Bankruptcy in a nutshell...

[randomthoughts1875]

Can someone explain to me in a nutshell what filing for bankruptcy accomplishes, if the pro's out weigh the con's, and at what point you should start thinking about taking this step. It all seems a bit overwhelming!

[Calypso]

Hi, I'm not sure where you're posting from, but in the United States there are bascially two types of bankruptcy an individual can claim.

In Chapter 13 bankruptcy, a repayment plan is established so the creditors get at least a little of what they are owed. In Chapter 13 bankruptcy, the debtor's assets are protected as long as he or she makes payments on time.

In Chapter 7 bankruptcy, the debts are discharged, but the court can seize certain assets of the debtor's in order to pay creditors what they can. Most states protect your house, your car, and up to a couple of thousand dollars in property. Realistically, most people who claim Chapter 7 bankruptcy don't lose any of their assets.

Recently, a law was passed in the U.S. to make it harder for debtors to file for Chapter 7 bankruptcy and to mandate credit counseling before bankruptcy is filed.

Most financial counselors agree that bankruptcy should be a last resort, after all efforts to negotiate with your creditors have failed. Used properly, though, it can really give you a fresh start.

Hope this helps...

[randomthoughts1875]

This was very helpful! Thank you for posting such detailed information. I like to be educated on all of my options and that can prove difficult when faced with all that the internet has to offer. I don't forsee bankruptcy in my future but then again...you never know what the future holds! At least now I feel knowledgeable on the subject!

[mamab]

The thing you have to remember about bankruptcy is that this black mark will remain on your credit for a minimum of 7 years, most likely 10, before it's taken off. Having a bankruptcy on your credit history is enough of a reason to affect whether you'll qualify for a home or car, if you try to buy one, and may also affect whether you can get into an apartment lease or not. Just remember, they're not something to "play" with, and should only be used as a last resort.

[Calypso]

Mamab, you are absolutely right. A bankruptcy will stay with you for seven to ten years. HOWEVER, if you are truly in a position where you can't pay your bills, a write-off or failure to pay will stay on your credit score for about the same amount of time. Meanwhile, loans that haven't been discharged through bankruptcy remain open to unpleasant collection attempts.

[SageMother]

I heard that some places were MORE likely to approve you for loans and such, after bankruptcy, because you can't file another one for 10 years.

Is that true?

[aquariancore]

Unless you are a business, I think you can only do it once.

[randomthoughts1875]

Quote:

Originally Posted by SageMother

I heard that some places were MORE likely to approve you for loans and such, after bankruptcy, because you can't file another one for 10 years.

Is that true?

I've heard of some people who have had more offers of credit after declaring bankruptcy...it seems there are just as many though that are seeing the opposite. I think this might be one of those things that varies from person to person and state to state.

[Melizzy]

Quote:

Originally Posted by randomthoughts1875

I've heard of some people who have had more offers of credit after declaring bankruptcy...it seems there are just as many though that are seeing the opposite. I think this might be one of those things that varies from person to person and state to state.

This is true. And usually the rates are out of this world. And they have high annual fees, etc. You pay for them taking a chance on you. And you can file multiple bankruptices. Not yearly, but I know people who have filed 2-3 times.

[techluck]

I have heard the same thing- however as far as ruined credit, charge-off's late payments and over 30 days stay on your credit report just as long as the bankruptcy does.