Filing For Bankruptcy: Questions And Answers

Many people, in today's economy, find that they are falling beneath a mountain of debt. The reasons are many and some are through no fault of their own yet the outcome is the same. Debt continues to accumulate and possessions become threatened when the debtor is no longer able to pay the bills. Accidents, unforeseen job layoffs and natural catastrophes can destroy a person's home, automobile and their job.

As more people find themselves becoming unable to pay their debts, they are forced to undergo bankruptcy. Unfortunately there are many myths involving the whole bankruptcy process but in this article many of the more common questions will be answered. Hopefully you will find the information and help you are searching for and so desperately need.

What types of bankruptcy are there?

There are four types of bankruptcy within the United States judicial system. Chapters 7, 11, 12 and 13, with each chapter covered under different guidelines and laws. The general breakdown of each chapter is all dependent upon the particular situation of the debtor. Businesses typically file Chapter 11 whereas farm owners will file for Chapter 12. Under Chapters 11, 12 and 13 the debtor agrees to a plan where he or she will repay a portion of the debts back to the creditor. Chapter 7 is a complete liquidation and any assets obtained through secured debts are repossessed and sold. The remainder of the debt is discharged.

Can a bankruptcy affect my retirement and 401k?

Thanks to new bankruptcy laws most retirement programs and 401k's are exempt from being considered part of a person's estate. The retirement must have an anti-alienation clause that exempts them from being seized by outside creditors. There are exceptions such as in the cases of self-employed plans but even these can fall under exemption rules. There is a cap on how much retirement is allowed before the remainder is seized as an asset. That cap, under the new bankruptcy laws, is one million dollars.

How long will my bankruptcy be on my credit report?

Bankruptcy can remain on your credit report for up to ten years from the date of filing. Once the bankruptcy has been discharged all of the reported debts will show as zero. It will have an impact on your credit score but not nearly as bad as it was before. This is a golden opportunity to learn from your mistakes and learn how to manage your debts better. You will eventually be out from under the looming bankruptcy but staying out of trouble is an entirely different story. Many people do not learn from their bankruptcy mistakes and find themselves in the same situation repeatedly.

How do I deal with credit collectors?

Well…unfortunately ignoring credit collectors is not an option. Credit collectors can employ sneaky, underhanded methods of trying to collect their debts. They get paid when you pay your debt. If you have begun the process of filing for bankruptcy and have met with your attorney, any calls or letters you receive from a collection agency need to be directed to your attorney. Once the bankruptcy process has been filed, debt collectors are not allowed to continue their threatening tactics. If they continue to do so you will need to file suit against them. New debt collection laws are in your favor if you are filing for bankruptcy. The laws do not apply if you are only considering the process.

What if I cannot make my bankruptcy payments?

Chapter 13 bankruptcy requires you make repayments on a portion of your debt. Some times financial situations change and the payment you once made before easily, now is beyond your financial means. The very first step you need to take before missing a payment is to talk to your trustee and attorney. They can help you by giving you some leeway to come up with the money or they can renegotiate the terms of your bankruptcy. You may need to file for Chapter 7 bankruptcy and liquidate your assets. There are also options of discharging the remaining debt through hardship but only a knowledgeable bankruptcy attorney can advise you on the step you need to take.

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