Filing for bankruptcy is a serious financial decision that must be carefully weighed. When you consider taking this step, there are numerous things that you need to think about.
One of the primary considerations is which type of bankruptcy you are going to file. As an individual, you will likely file either Chapter 7 or Chapter 13. The differences between these are considerable. You won’t have to make regular payments to the trustee if you file Chapter 7 like you will if you file Chapter 13.
Another difference is that there are exempt assets that you won’t have to hand over to the bankruptcy court. The assets that aren’t exempt will be liquidated to help pay off the debts that are included in the case.
Income and asset limitations apply to people filing for Chapter 7 bankruptcy. Conversely, if your assets are too low and your debts are too high, you might not qualify for a Chapter 13 because you wouldn’t be able to repay your portion to the trustee while still keeping up with your monthly living expenses.
You need to think about the fate of any co-signers on the accounts you are trying to have discharged. Just because you are being relieved of the debts doesn’t mean that co-signers are also off the hook unless they are part of the bankruptcy case, too.
In all bankruptcy cases, you have to be prepared to handle the counseling and other requirements set forth by the law. This can help you to learn how to use money and credit wisely in the future.