by Edwin Ivanauskas | Tags: Personal Finance

Bankruptcy has become an increasing fact of life with layoffs and increasing medical bills. No one wants to file bankruptcy. It once was something that we rarely heard about. Now it can take up an entire page in the weekly newspaper. If you are thinking of filing bankruptcy here are some things that you will need to know. With the economy in a slump we are all having bad times and you are not alone. Many people are choosing bankruptcy in order to save the little that they do have.

What is bankruptcy?

Bankruptcy is protection under federal law from all your creditors and unpaid bills that you have accumulated over the years. Bankruptcy can even protect you from foreclosure. When you file bankruptcy, you are telling the courts and the creditors that you can no longer afford to pay them, or you cannot pay them as much as they are asking without hurting your credit.

Types of Bankruptcy

Chapter 13- If you choose to file chapter 13 then you have property (house) or a car. It is an item that you do not want to lose. Filing chapter 13 provides you a safety net to repay your creditors and save your home and car. With a chapter 13 you are given three to a five year plan to repay your secured debt so that you may keep your home and car.

Chapter 7- If you choose to file chapter 7 then you are choosing to get rid of all unsecured debt, such as medical bills, credit cards, and utilities. With chapter seven you may be forced to turnover your home and car. They are not protected. You can ask them if you can sign a reaffirmation agreement in which you will continue to pay for your home and car even though you are filing bankruptcy.

Things to know

When you file for bankruptcy whether it be chapter 7 or chapter 13, you are granted an automatic stay which means any creditor that you had calling or harassing you, is no longer allowed to.

When you file bankruptcy, you must go to a pre-file credit counseling briefing. If you do not attend this, then you cannot file bankruptcy.

You always want to speak to a bankruptcy attorney for legal advice regarding which bankruptcy is going to be the right one for you. Bankruptcy does affect your credit even though it professes to give you a clean slate. You may have a harder time rebuilding your credit once you have been discharged from your bankruptcy. Some utility companies may require a deposit once you have filed a bankruptcy. Bankruptcy can affect your life in many ways. It is important that you speak with a good bankruptcy attorney and choose the best options for you.

Bankruptcy is not always the best answer but it is an option that is there if you need it. Take your time and speak with an attorney and ask many questions. Be prepared to list all of your debt. That means down to the hundred dollars you owe a magazine company. A bankruptcy can take up to six months to discharge so don't be frustrated. Your attorney will be there for you during the entire bankruptcy process from start to finish.

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