What Can Happen If You File For Bankruptcy?

Bankruptcy is a way to get relief from debts that you owe and cannot pay. That being said, it’s not a solution that should be taken lightly. There are consequences to being made bankrupt that can be long lasting. This is why it’s a good idea to seek advice from a Sacramento Bankruptcy Attorney if you are thinking of declaring bankruptcy.

Let’s take a look at bankruptcy and the possible alternatives. We are also going to explain the different types of bankruptcy that exist. Do not forget that bankruptcy is generally considered as a last resort for people who are struggling to pay off their debts.

What Are The Positives And Negatives Of Declaring Bankruptcy?

The one positive aspect of declaring bankruptcy is that you can wipe out a good portion of, or all of, your debt. This can be a big advantage if debt is causing you major worry in your life. You have to weigh this up against the negative results of bankruptcy. The biggest negative is that being declared bankrupt can have a detrimental and long lasting effect on your credit rating; in fact bankruptcy is recorded on your credit report for between seven and ten years.

Having a poor credit rating means that you may have problems getting credit and you may also encounter issues when applying for certain jobs. Of course, if you have a lot of debt your credit rating may already be in a poor state anyway. It’s a good idea to seek professional advice to see if bankruptcy is the best option for you.

What Are Your Alternatives?

There are alternatives to bankruptcy that you may want to consider. You can try to resolve your problems yourself. You may want to consider changing jobs to secure a higher income, reducing the amount of money you spend and reaching agreements with your creditors to make payments on an installment basis.

You may also want to think about speaking to a credit counselling agency that can help you with your situation. They can help you with things such as working out a budget and making payment arrangements with creditors. It’s worth mentioning that you need to be selective about which credit counselling agency you speak to. Not all of these agencies have your best interests at heart so you need to do your research before you make a decision about which one to contact.

What Types Of Bankruptcy Are There?

There are four different types of bankruptcy that are generally used. Here is an explanation of them:

  • Chapter 7 is the type of bankruptcy which is most widely used. If you declare this type of bankruptcy all of your assets (except those that are exempt) are sold by the court and the money is paid to your creditors. You are able to wipe out the majority of your debt. This type of bankruptcy is not available to everyone so you need to undertake a means test to see if you are suitable. Once you have filed for Chapter 7 bankruptcy you cannot do so again for six years.
  • Chapter 11, Chapter 12 and Chapter 13 bankruptcy. All of these types of bankruptcy involve agreements to pay off debt over a certain period of time. Property is kept by the debtor and not sold. Chapter 11 bankruptcy is most often used by partnerships or corporations; Chapter 12 bankruptcy is for family farmers and Chapter 13 bankruptcy is for individuals.

No matter which type of bankruptcy you are applying for, you need to think carefully about it. You may want to think about other options first and if you speak to a bankruptcy attorney they should help you to decide what to do.