Should I File for Bankruptcy

A Major Decision

Should I file for bankruptcy, is the frequent question that most debtors ask themselves when they are in a deep amount of debt, that they are unable to pay.

Filing for a bankruptcy is a huge financial decision that has a very big impact on your future credit, so it is better to know more about the process before applying for one. This is not something to take lightly. We spoke with 3 different lawyers before deciding on this. And it was still a heart wrenching decision.

Declaring bankruptcy generally wipes most of your debts clean and you are given a fresh financial start. But please note that your credit score gets affected very badly in this process and this negative mark remains for a period of 7-10 years.

So before you make the decision for your question “Should I file for bankruptcy”, you need to educate yourself about the process itself and the effects it cause.

Many debtors file for bankruptcy as they feel that it gives them a fresh financial start. Though this is true, it happens at the expense of your financial score.

In general this type of default can be categorized into either a Chapter 7 and Chapter 13.

Chapter 7 wipes most of your debts clean, by liquidating most of your non-exempt assets to pay the creditors. Any debts remaining after this are usually discharged, meaning that you are no longer obligated to pay them. This type is generally advantageous for those who have no properties of their own, as they have nothing valuable to lose.

Chapter 13 is a bit more complicated. Here you are allowed to keep all your properties, but you will have to pay off your debts within a period of 3 to 5 years based on the plan you submit to the court. This is usually helpful for those who are facing foreclosure, as it gives them time to catch up on their mortgages.

Note: You can only apply for a bankruptcy once in six (6) years.

Filing a bankruptcy is a matter of public record and appears on your report for 7 years (after repayment) if you file for Chapter 13, and for 10 years (after discharge) if you file for Chapter 7.

Note: If you have FICO score of 780, 240 points will be reduced from your score and for those with a FICO score of 640, lose 150 points from their score.

The important question you have to ask yourself before you ask, Should I file for bankruptcy is “Can I afford the credit repair?” Because repairing your financial record after a bankruptcy is very time consuming and difficult process that affects you both physically and emotionally.

You have to be prepared to face the consequences before filing. This is all the more reason to get a credit repair professional.

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