5 questions you may have about bankruptcy

On Behalf of | Nov 9, 2022 | Bankruptcy

People who are going through financial difficulties might ultimately consider filing for bankruptcy. Making sure that you’re doing what’s in your best interests is important. The only way to do this is to ensure you understand the process and what it entails.

Many people have the same questions about bankruptcy and what it can do for them. These five might help you to make your decision.

#1: How does income impact bankruptcy?

Income can determine what type of bankruptcy you file. You have to pass a means test to file a Chapter 7. If you don’t qualify for the Chapter 7, you’ll have to file Chapter 13. The difference is that there aren’t any regular payments on a Chapter 7 but assets are liquidated to pay creditors. A Chapter 13 has regular payments that you make to the bankruptcy trustee.

#2: Are all debts discharged?

There are some debts that aren’t discharged during bankruptcy. Past due child support and alimony can’t be discharged. Most tax debts aren’t eligible for discharge. Certain legal debts, such as restitution and fines, can’t be part of the bankruptcy case.

#3: What does the filer need to do?

Anyone who files for bankruptcy has to go through credit counseling and take a class on financial management. They also need to ensure they accurately report their assets, income and debts.

#4: Can creditors still try to collect money?

Creditors can’t continue to try to collect money from you once you file bankruptcy. They court issues an automatic stay, which halts all collection attempts. Instead, they have to go through the bankruptcy court to get their share of what’s

#5: How long does bankruptcy stay on your credit?

A Chapter 7 bankruptcy stays on your credit report for 10 years. A Chapter 13 remains on the report for seven years. The longer it’s been since your bankruptcy, the less of an impact it has on the score.

Anyone considering bankruptcy needs to take a look at the way filing can affect them in the long run. Working with someone who can help them to understand their responsibilities and rights is important so they can ensure the bankruptcy is discharged as intended. The sooner you start the process, the sooner you can have the financial relief you need.