What Is Bankruptcy And Is Bankruptcy Right For You?

Bankruptcy is a federal law that has been created to offer individuals and businesses to either wipe out their past debts and default judgments or restructure their existing debts into an affordable payment plan where the individual or business can pay with a fraction of their monthly income or revenues.  Bankruptcy offers hard working folks who have lost their jobs or businesses a fresh financial start in life where they are not hounded by creditors and bill collectors.  There are millions of Americans who had to file bankruptcy after the Great Recession of 2008 and bankruptcy benefited them in getting a fresh start in life.  People who have filed bankruptcy can qualify for new credit and mortgage loans after a year or two after the bankruptcy discharge and some even have credit scores over 700 FICO after filing bankruptcy.  There are two types of bankruptcies for individuals, Chapter 7 Bankruptcy and Chapter 13 Bankruptcy.  With Chapter 7 Bankruptcies, all your non exempt assets are liquidated to pay off your creditors.  Most people who file Chapter 7 Bankruptcy do not have much assets and a lot of unsecured debts such as credit card bills, medical bills, and other debts and judgments.  If you have multiple judgments, a Chapter 7 bankruptcy will wipe it all out where you can have a fresh start.  Judgment creditors can no longer attach wage garnishments or freeze your bank account.  All collection efforts from creditors come to an abrupt halt once a debtor files for bankruptcy protection.

Is Chapter 13 Bankruptcy Right For You?

Chapter 13 bankruptcy is for folks who have assets and income and want to protect their assets and reorganize or adjust their overall debt through a court ordered payment plan over the course of several years.  This type of bankruptcy is ideal for folks who had a drastic income reduction and own a home with equity and do not want to lose their home or other assets and all they need is a smaller overall monthly payment plan until they are able to catch up.

Pros Of Filing Bankruptcy And Is Bankruptcy Right For You?

The day your bankruptcy petition is filed in Bankruptcy Court, your are immediately protected from any collection activities from any creditor.  The bankruptcy filing is an automatic stay from any collection activities which includes collection calls, collection letters, filing suit against your, wage garnishments, and seizing any assets or freezing any assets such as bank accounts and investment accounts.  Bankruptcy is a creditors worst nightmare.  After 90 days of filing your bankruptcy, unless there is fraud involved, your the court will most likely discharge all debts where you do not have to repay any creditors.  This is known as the discharge date of your bankruptcy and it is the effective date where you are completely debt free.

Cons Of Filing Bankruptcy And Is Bankruptcy Right For You?

Bankruptcy will not relieve your student loans, back taxes, alimony, or child support.  The minute your bankruptcy is recorded on your credit report, your credit scores will most likely drop 200 plus FICO points.  However, the drop of your credit scores is temporary and your credit scores will gradually improve as time passes.  You should get yourself three secured credit cards as soon as possible after the discharge date of your bankruptcy and start re-establishing your credit.

Is Bankruptcy My Best Option?

If you have prior bad credit such as open collection accounts, charge offs, repossessions of cars, or other bad debt and it has been longer than three or more years and the debt collectors are living you alone, you may want to think twice about filing bankruptcy.  As long as you have no judgments on your record, most older unpaid debts can be wiped out due to statute of limitations where you are no longer responsible.  Most credit card debts and bad debts have a five year statute of limitations depending on which state you reside in or where the credit was issued.  I am not a bankruptcy attorney but why stir things up and file bankruptcy when the creditors are leaving you alone.  You can qualify and get a mortgage loan approval with aged unpaid debts and open collection accounts.

Judgments: Bankruptcy Will Solve Judgments

However, if you still have creditors and collection agencies hounding you and are getting sued and have judgments, wage garnishments, and assets frozen, bankruptcy might be the best option for you.  If you have multiple judgments and the judgment creditors are aggressively pursuing in garnishing your wages and freezing your bank account, I strongly recommend you seek the advice of a reputable bankruptcy attorney.  When you go meet your bankruptcy attorney, get a copy of your credit report so you can review the credit report with your attorney.

Mortgage After Bankruptcy

For those who have filed bankruptcy in Illinois, Florida, Wisconsin, California, and Indiana, please contact me at 262-716-8151 or at www.gustancho.com  so we can start re-establishing your credit and get you qualified for a mortgage loan.

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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