You may be just starting your search to determine what your options are when it comes to financial relief and you may be wondering What is Bankruptcy? Perhaps you had a friend or relative who has gone through the bankruptcy process and advised you it may be a good option to help you get back on track financially. The truth is bankruptcy can help many if not most people recover from financial hardship and get a fresh start, but it is not for everybody which is why you should consult with a bankruptcy attorney prior to making any decisions to see if bankruptcy may be a good fit for your situation. Nobody foresees themselves having to make the call to a bankruptcy law firm, however sometimes it may be a necessary in order to get a fresh start. Many consumers weighing their options may not seek out a bankruptcy professional because they sometimes feel embarrassed or they may feel that they are a failure and want to repay their debts and may even enroll in a nationwide debt settlement program, only to end up filing bankruptcy a few months later. You shouldn’t feel too bad as there are thousands of people nationwide who file for bankruptcy every year, even some very famous or well educated people as well such as Donald Trump, President Harry S Truman, Abraham Lincoln, Willie Nelson, Walt Disney, John Wayne, Michael Vick, Mike Tyson, MC Hammer, and Larry King. The most famous bankruptcy’s often involve large companies who need to re-organize with a chapter 11 bankruptcy, but that doesn’t mean ordinary people don’t file everyday. As long as there is the availability of credit, unexpected medical debt and business that fail, there will be people who need to file for bankruptcy.
So why are so many people ashamed of filing for bankruptcy? Most debtors are good, honest people who really want to repay their debts, however they have just hit a rough patch in their life and need help. Many people try and make things work before contacting a bankruptcy lawyer, but this can actually be to the debtors detriment as starting fresh as soon as possible may be just what the debtors need in their time of need. Creditors make it difficult for debtors to catch up on their debts as they hike interest rates up to 30%, charge large late fees, call and write debtors with nasty and intimidating threats, and are plain difficult to work with and don’t have the debtors best interest in mind.
Creditors try and make people believe that filing for bankruptcy is a terrible thing to do because they have a vested interest in making you think this. Since people want to do the right thing, they start to believe the debt collectors and try to work out payment plans that have little or no chance of being successful. If this sounds familiar, then you may want to check out chapter 7 bankruptcy or chapter 13 bankruptcy which is what most individual debtors end up filing, should they file for bankruptcy. A chapter 7 bankruptcy can eliminate debts and most debtors get to retain all of their assets so long as they are qualified to file chapter 7 by being under their states median income or passing something called the means test while having assets valued at less than the Washington state or Federal exemptions. On the other hand, a chapter 13 bankruptcy will allow debtors a repayment plan that can last for 3-5 years based on whether a debtor is above the Washington state median income or not. Some debtors need to repay all of their debts over the plan period, while others need to pay very little of their debts. This is determined by a debtors available disposable income, family size, household income and the value of any non exempt assets.
Filing bankruptcy may not be for everybody, for instance if you own an asset worth more than you are allowed to exempt, then you should not file for chapter 7 bankruptcy, unless you want to risk losing the asset. Additionally, filing bankruptcy can remain on your credit report for up to 10 years, however you will be able to obtain new credit after filing and even qualify for a car loan right away or a home loan under most federal programs after 2 years from a chapter 7 case and right away after you complete your chapter 13 plan. Additionally, if you are somebody with a good credit score, you might expect that score to dip into the 600’s, but if you have a score of less than 600’s it’s likely your credit score will improve after your case is filed and you receive a bankruptcy discharge, eliminating your debt, as your total available debt utilization is a big part of your overall credit score. Hopefully after reading this article, you will have enough information to consider talking to a bankruptcy professional to determine if filing bankruptcy is right for you.