Filing for bankruptcy comes with many emotions — from shame and despair, overwhelm, and even relief. We’ve put together this quick guide to debt relief so you can start arming yourself with information in order to take on the bankruptcy process.
What is Bankruptcy?
Bankruptcy is a legal process intended to help people and businesses eliminate all or at least a significant chunk of debt or pay back a portion of what they owe.
Although bankruptcy can relieve you from overwhelming debts, it also comes with some long-term effects on your credit score. Bankruptcy stays on credit reports for seven to ten years, which can significantly impact your ability to open credit card accounts and get approved for loans with reasonable interest rates.
There are two main types of bankruptcy:
Chapter 7: This is an effective method to erase credit card debt, medical debt, and other forms of unsecured debt. You can file for Chapter 7 bankruptcy once every eight years.
Chapter 13: The main difference between 7 and 13 is that you are required to pay back some of your debts through the Chapter 13 trustee. You will pay a monthly amount based on what you’re able to pay.
Bankruptcy Filing Process
The bankruptcy filing process commonly goes as follows:
Collect Your Documents: Collect all financial documents, including a credit report, tax returns from the past two years, pay stubs or other proof of income for the last six months, recent bank account statements, recent retirement account statements, valuations of any real estate you own, copies of vehicle registrations, and any other documents that relate to your assets, debts, and income.
Take Credit Counseling: Every individual who files for bankruptcy must take a credit counseling course in the six months leading up to filing their bankruptcy petition with the court. These courses are designed to give you an idea of whether you really need to file for bankruptcy or whether another repayment plan might suit you better.
Complete All Bankruptcy Forms: There are at least 23 separate forms you will need to fill out to file bankruptcy.
Pay your filing fee and file your forms: Federal court charges a $388 filing fee for Chapter 7.
How Debt Relief Can Help
Filing for bankruptcy is a stressful event, but debt relief can make it a little easier. There are a number of debt relief options that may take longer than filing for bankruptcy but will do far less damage to your credit score.
It’s important to speak with a professional who can guide you in the right direction for the best path for your unique circumstances. Contact one of our debt relief experts today and let’s get started reclaiming your future and financial freedom.