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Five Common Bankruptcy Questions

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Understanding and navigating the bankruptcy process can be extremely confusing and overwhelming. You might feel like every creditor is reaching out for money that you simply do not have. You are receiving threats from debt collectors. Every time you pay a bill, another two or three follow. Many people in debt feel like they are drowning. Fortunately, filing for bankruptcy can be that life raft that you so need.

What is bankruptcy?
Filing is admitting that you are struggling financially. It essentially gives you a do over on your finances. If you are approved to enter into bankruptcy, your handler will do one of two things, depending on the type. In Chapter 7, all of your debt is combined and instead of dealing with multiple creditors, you make a single payment. The bankruptcy holder decides what percentage of the pay goes to each debt. In a chapter 13 bankruptcy, your debt is basically forgiven, allowing you to start over financially.

Who is eligible?
Bankruptcy is likely very appealing if you are struggling financially. However, you still have to qualify for bankruptcy, either for chapter 7 or chapter 13. You will want to work with a bankruptcy lawyer to file bankruptcy. A law firm handles all of the paperwork, including gathering needed documents to file properly. If you do not file correctly the first time, the process could be extended. This could put you even more into debt and could make it more difficult to be approved later on. According to US bankruptcy court statistics, more than 1.5 million people file for bankruptcy in the average year. Work with an attorney to see if you are eligible.

What type of bankruptcy should I file for?
Your attorney will help decide the type of bankruptcy that is right for your financial situation. It will most likely depend on the type of debt that you are in and how much debt you have accumulated. Bankruptcy law firms are familiar with all types of bankruptcy and are a valuable source of information. The most common cause of bankruptcy, however, is for medical debt. A recent Harvard University study showed that medical expenses account for approximately 62% of all personal bankruptcies in the U.S.

What services does a bankruptcy attorney offer?
Paying for the representation of a bankruptcy attorney when you are already financially struggling may seem like an extra cost that you do not need. However, you will actually find that bankruptcy attorneys can save you money in the long run. They prevent you from having to file multiple times. Considering you are charged per file, this could get very costly. For a chapter 7 case, the fee is $335. For a chapter 13 case, the fee is $310. Additionally, when you work with an attorney, you increase your chances that your bankruptcy case is accepted the first time.

Will my credit be ruined forever?
Many people do not want to file for bankruptcy initially because it places a mark on your credit report. This can affect your ability to get a car loan, mortgage, or any other type of credit. However, not paying and going further into debt will do the same thing. A bankruptcy only stays on your credit for a set number of years, depending on which state you live in. It gives you a chance to get financially back on your feet and start over. Once the bankruptcy falls off of your credit report, you will have a clean report that you can begin building good credit with.

Being underwater financially can be very scary. You might be getting harassed by debt collectors and you simply do not have the funds to pay them. Bankruptcy might be the solution to your problem. Filing for bankruptcy can help you control your debt, eventually working to entirely eliminate it. If you are struggling to keep up with your monthly bills, consider contacting your local law firm that specializes in bankruptcies.

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