Three Things You Should Know About Filing For A Personal Bankruptcy

Posted on: 12 August 2016

If you are at a point in your personal finances where you believe you may need to file for bankruptcy, there are a few things you should understand before heading down that road. Bankruptcy isn't as simple as many people believe it to be; there are many misunderstandings about it.

There are two different types of bankruptcies

For personal bankruptcy, there are two different types of filings. One is referred to as Chapter 7. This type of filing is when most of your debts are discharged. You are given a fresh start; however, there are a few debts that cannot be discharged under Chapter 7. Examples include student debt and income taxes. The second bankruptcy filing is called Chapter 13. This type of bankruptcy consolidates your debt and often reduces the total amount owed.

You must qualify for a bankruptcy

Congress has changed the laws in recent years, so it is not as easy to declare bankruptcy. It was believed that people were abusing the system, so the laws were changed to give more protection to lenders. If you have the ability to pay back the money you owe, you are likely to be required to pay it back. Whether you qualify for bankruptcy will depend upon several factors, so consulting with an attorney is imperative. The standards for qualifying for a Chapter 7 bankruptcy are more stringent than those of a Chapter 13 filing, so if you don't qualify for the first type, you may still qualify for the second type.

Bankruptcy may not solve your problem

On the surface, bankruptcy may seem to be exactly what you need in your personal finances. Although it may be true that you are likely to get the debt relief you need, the underlying reason for your debt problem will likely still be there. This is especially true if the debt is in the form of credit cards and other types of debt related to consumer spending. You will need to address the issue of how you obtained so much debt to begin with. Without solving this problem, you may wind up worse off after a bankruptcy.

Bankruptcy is not always the solution to your financial problems, but for many people, it can be. You will need to know if you qualify for a bankruptcy and which type of bankruptcy is best for you. The best way to go about this is to consult with a bankruptcy attorney, such as Thomas A Blake, and let him or her know your finances, so they can let you know the best path for you to take.