Did you know that about one out of every two hundred people in the U.S. end up filing for bankruptcy every year, as well as many businesses? There are a lot of myths as well as important facts about bankruptcy that you should know the truth about. Because so many people have to go through this process, fortunately, there is a well tread path in front of you. Here are four common questions about bankruptcy, as well as answers.
1. What types of bankruptcy are there?
There are several forms of bankruptcy. Most people will opt for either Chapter 7, or Chapter 13. When you file chapter 7 bankruptcy, some of your assets are liquidated in order to pay down a portion of your debt. Chapter 13 bankruptcy, on the other hand, is a process of debt restructuring. The majority of people usually choose to file Chapter 7 bankruptcy.
2. Will anything happen if I charge up my cards before filing?
Potentially, yes. There is a widespread myth that you can run up your cards right before filing, so that you will not need to pay back for everything you bought. This is not true, however, because the government sees this action as fraud, and when you file for bankruptcy the debt will not be discharged.
3. Why file for bankruptcy?
Bankruptcy is the right option when you simply have no way to repay your debts. If you have already tried to negotiate payments and creditors insist on not altering the length of time you can pay them in, you might have no choice but to file. Individuals might also have to file when their liabilities exceed their assets,which means their debt could never be paid down given their current earnings. As for the reasons people file in the first place, 91% of filers report that job loss, divorce or medical expenses were contributing causes in their bankruptcy.
4. How much does it cost to file bankruptcy?
The average cost to file chapter 7 bankruptcy is about $1,500. About $300 goes to the necessary paperwork, and the rest is attorney fees and mandatory credit counseling.
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