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Certain financial products have proven to be confusing for the general public, and bankruptcy is certainly one of them. This lack of knowledge on a particular subject generates undesirable misconceptions. Bankruptcy certainly has its share of myths surrounding it. This article seeks to answer many questions consumers have regarding this subject.
FAQ #1: What Are The Most Common Chapters And Which One Is Right For Me?
Bankruptcy comprises several chapters, each being suitable for a different situation and bringing about different outcomes. The two most common chapters are Chapter 7 and Chapter13, being the rest of the chapters: Chapter 9 for municipalities, Chapter 11 which is most commonly filed by businesses and Chapter 10 for family farmers.
Regarding the second issue, which one to choose, sometimes it is not a matter of choice or convenience, but a matter of eligibility. Under the new law, some individuals may qualify for Chapter 7 and 13, and some may only qualify for the latter. Do some research on eligibility criteria for each chapter and you will find out which one is for you. On the other hand, provided that you qualify for both chapters, the choice is completely up to you and depends on what you have in mind. Chapter 7 is a very popular type of bankruptcy because the debtor is not required to pay off his debts. But Chapter 13 also carries benefits that should be taken into account when making this decision.
FAQ #2: Can Anyone File For Bankruptcy?
As with any rule, there are exceptions to it, but they are rare. As a general rule, any person or business is able to file a bankruptcy claim if they need to.
FAQ #3: Will They Take All Of My Assets? Which Ones Am I Able To Keep?
No, not all assets can be taken, the law protects individuals from losing everything. There are some assets which cannot be seized and are referred to as “exempt”. Which assets are exempt? For example, vehicles (though there might be a value limit, you might want to research that), home equity (there might also be a value limit here, again, look carefully into this), jewelry, working equipment which is absolutely necessary for the debtor to work, etc.
FAQ #4: Will I Have All My Debts Discharged?
Possibly not. There are some types of debt which cannot be discharged, these are: debts related to taxes, alimony o spouse maintenance debts, government student loans, debts obtained by fraudulent procedures or actions, etc.
FAQ #5: Does Bankruptcy Stay On My Record After Being Discharged?
Absolutely, a bankruptcy claim is possibly the worse negative input an individual can have, and it will stay on his or hers credit report for up to 10 years, being 7 years the minimum this input will be there. And no, there are no ways of removing the input either, if that is what you are thinking of.
FAQ #6: Will I Be Able To Obtain Finance After Filing?
As a general rule, it will take some time for the debtor to obtain finance after he has filed for bankruptcy. Though nowadays there are many financial institutions out there who specialize in high risk lending and might be willing to help the debtor out, it is advisable for the applicant to wait some time before applying for a loan, at least a year after the bankruptcy is discharged, being two years the optimum time. Again, it all comes down to the creditor’s will to lend the loan, not to the applicant’s will to get one. |
