What is Bankruptcy?
Bankruptcy is a legal process that allows individuals and businesses to receive assistance and relief in dealing with financial disasters that arise due to a loss of employment, loss of income, or excessive spending. When a person declares or applies for bankruptcy, he or she is stating that they have an inability or impairment of ability to pay their creditors. Depending on the form of bankruptcy that is filed, the person or individual will have different options of either wiping away their debts or preparing a repayment plan in order to pay off a portion of their debts.
What Does Bankruptcy Cost?
The basic cost of filing bankruptcy for an individual will vary depending on where you live. The majority of the cost is given to the bankruptcy attorney and he or she will generally charge a few hundred dollars. However, if this amount will save you larger amounts of money through debt relief then the fee will be worth it. Other costs may arise later on that are not directly related to the cost of bankruptcy such as higher loan interest rates, poor credit, and higher insurance premiums. Most states charge a filing fee, which generally cannot be waived, of between $100-$200.
What Kinds of Bankruptcy Cases Are There?
There are several different kinds of bankruptcies that may be filed. Among the more common bankruptcies are Chapter 7 for liquidation, Chapter 9 for municipality bankruptcy, Chapter 11 for reorganization, Chapter 12 or Family Farmer/Fisherman Bankruptcy, Chapter 13 which is the most common and is designed for individual debt adjustment, and Chapter 15 for ancillary and other cross-border cases.
Does Bankruptcy Affect My Credit?
Bankruptcies will be listed on your credit report for 10 years, according to federal law. For most people who are considering filing for bankruptcy, this may not be a huge deal because their credit score is probably not very good to begin with. Bankruptcies do stay on your credit report a little bit longer than other marks such as late payments and unpaid debt, which stay on your credit report for 7 years. This does not mean you will not be eligible to receive loans or credit for the next 10 years, but rather that you will have a higher interest rate than if you had not filed bankruptcy.
Do You Have to Go to Court for Bankruptcy?
In most cases, the person filing bankruptcy will have to attend at least one hearing that is known as a "meeting of creditors". This hearing is short and gives the filer an opportunity to answer a few questions about your personal and financial situation. The filer's creditors are allowed to attend and ask questions if they so choose. The creditors are not allowed to be abusive, so the filer should not worry about being attacked. Bankruptcy cases generally are completed within 6 months from the date they are filed.
