If you are at that point where you simply cannot pay all your bills, bankruptcy may be a realistic option for you, although you should also look at other possible solutions, such as debt consolidation. However, declaring bankruptcy is not as easy as you might think; firstly, there are several different types, although most people file under Chapter 7 or Chapter 13. If you are thinking of filing Chapter 7 bankruptcy, the following information can help you.
Chapter 7 is also known as a straight bankruptcy, and is the most straightforward of the different options, allowing you to basically eliminate all your so-called unsecured debts. Medical expenses that are so high that they just cannot be paid are the cause of about half the bankruptcies in the US; once you file, you will no longer be responsible for these debts. In addition, any credit card debt, consumer loans or other loans are wiped out; it is in effect, a chance to make a fresh start.
Perhaps the biggest drawback of filing for bankruptcy is the effect that it has on your credit report, and it will remain on your report for up to 10 years. Anyone with a bankruptcy on their credit report will find it difficult to be approved for any type of a loan, as the lenders class them as high risk, meaning there is a high chance of defaulting on any loan. If you are approved for a loan, you are not going to get a favorable interest rate, and buying a car or a home becomes that much more difficult. It can take several years of hard work to build up your credit score again. A bankruptcy is also on public record, although realistically nobody would know that you have filed, unless they made a point of finding out.
However, if you are constantly being harassed by creditors demanding their payment, you will probably agree that one of the biggest benefits of filing Chapter 7 bankruptcy is that your creditors have to leave you alone and cannot go after their money. That means no more letters or phone calls, or having to juggle payments around that you cannot really afford. In addition, once your bankruptcy is final, there is no danger of having your wages garnished, or being sued by a creditor for non payment of your debts.
It does cost money to file Chapter 7 bankruptcy, to the surprise of some people, and you should expect to pay between $1,000 and $2,000 including your attorney’s fees. Virtually all bankruptcy attorneys offer a free initial consultation, and the better prepared and organized you are, the less the whole process will end up costing you. You will also need to amass a lot of paperwork to give to your attorney; once he or she has filed the paperwork at the court, the process officially begins and your creditors are notified that you have filed. You can expect the whole process to take up to several months, depending on the complexity of your case and your particular circumstances. Undoubtedly, bankruptcy still has a stigma attached to it; however, for many it really is the only solution to their financial problems.