Although the bankruptcy process is not inherently difficult, it can be very intimidating for many people. The decision to file for bankruptcy generally does not come easy and most people shy away because of the many misconceptions associated with the process. If you are considering filing for bankruptcy, the best place to start is by getting to know some of the most basic questions asked by people who enter the process.
What kind of debts can I include in my bankruptcy filing?
There are two types of debts that can be included in a personal bankruptcy filing. Secured debts, like a mortgage or car loan, are the largest source of debt held by most people. These debts are best managed in a Chapter 13 case, in which you would repay the debts over a period of three to five years. Unsecured debts, like credit cards or medical bills, are the most common source of debt brought into bankruptcy. These debts can be repaid through Chapter 13 or eliminated in a Chapter 7, if you qualify. Although tax debts, student loan debts and domestic support payments are considered unsecured debts, they cannot be eliminated in a Chapter 7 case.
Are there any risks of losing my assets in the process?
For most people, this is their worst fear of bankruptcy. The good news is that most people do not have to worry about losing assets in bankruptcy. Secured debt assets are not at risk of liquidation as long as the debts are being repaid through the Chapter 13 plan. Other personal assets are generally protected under bankruptcy exemption laws, which prohibit them from being liquidated by creditors in either a Chapter 7 or Chapter 13 case.
Will my credit be damaged as a result of filing for bankruptcy?
The issue of credit damage is one of the most common myths associated with bankruptcy. While the bankruptcy filing will be noted on your credit report for up to ten years, the actual filing of bankruptcy itself does not damage your credit. In fact, most people see an improvement in their credit standing following a bankruptcy filing. Because filing for bankruptcy resolves debts it also eliminates delinquency statuses from accounts, which is the main source of credit damage.