Finance Tips: What To Expect Upon Filing Bankruptcy

Information about filing bankruptcy and hints on who should file, where and when to file, what to expect during the proceedings, and how it will affect your credit rating.

Unexpected things can happen in a person's life - a lost job, a lengthy illness - which can have quite an impact on finances. After struggling to pay bills, fend off bill collectors and trying to hold your head above water, you might be contemplating bankruptcy, or Chapter 13. Bankruptcy is a federal court procedure and certain steps must be completed before the bankruptcy will go forward. Bankruptcy allows the individual or family to restructure the payments to their creditors and allows the individual to keep certain properties and belongings. Many people get an attorney's advice when it comes to filing bankruptcy, particularly if there is much property involved. Upon filing for Chapter 13, the person is required to provide a list of all assets and liabilities, the establishments' names, addresses and phone numbers. The list must include every debt you owe, whether you are behind with payments or not. Assets must include all cash and property, along with secured and unsecured possessions. The next step is to file a repayment plan with the courts. After the repayment papers are filed, the creditors are given the opportunity to file an objection. If there are no objections, the restructuring will go forward.

In the case that you are getting ready to lose your home for failure to pay the mortgage, filing Chapter 13 will allow you to keep your home, since the court orders an automatic stay, preventing the house from being repossessed during the repayment period of the bankruptcy. In addition, the creditor can no longer attempt to collect any currently due payments, back payments or future payments from the debtor until the bankruptcy matter is settled.

Credit cards might be kept, if the individual signs papers with the credit card company stating that the payments will continue on as they did prior to the bankruptcy. Sometimes, if there is no money owed on the credit card, it will be withdrawn. It's normally granted that the bankrupt individual can keep any vehicles which are necessary to continue making a living, even if money is still owed and payments are behind. Cars which are owned outright and are not the main family vehicle, such as vintage collector's cars, will likely be taken by the courts and sold to pay creditors. Likewise, many other personal belongings, like a shed full of power tools, might be taken by the courts for debt payments.

The restructuring of the bills owed is done by calculating how much real income there is available to pay absolute needs, such as electricity, water, food and heat, then figuring how much of the income is left over for repayment of the previous debts. The payments are then reduced substantially from what they were prior to the bankruptcy. Often the debts are totaled and one monthly payment towards the whole lot of bills is required. Failure to make the bankruptcy payments will void the bankruptcy agreement.

It will cost a few hundred dollars to file all the needed paperwork through an attorney, but filing it without any assistance can save you a little. The paperwork is quite substantial for filing bankruptcy, since detailed information is required concerning income, household expenses, current debts, amounts and so on. But, after the paperwork is filed with the courthouse, the creditors can no longer bother you, without the court's permission. Bankruptcies stay on a person's credit for 7 years, but some companies will loan you money knowing that you can't file another bankruptcy for 7 more years.

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