3 Things You Need To Understand About How Bankruptcy Really Works
Posted on: 2 November 2017
Bankruptcy is a great tool that can help you out if you are in debt and are unable to handle all of the debt that you have accumulated. However, you need to make sure that you understand the full implications of filing for bankruptcy and how it will affect you long-term.
#1 Bankruptcy Stays With You
When you file for bankruptcy, it is important to remember that this information is going to stay with you for a while. Your credit report and credit score are not just going to instantly get better.
How long the bankruptcy shows up on your credit report depends on the type of bankruptcy that you filed. A Chapter 7 bankruptcy will show up for ten years and a Chapter 10 bankruptcy will show up for at least seven years on your credit report. Although the impact of a bankruptcy will lessen over time, you may still have to explain the bankruptcy for a number of years when you apply for a loan, a credit card or financial aid.
#2 Bankruptcy Doesn't Cover Everything
Although filing for bankruptcy will help you deal with a lot of your debt, it will not take care of all of your debt. Bankruptcy can help you get rid of old income tax bills, but any unpaid income tax bills that you have accumulated over the past couple of years cannot be erased and you will still have to pay those.
Additionally, student loan debt is one type of debt that you can't get out of, even by filing bankruptcy. You may be able to set up a more affordable payment arrangement, but student debt can't be erased with bankruptcy.
#3 Bankruptcy Costs You
Finally, it is important to remember that filing for bankruptcy is not a free process. To start with, you have to pay the filing fees that the courts require for the bankruptcy process. You also have to hire legal representation as well. You are not entitled to legal representation; that only applies to criminal cases. When you bring a civil matter before the courts, you have to pay your own legal fees. Going through the bankruptcy process can end up costing you a couple of thousand dollars.
Before you choose to file for bankruptcy, remember that it will not erase all of your debt and your choice to file will show up on your credit report for around a decade. Also, keep in mind that you have to pay for the legal costs associated with filing for bankruptcy. Contact a law office that can help you prepare for bankruptcy.
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