Bankruptcy: Things You Should Know

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Many people fear the stigma of filing for bankruptcy to escape debt. But what if you have no other options?

The two consumer types of bankruptcy are Chapter 13 and Chapter 7. Many clients want to know how long a bankruptcy stays on their record.

Chapter 13 runs for three to five years; it is more of reorganization. For instance, if you have a steady income but you’re behind on a house or car payment, Chapter 13 will let some debts be discharged and a payment plan set up for others.

But at least three to five years, and after that, if you complete all of your payment plans, your bankruptcy will be discharged.

As for how long it lasts on your credit record, typically five to ten years.

Chapter 7 is a shorter bankruptcy. It usually lasts about six months as long as there are no assets a trusty would sell to settle debts. This is true of Chapter 13, as well.

Chapter 7 stays on your credit record for seven to ten years. But if you’re in the process of filing bankruptcy, your credit is probably shot anyway, so that shouldn’t be of great concern.

If you do file for bankruptcy, what happens if you forget to a list a creditor? It does happen, but we do give our clients a list of things to bring with them to our meetings.

Between gathering all of your bills and looking at your credit report, we usually catch everything.

What do you pay first – for example – your boat payment or other creditors?

Say you owe $10-thousand on the boat – if you pay that, you would have to pay the same amount to your other creditors.

The way the Bankruptcy Code reads is that it would be unfair to pay for a luxury item, like the boat, and not pay your other creditors.

Bankruptcy law is complicated. Call us to help you work through the many issues and deadlines.


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