What You Should Know About Filing Bankruptcy | Richard Banks & Associates, P.C.

Many people consider bankruptcy to be a dirty word, but we are here to help change that misconception.

For those filing, bankruptcy can serve as a fresh start—a chance to right their financial circumstances and move on to a brighter future.

What Is Bankruptcy?

Plainly put, bankruptcy is a legal process in which people or other entities who cannot repay debts to creditors can seek relief from some or all of their debts.

For most consumers, Chapter 7 and Chapter 13 are the two types of bankruptcy that are used.

Chapter 7 is one of the most effective ways to get relief from credit card debt, medical debt and other forms. If considering filing, remember this: Over a million people in the U.S. will file Chapter 7 bankruptcy this year.

Chapter 7 is referred to as straight bankruptcy where most, if not all, of your debt can be discharged. The process from initial filing to final discharge of debts can take about four months in most cases.

Chapter 13 serves as a way to reorganize your debt by creating a payment plan that is based on your income. This plan will typically last three to five years and can include a much lower interest rate.

You run no risk of losing your property when filing Chapter 13, as it can help stop foreclosure, car repossession, bank levies, wage garnishment and creditor harassment.

There are debt limits in Chapter 13, with no more than $1,257,850 in secured debt and $419,275 in unsecured debt as of April 2019.

How It Can Impact You

Yes, bankruptcy will impact your credit score, but remember this: It is not permanent. Bankruptcy will remain on your credit report for 10 years, and during that time can make it difficult to get things like a credit card, auto loan or mortgage.

Instead of fearing the “negatives” portrayed in the media, try to focus on the positive side—you get to start over financially. Once starting over, you can re-evaluate your expenses and the financially missteps that were made in the past, learning from them.

Richard Banks & Associates, P.C. is here to be your bankruptcy resource and guide throughout the process. Please don’t hesitate to reach out to us with any questions you may have!