Bankruptcy 101

When deciding to declare bankruptcy there are a few things you should know before you file. First you have to decide which chapter – Chapter 7 or Chapter 13. Chapter 7 will get rid of all of your debt, and your assets will be sold in order to do this. Not your house, for that is considered exempt, but pretty much everything else you own.  It literally lets you start over, unless of course you have student loans, alimony payments or any sort of child support – these are things you cannot declare bankruptcy on.

Chapter 13 allows you to set up a kind of repayment schedule, and gives you an opportunity to get out of debt with some assistance. You keep paying your regular bills, but any excess income you have left over goes to the court who will handle dividing up your payments over the rest of your debts. This allows you to pay off either the entire debt or a portion thereof, which has been negotiated with the court.

Once you decide you want to file, your best bet is to go see a lawyer who specializes in bankruptcy. They will look over your debts and your assets and help you assess which one is right for you. Know that whichever one you choose, you will be looking at some hefty lawyer and court costs, and that the bankruptcy will stay on your credit for at least 7 years. Some jobs will even ask you if you have ever filed, so know that this could possibly be with you the rest of your life.  ■