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What you Need to Know About Filing for Bankruptcy

Deciding whether to file for bankruptcy is a difficult decision, and the choice may not be appropriate for every individual who believes their debt is imaginable. Every person's situation is different and you should ensure you consult with an experienced and specialized attorney. The right attorney will help you in determining your true position, if sequestration is the appropriate solution and the factors to consider before applying for liquidation.

Many people consider filing for sequestration because their financial situation is an impairment to their mental health while others file because they are not in a position to honour their financial responsibilities. Many people prefer the later since it gives them a chance to rebuild their financial life. However, before making the decision, you should be sure that bankruptcy is the right decision.

Issues to consider before you file for bankruptcy;

  • Bankruptcy may be appropriate if most or some of these factors apply:
  • Most of the debts you have are unsecured debts such as medical bills and credit card bills.
  • Your bank account has been attached and wages garnished. A bankruptcy application will stop the wage garnishment and wipe out the outstanding debt.
  • The total debt you owe your creditors, including your home and car loan, is more than what you can pay, even after a period of five years.
  • You have lawsuits against you pending and a judgement may possibly be entered as a result.
  • Your credit is already in bad shape such that filing for sequestration would not have a major impact on it.
  • You believe you can afford paying a percentage of the debt but not the whole of it.

Common types of bankruptcy

The most common types of sequestration that can be filed are chapter 7 and chapter 13. They are discussed below.

Chapter 7 bankruptcy

Chapter 7 filings make most of non-business sequestration cases. It is ideal for individuals who do not own a lot of property but have a large amount of unsecured debts, such as payday bills, credit cards and medical bills. This chapter may be attractive since under it, all debts are cleared and you are no longer responsible in paying them.

Advantages of chapter 7

  • Most unsecured debts can be cleared or completely eliminated.
  • The application process moves quickly and you may be able to receive your discharge after a few months.
  • Creditors are not allowed to contact you while the automatic stay in in effect and after you are granted the discharge.

Chapter 13 bankruptcy

This chapter involves repaying some of your debts to have the rest forgiven. People are only allowed to file for this chapter if their debts do not exceed a certain amount. This option can be the right choice if you have invested significant equity in your home and you do not want to lose it.

Advantage

  • You are able to retain most of your stuff while scattering out the time to pay past due accounts.
  • Debtors are given a period between 3 to 5 years  to balance delinquent accounts as per terms signed with a trustee.0
  • You will not have any direct contact with the creditors and you'll only need to make one monthly payment which will be distributed.

Choosing a bankruptcy lawyer

When thinking of filing for liquidation, it is prudent to select the services of a lawyer specialized in bankruptcy law. There are many such lawyers in the industry, hence you need to consider a number of factors first.  The factors are:

  • Experience -- ensure you choose an attorney or a bankruptcy company which has been operational for a number of years and has handled many similar cases.
  • Cost of services -- lawyers charge rates that differ.  Through comparing rates of different lawyers, you will be able to know who charges reasonable rates.
  • Reputation -- before you settle for the services of any attorney, consider checking what other clients think of his services. If past clients have positive opinions, this probably means that the lawyer provides excellent services.

Filing for bankruptcy is usually considered the last option to help an individual rebuild his or her financial life. However, it is important that you have an understanding about the sequestration and what bankruptcy law entails before making an application.