When you are drowning in debt and struggling to make ends meet, it can often feel like there's no way out. However, bankruptcy protection may give you the breathing room you need to secure a better financial future for yourself and your family.
Factors to Consider Before Filing for Bankruptcy Protection
While bankruptcy can be helpful in a number of circumstances, the decision to file for bankruptcy should not be made lightly. Filing for bankruptcy can have a number of negative consequences, such as:
- The potential loss of property. While some types of assets are exempt from bankruptcy filings, it is possible that you could lose property such as your home or your vehicle if you are unable to keep making payments.
- Inability to obtain credit. A bankruptcy filing is the most serious type of black mark on your credit report. A bankruptcy will remain on your credit report for 7 or 10 years from the date it is filed, depending on which type of bankruptcy protection you seek. This will make it difficult or impossible to obtain a credit card, car loan, and mortgage.
- Trouble renting an apartment. A credit check is often a standard part of the process of renting an apartment. Some landlords may not accept prospective tenants with a recent bankruptcy filing.
- Difficulty obtaining employment. The hiring process for some types of positions routinely involves pulling an applicant's credit report to determine their financial stability. In this case, a recent bankruptcy filing may prevent you from obtaining suitable employment.
- Loss of personal privacy. Bankruptcy filings are considered public records. As such, they can be accessed by others and used to make personal or financial decisions—even when a full credit report is not accessed.
Typically, experts do not recommend filing for bankruptcy unless other options, such as credit counseling and payment accommodations with your lenders, have proven to be unsuccessful. Filing for bankruptcy is typically considered an option of last resort.
Bankruptcy may be the best choice when:
- Your outstanding debt far exceeds your current income and assets.
- You are experiencing a period of prolonged unemployment.
- You are struggling to repay medical bills from a recent illness or injury.
- You are experiencing financial hardship due to divorce.
Types of Bankruptcy Protection
For individuals, there are two main bankruptcy options: Chapter 7 and Chapter 13:
- Chapter 7 bankruptcy. In this type of bankruptcy, the court appoints a trustee to collect your non-exempt assets, sell them, and use the proceeds to repay some of your debts. Chapter 7 bankruptcy is also known as a straight bankruptcy or liquidation bankruptcy.
- Chapter 13 bankruptcy. When you file for a Chapter 13 Bankruptcy, you will use your income to repay a portion of your debt over the next three to five years. A Chapter 13 bankruptcy is sometimes referred to as a wage earner’s plan.
Chapter 7 is the most common type of bankruptcy in the United States. However, you will be prevented from filing for Chapter 7 bankruptcy if it is determined you have enough income to suitably repay your debts in a Chapter 13 plan. Regardless of which type of bankruptcy you choose, filing for bankruptcy protection will stop a wage garnishment, stop a bank levy, stop harassing phone calls from creditors, stop a lawsuit, and stop the foreclosure of your home.
There’s No Need to Feel Guilty
Often, people who are experiencing serious financial difficulties delay filing for bankruptcy because they see it as a moral failing. While wanting to be financially independent is admirable, you must consider that bankruptcy laws were enacted to protect everyday consumers. The law recognizes that when you are overwhelmed with debt, you are unable to be a fully productive member of society. Bankruptcy protection is designed to provide a financial fresh start because second chances are considered an integral part of what it means to give people the opportunity to achieve the American Dream.
Alatsas Law Firm Can Help
Making the decision to file for bankruptcy isn't easy, but you don't have to go through the process alone. Experienced attorney Theodore Alatsas will explain your options in plain English and guide you through the filing process step by step.
Alatsas Law Firm is conveniently located for residents of Brooklyn, Queens, and Staten Island. Our ground floor office is handicapped accessible with a subway stop and two bus lines nearby. Contact us today to schedule a free, no-obligation initial consultation.