Budgeting – Getting Started

As with all financial decisions the first step should always be to educate yourself about your options.  If you are thinking about bankruptcy your first steps should be to learn about what options are available and what the impact of your decisions will be.   Bankruptcy and have a long term effect on your financial situation and should not be something you rush into.   Here are some basic answers to questions you may have about bankruptcy. 
1. If I file for bankruptcy will my creditors stop calling me?

Yes.   Creditors are required by law to stop calling you once you have filed for bankruptcy. 

2.  Who will know that I filed for bankruptcy?
A chapter 7 bankruptcy is a public record so anyone that wanted to could find the information.   However, most people you interact with will not know that you filed.   The chapter 7 filing will appear on your credit record and will remain there for 10 years.  This means that ANY time in the ten years after you have filed bankruptcy that you apply for something requiring a credit check it will show you filed for bankruptcy.  This can have a serious impact on your ability to rent an apartment, get financing for a car or home or get a credit card.

3. What is Chapter 7 bankruptcy?  How about Chapter 13?

Chapter 7 bankruptcy is the most popular form of bankruptcy filing.  Chapter 7 is typically for someone that has high credit card debt and doesn’t own many assets of value (e.g. home, car).  In most cases a chapter 7 filing eliminates all outstanding debts.

A Chapter 13 bankruptcy is different from a Chapter 7 because it usually requires the filer to pay back the debts.   Typically you propose a 3-5 year repayment plan when filing your chapter 13.  This repayment plan would pay off all or most of the debt by "docking your pay" or taking a portion of your future income to pay the debt.  To file this you must have a regular source of income and you must be making more than you are spending. 

NOTE:  There are currently attempts to pass laws to make it difficult for individuals to file for Chapter 7 bankruptcy.   The credit card companies are trying to get these laws passed so that no one can wipe out their debts.

4.  Will I ever be able to get credit again?
Filing for bankruptcy makes it difficult to get credit.   However, if you begin to build a good credit history after filing you should be able to get credit at some point.  

5.  What Does It Cost?
It costs $200 to file for bankruptcy and also can cost up to $2,000 in lawyers fees.   Some lawyers will give a free consultation.  But filing for bankruptcy is going to cost you money.