumer bankruptcy provisions

The vast majority of personal bankruptcy filings are either Chapter 7 or Chapter 13. These both:
-Offer relief from a wide range of different types of debt
-Will affect a filer's credit report and credit score for a time
-Require participants to undergo mandatory credit counseling and debt management education
-Involve payment of filing fees
-Require commitment to change on the part of the filer
-Will give filers opportunities to start to rebuild their credit in a relatively short time, usually one or two years

Even though bankruptcy filings do offer a chance at a financial fresh start, there are some limitations to consider. It is important to remember that neither Chapter 7 nor Chapter 13 will discharge certain types of debt, including:
-Most tax debts (including interest and penalties)
-Child support
-Alimony payments, whether lump sum or long-term
-Most student loan debts (though some federal legislators have proposed bills that would allow student loans to be forgiven under certain circumstances)

Differences abound

Those similarities aside, the various bankruptcy filing options differ greatly in their approach.

Chapter 7 involves the sale of non-exempt assets, the proceeds of which are divided amongst creditors depending on the type and age of the debts. Since a massive overhaul of the laws in 2005, it has become more difficult to file for Chapter 7, but it is still possible, and it is a great tool for some people.

Chapter 13 on the other hand, doesn't typically involve the sale of assets, but instead consolidates debts into one monthly payment that will last for several years. At the end of the repayment period, the remaining debts are discharged, wiping the financial slate clean.

Questions?

If you have questions about the opportunities and limitations associated with various bankruptcy provisions, seek the advice of an experienced bankruptcy lawyer in your area.