Are you struggling to make ends meet and thinking that filing for bankruptcy might be the perfect solution to fix your financial situation? Well, don’t despair! Bankruptcy is a good option for people like you who need help achieving financial relief. It allows you to discharge your debts and start afresh. It will also cease legal actions or foreclosure against you and stop creditors from demanding payment from you. This “breathing space” is what many debtors desire when filing for bankruptcy.
However, as good as it sounds, there are a few things you ought to know before going down this road. Here are 5 things you should know before filing for bankruptcy:
It Affects Your Credit
Most likely, your credit score has already been drastically affected by the nonpayment of your debts, but filing for bankruptcy will likely hurt your it even further. Bankruptcies are considered a negative report on your credit and can impact how futures lenders view you. Seeing a bankruptcy report may prompt creditors to decline you loans based on the risk that they will not get paid back in time. And if they decide to give you credit, it could result in higher interest rates and less favorable borrowing terms.
Differentiate Types Of Bankruptcy
If you want to file bankruptcy, it’s crucial to find out which type is best for your situation. Ordinary people can use one of these two types of the Bankruptcy Code —Chapter 7 or Chapter 13.
Also known as liquidation, Chapter 7 bankruptcy is used when you have little or no assets. That’s because if you own property, the trustee will sell it to pay your debts. Many people love to file for Chapter 7 because they can wipe out most of their unsecured debts and that means you won’t be required to pay back the money they owe through a repayment plan.
Chapter 13 bankruptcy is for people with regular income but who don’t have enough money to pay back debts through the agreed repayment plan. You’ll keep all your property, but you’ll need to pay the value of your “non-exempt” property to your creditors. This is a good option if you’ve lagged behind on a car or a house payment and want to keep up with missed payments and retain the property.
Not All Debts Will Be Wiped Out
You can’t shake off all your debts when you go bankrupt. Certain types of debt, such as child support and taxes, are not discharged in bankruptcy. Students loans are also difficult to write off too unless you prove that you have undue hardship. Besides, if someone has a secured loan, the creditor has the right to collateral and will still be able to claim what is owed to them and take your assets/collateral when you’re unable to pay. However, unsecured debts are often wiped out in bankruptcy.
Typically, here are some debts that can’t be discharged by filing for bankruptcy:
- Student loans
- Child support
- Real estate liens
- Certain luxury items
It Isn’t A Quick Fix
Bankruptcy isn’t a quick solution to your financial problems. Chapter 7 bankruptcies take about four to six months to complete.
On the other hand, Chapter 13 bankruptcies can take even longer. First, the bankruptcy court has to approve the bankruptcy plan, which can take a lengthy period of time. Moreover, while you are able to keep certain secured assets (like a home or car) as you continue to make payment under the Chapter 13 bankruptcy plan, the process can take up to 3-5 years.
There Are Other Ways
Before filing for bankruptcy, it’s essential to consider other alternatives that are not as drastic. You can borrow an online loan to negotiate your debts down and manageable numbers. There are numerous types of online loans you can apply for, from payday loans, unsecured personal loans, online installment loans, small business loans, guarantor loans, or cash advance loans. Use the money to pay off some debts or boost your business. For instance, online installment loans have a longer repayment plan and may offer a higher loan amount. Larger loan amounts and manageable payments can minimize your risk of needing to file for bankruptcy. Taking an online loan from Little Loans to mitigate bankruptcy has the following benefits:
- 24/7 availability
- Faster process
- User convenience
- Low-interest rates
- No physical submission
- Minimal Documentation
- Small cash loans
- Quick Disbursal