Bankruptcy is probably the last option someone chooses in case. It has both good and bad sides, advantages and disadvantages to be precise.
In brief, if someone has a large debt they cannot repay or pay for the mortgage, they can file a self bankruptcy to avoid all these problems.
The process might be critical, and it is essential to know the process and laws regarding Bankruptcy.
Things to know before filing a bankruptcy
- Filing a bankruptcy affects the claimer’s credit score.
- One can file two types of Bankruptcy – Chapter 7 and chapter 13.
- The claimer can negotiate with their creditors and look for further payment plans.
- Chapter 7 bankruptcy allows you to sell your assets to pay the creditors.
- Chapter 13 bankruptcy lets you keep your assets safe but restricts you to a certain period to pay off the debts.
How does Bankruptcy work?
Even though Bankruptcy seems to be a beneficial option, people who got through it found it more troublesome. Although there is no other option for the person to repay their debts, they can file a self bankruptcy.
There are two basic types of Bankruptcy- chapter 7, which is for people with lower income rates, and chapter 13, for people with good to better incomes. Bankruptcy works as a savior at times.
In chapter 7, when someone files a bankruptcy, the court appoints a trustee who sells some of the claimer’s assets to pay their creditors.
Most individuals file under chapter 7, also known as the liquidation or straight Bankruptcy. The debts of the claimer get discharged once the trustee repays the creditors partially.
On the other hand, chapter 13 bankruptcy is where the court does a meeting known as 361 meetings and comes up with a plan for the claimer to repay all their debts in three to five years.
Consequences
- The Bankruptcy will show in your credit score for ten years in the case of chapter 7 and 7 years for chapter 13.
- One may not be able to get other loans.
- It might lead to a situation where getting a job would be difficult.
Call to action
It will help if you learn more about self-bankruptcy laws and processes from experts.
