The decision to file bankruptcy is important and complicated. If debt is overwhelming, whether it is due to a past or present illness, a job loss, marital discord, or just overspending, bankruptcy is a good option.
If a home must be saved from foreclosure and a reasonable modification is not possible, bankruptcy may work to allow time to catch up. The goal of the client is important in the determination as to whether to file and what type to file.
Usually I tell my clients that your future credit worthiness should not determine whether to file. If bankruptcy relief is needed then make the decision to file. Credit may be rehabilitated and sometimes it does not take long.
Every situation requires discussion and review. We will discuss the pros and cons to make you comfortable with your decision.
Common Questions about Bankruptcy
1. How will bankruptcy affect my credit?
Bankruptcy filing will appear on your credit report for 7 to 10 years. That does not mean that you can't obtain credit. Many people are able to obtain credit within a short period of time depending on income and recent payment history. It is, of course, important to have equity if obtaining a mortgage or money down when making a purchase. Bankruptcy alone does not stop one from obtaining credit.
2. What kind of bankruptcy should I file?
Depending on your individual circumstances, they lawyer will determine what type of bankruptcy should be filed. The lawyer will determine the client's goals to make that determination. The goal may be to save a home or wipe out credit card debt. The overall situation will determine which type is best.
3. What is the difference between Chapter 7 and Chapter 13?
There are many differences as well as similarities. The lawyer will determine the goals of the client to decide which is best.
Usually if an asset is being saved a chapter 13 is the answer. Sometimes taxes and fines and penalties require a payable plan that a chapter 13 provides.
4. Can I modify my mortgage, reduce my interest or principle?
There is legislation pending that may change the rights of mortgagors. It may allow mortgagors to go into bankruptcy court to ask the judge to lower their mortgage interest rate or even the loan balance to the current value of the real estate. At the time this article was written, nothing has been passed into law.
Your mortgage company is, and has always been permitted to work out a reasonable arrangement with you to help you save your home. The problem is that often, they decide not to help. That is why it is important to call my office to explore the assistance that the bankruptcy law affords.
Contact us and we will help you decide if bankruptcy is right for you.
