8 things to know about bankruptcy
If you are trying to cope with overwhelming debt in Louisiana, you might consider bankruptcy. While bankruptcy is often an effective form of debt relief, there are a lot of misunderstandings about how it works.
What you should know about bankruptcy
Bankruptcy is a complicated issue. Here are some things that you should know about this form of debt relief.
1. Some debt is not dischargeable
The types of debt not eliminated in bankruptcy include child support, judgments for injuries caused by drunk driving, some tax debt and, in most cases, student loans.
2. You have protection against collection efforts
Your creditors cannot take collection action against you while your bankruptcy case is active. This means they can’t call you, sue or try to garnish your wages.
3. You may be able to keep your assets
Some types of bankruptcy, such as Chapter 13, don’t require you to liquidate assets. Some of your assets also remain exempt from a Chapter 7 liquidation.
4. Bankruptcy courts can “claw back” recent creditor payments
Avoid paying off some debts right before filing for bankruptcy. The bankruptcy court considers your assets part of your estate and can require those creditors to repay these funds for redistribution among all your creditors.
5. Repaying your debts may be an option
If you have a steady income and assets, a Chapter 13 plan lets you repay your creditors over three or five years without giving up your assets. This is an ideal plan for many people.
6. Your credit score will recover
While filing for bankruptcy can cause your credit score to plummet 100 points or more, this number can rebound. You may even qualify for a mortgage within a few years after your discharge.
7. You may have to meet with creditors
Part of the bankruptcy process is a meeting with creditors. Your creditors can come to court and ask you questions about your financial situation.
8. There are fees associated with bankruptcy
You must pay court costs and legal fees associated with your case. This is one reason to consider bankruptcy before your finances are out of control.
Consider your options
Bankruptcy might be right for you, but it’s important to review and understand the facts about this legal process and how it may or may not resolve your financial concerns. Take your time, and do it right.