Filing for a bankruptcy is not something that you hear every day in your life. You take this resort when your debts are insurmountable then you can manage.
Assets – In a bankruptcy filing all that you own will be considered as assets. These will your house, clothes, cars, jewelry, computers, TVs, furniture, stocks, bonds, patents and copyrights. It will also include forthcoming assets you have a right to, such as auto accident claims, business accounts receivable and an inheritance. All these things will be assessed and estimated in a bankruptcy hearing.
Liabilities – They represent the people and entities to which you owe money. This can include credit card companies, suppliers, the Internal Revenue Service, banks, business associates, employees, hospitals, friends and family. Some of them such as mortgage are secured as you have pledged one or more of your assets as collateral while others like medical bills and credit card bills are unsecured. In a bankruptcy filing your creditors will be paid before your unsecured creditors and you may be forced to sell some assets.
Types of Bankruptcy – The federal government offers several different types of bankruptcy protection. Chapter 7 bankruptcy is also known as liquidation or discharge bankruptcy. This is based on the calculation of outstanding debt once you have sold all your assets to cover as much debt as possible. Another type of bankruptcy is Chapter 13 also known as reorganization. Lenders are ordered to accept a new or reduced payment schedule that the debtor can actually afford. You won’t need to sell your assets in this type of bankruptcy which isn’t eliminated but reorganized.
Effects on Credit Score - Filing for bankruptcy will affect your credit score for some time and it is expected to go down by a couple of hundred points. Once bankruptcy filing has taken place the results normally loom on one's credit report for about 10 years. You might notice the difference in percentage when you pay on a home loan mortgage, car insurance rates, and other various forms of related items. However this is not something to worry as you can repair your credit score over a period of time.
Hiring An Attorney - Filing for bankruptcy comes with some additional expenses. You will need to hire an attorney to file your bankruptcy and ensure that the verdict is in your favor. You will need to shell out some money for paying the attorney. Apart from this you will also need to pay the related expanse to a court clerk. These include the filing charges and other handling charges. In case your case stretches for a long duration your expanses might go up.
Summary: Filing for a bankruptcy is one of the toughest things in life and there are a few things that one should know before filing for a bankruptcy.
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