Declaring personal bankruptcy is one of the biggest decisions you may ever make in your personal financial life, so it makes sense to consider all of the issues and factors that you'll be facing if you decide to move forward. Here are some things to think about before you make a final determination:
Chapter 7 or Chapter 13? Depending on your personal situation, level of debt, income and other factors, you may only qualify for one type of bankruptcy. Chapter 7 is for people with few assets, and little income. It will wipe out many of your debts in 3 to 6 months, but you must meet certain qualifications, otherwise you will need to file Chapter 13 bankruptcy. This is more complicated than Chapter 7, and you will be required to make repayments based on your income, over the course of 3 to 5 years.
Should you even file bankruptcy? Declaring personal bankruptcy can stay with you for as long as 10 years, so you owe it to yourself to explore all of your options before deciding on bankruptcy as a course of action. You may be able to negotiate a way out of your financial woes or make a few changes that will allow you to avoid bankruptcy altogether.
What debts will be forgiven, and what debts won't? Some debts will be wiped clean, but others such as student loans, child support, alimony and tax debts may continue to be on the books even after you file and complete bankruptcy proceedings. With the help of a lawyer, you should determine exactly what you'll be on the hook for after you go through the process.
Are your pension plans safe? Most pensions and life insurance policies are protected by state laws, but it is still a good idea to make sure that's the case in your instance before you face a rude awakening.
What will happen to your home? Filing bankruptcy can stop you from having to make mortgage payments on a regular basis until you reestablish yourself financially. But you could still lose your home in a Chapter 7 filing. In a Chapter 13 filing, you may be able to include your mortgage payments as part of a repayment plan, protecting your biggest asset.
The Hixson Law Firm serves clients in Mansfield, Arlington, Grand Prairie and other nearby Texas communities.