Bankruptcy

Regarding Chapter 7 & 13

About Bankruptcy

Bankruptcy is a court action that stops lawsuits and any other attempts by creditors or collection agencies to collect from you. However, it comes with a high cost—it generally stays on your credit report for a full 10 years, causing extreme difficulty in using credit to obtain cars, home or other loans and can even restrict you from certain types of employment. Bankruptcy should never be thought of as a “quick” or “free” way to get out of debt, as it can completely destroy your credit worthiness for a very long time.

Chapter 7 Bankruptcy discharges virtually all of your consumer debts but does not eliminate secured debt, so you could still lose your home if you fall behind in your mortgage payments. You also will be required to pay such debts as student loans, alimony, child support, income taxes, and legal fines.

Chapter 13 Bankruptcy is used in special situations, primarily to allow the filer to keep his/her home. A court-appointed trustee oversees a strict repayment plan to pay off your debts during a period of three to five years.

Although bankruptcy may fix your short-term problems, because it stays on your credit report for so long it should only be used in extreme situations. Many people who file bankruptcy make the mistake of doing so without fully exploring their options, and never realize they have other, more viable choices that will allow them to preserve their credit standing.