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Top 10 Bankruptcy Questions

Updated on February 20, 2013

Bankruptcy FAQ

Filing for bankruptcy is an important decision, so it is only natural to have bankruptcy questions before making a final decision. Due to the important of filing for bankruptcy it is imperative to have all of your bankruptcy questions answered before you begin pursuing bankruptcy.

1. What is Bankruptcy?

This is one of the most common bankruptcy questions. There are a number of myths about bankruptcy and as a result many people misunderstand the process of filing for bankruptcy. Essentially, bankruptcy is a type of legal proceeding in which you legally declare that you are not able to pay all of the money that you owe. It grants consumers a fresh financial start while also providing the opportunity to potentially repay creditors in an orderly fashion.

2. What are the Advantages of Bankruptcy?

Bankruptcy makes it possible for consumers to stop foreclosure on their home and provides an opportunity to catch up on payments that have been missed. It may also prevent a vehicle or other property from being repossessed. In addition, bankruptcy can stop wage garnishment and harassment by debt collectors. Bankruptcy can also provide a discharge of debts.

Bankruptcy Further Reading

3. What Won't Bankruptcy Do For Me?

This is another of the most frequently asked bankruptcy questions and it is important to understand that bankruptcy will not cure all of your financial problems. It is not the right choice for everyone, so it should be understood that bankruptcy will not eliminate certain types of debts, especially those that are secured. Secured types of debt include mortgages and car loans. In addition, bankruptcy will not discharge special treatment debts such as alimony, child support, certain student loans, criminal fines and certain taxes.

4. How Often Can You File For Bankruptcy?

It depends on the type of bankruptcy that is filed. You can file for Chapter 7 bankruptcy six years after the date of the last time you filed. Chapter 13 bankruptcy can be filed again at any time.

5. What is Chapter 7 Bankruptcy?

Ultimately, the goal of this type of bankruptcy is to discharge your debts. In order to wipe out those debts; however, you will need to give up all non-exempt property. Exemptions will need to be applied and it is important to speak with your bankruptcy attorney ahead of time to determine exactly what property is exempt and which is non-exempt before your bankruptcy petition is filed.

6. What is Chapter 13 Bankruptcy?

This type of bankruptcy gives you the opportunity to legally create a plan by which you will repay your debt. Under this type of bankruptcy, you will pay into the plan on a regular basis. This type of bankruptcy offers advantages over Chapter 7 by helping you to avoid foreclosure, offering a lower cost than Chapter 7, remaining on your credit for fewer years than Chapter 7 and avoiding the confiscation of and sale of property in order to satisfy debts.

7. Who Should Consider Filing for Bankruptcy?

Bankruptcy is ideally designed for individuals who feel as though they are overwhelmed by financial problems.

8. Will my Credit be Ruined if I File for Bankruptcy?

While your credit will not be completely ruined if you file for bankruptcy, it will remain on your credit report for up to ten years. If you have a regular, decent income you will typically find that you can receive credit even after filing for bankruptcy. Most people find they can still purchase an automobile after filing for bankruptcy and can then begin rebuilding their credit from there.

9. What is an Automatic Stay?

An automatic stay is a restraint that prevents your creditors from taking any subsequent action to collect debts. The automatic stay is filed immediately after your bankruptcy petition is filed.

10. Will My Employer Know I Filed for Bankruptcy?

It should be understood that bankruptcy petitions are public records. Normally; however, your employer will not know you have filed a petition for bankruptcy unless you owe him or her money and they are a creditor.

Getting answers to your bankruptcy questions is an excellent way to determine whether filing for bankruptcy may be the right option for you.

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