Filing for bankruptcy often seems like an easy way out for those overwhelmed by financial debt. Whether filing with the aid of a bankruptcy lawyer or without legal aid, this procedure should be a last resort rather than a go-to solution.
While it lifts some financial burdens, bankruptcy invokes others. It does not wipe all debts, contrary to popular belief, and it lingers on your credit report for at least seven years. A bankruptcy lawyer can guide you through the process of filing and outline what it entails. Before you get lost in all of the legal jargon, however, take the time to learn a little more about the benefits of bankruptcy, what it will not cover, and whether it is right for you.
The Benefits of Bankruptcy
Bankruptcy has fewer benefits than most financially-strapped individuals realize. One clear advantage is that credit card debt is wiped clean. Any other dischargeable debts may also be wiped, as long as they were not obtained or incurred through fraudulent means.
For those debts that cannot be discharged, bankruptcy protects you with automatic stay, a clause which prevents debt collectors from pursuing you, both legally and otherwise. This does not mean that the debt is not to be repaid, only that you will not be harassed or sued to repay it while you are declared bankrupt.
What Bankruptcy Won't Cover
It comes as a surprise to most individuals that bankruptcy does not cover certain kinds of debt, even if it was incurred legally. The following are not exempt from payment through bankruptcy:
- Alimony payments and other support orders
- Education loans and repayment plans
- Tax debts, both business and personal
- Debts incurred through an accident on your part due to intoxication or other influence
- Fines and restitution (Chapter 13)
- Condo or co-op association fees (Chapter 7)
- Unscheduled debts or debts that you forget to include when filing
Good Candidates for Bankruptcy
Though your debt may be crippling your financial well-being, you are not an ideal candidate for bankruptcy unless:
- You have valuable assets and property to protect
- You are free of a criminal background
- Your debt consists mostly of credit card payments
- Your credit score already hit rock-bottom
If you believe you might be a candidate for bankruptcy, consult a bankruptcy lawyer before you file. The process is not a simple one, and filing for the wrong type of bankruptcy at an inappropriate time may bring you more harm than good. There are two types available to US citizens (Chapter 7; liquidation, and Chapter 13; debt readjustment), and your bankruptcy lawyer (such as Fithian William C III) will work to determine which you should file for.