By Deciding to file for bankruptcy is a significant choice, demanding careful consideration. It’s vital to explore all alternatives first, like debt management or consolidation, to potentially avoid the process altogether.
Remember, bankruptcy affects your credit and assets, and not all debts may be discharged. Seeking professional advice to understand your specific situation is key to ensuring you make an informed decision about your financial future.
Before You Decide
First off, consider other options. Maybe you can fix your money troubles without going to court. Talking to a credit counselling agency could help you see the bigger picture and explore other ways to handle your debt, like managing your debt better, consolidating it, or settling it in different ways.
However, it’s important to consult an insolvency practitioner before filing for bankruptcy. If you’re planning on filing for bankruptcy, it might be best to contact a legal practitioner.
The Don’ts
- Don’t pay off certain debts right before filing: If you’re thinking about bankruptcy, avoid paying off some debts just before. It might seem like a good idea, but it can cause problems. The court might see it as unfair to other creditors and ask for the money back.
- Avoid taking on new debt: Getting more debt when you’re about to file for bankruptcy is a bad move. It might look like you’re not serious about sorting your finances. This can make the process harder for you.
- Don’t move your stuff into someone else’s name: You might think putting your car or house in a friend’s name can save it. This isn’t a good idea. It can be seen as you trying to hide your assets and affect your case.
- Keep away from using your retirement savings: It’s tempting to use your retirement money to pay off debts. But, try not to. This money is often protected in bankruptcy. You’ll need it later on.
Costs and Types of Bankruptcy
Bankruptcy isn’t cheap. If you go for Chapter 7, it might cost you between £1,500 to £3,000 in lawyer fees. Chapter 13 can be pricier, around £3,000 to £4,000, not even counting the filing fees, which are a few hundred quid. There are two main types to know about: Chapter 7 and Chapter 13.
Chapter 7 is about clearing your debts by selling some stuff you own. It’s for when you really can’t pay back what you owe. Chapter 13 is different. It’s for folks who earn enough to pay back their debts in a new plan. You get to keep your things and pay off debts over time.
Impact on Your Credit and Assets
Filing for bankruptcy will hit your credit score hard. Chapter 7 stays on your report for 10 years, and Chapter 13 for seven years. But it’s not all doom and gloom. Many folks start to see their credit score climb back up a couple of years after filing.
When it comes to your stuff, like your car or house, bankruptcy can affect these too. In some types, you can keep your home and car if you keep up the payments, but in others, they might be sold off to pay debts.
Do Your Debts Qualify?
Not all debts can be cleared through bankruptcy. Things like student loans, alimony, child support, and certain taxes might not go away.
Conclusion
Bankruptcy is a complex process with a lot to consider, including its impact on your credit, costs, and which type might suit your situation. Always best to talk to a professional who can guide you through the pros and cons of your specific situation.
