What you need to understand is the need to file bankruptcy is a bad thing. Filing for bankruptcy hurts your credit and so it should be avoided at the most. If you are in debt, it does not necessarily mean that you will have to file for bankruptcy. There are various chapters under which you can file bankruptcy like Chapter 7 and Chapter 13. These are the two options under which individuals can file bankruptcy. But, you will have to first decide if you have enough debt to at all file for bankruptcy. Can take help of these calculators : http://www.mortgagefit.com/calculators/
Enough debt to file for bankruptcy
There are many people who opt to file under Chapter 7. But, in this type of bankruptcy, it is really important or you to find out if you have enough debt to file bankruptcy. You will also have to pass a means test in order to be eligible to file this bankruptcy. In the means test, it is seen whether or not your income is higher or lower than the median income of the state you are in. if your income is above the median income or at par with the median income you can file bankruptcy under this chapter.
Other than this, it is important for you to find out whether or not you have enough debt to file bankruptcy because, bankruptcy hurts your credit. It lowers the credit score by 200-350 points. Moreover, once you file bankruptcy. It gets listed on your credit reports and is supposed t stay there for 7-10 years depending on the chapter under which you are going to file bankruptcy. In case of Chapter 13 bankruptcy it is going to stay on your credit report for 7 years while Chapter 7 bankruptcy will stay on your credit reports for 10 years.
This is going to lower your chances of getting any new credit in the form of wither credit cards or mortgages and even personal loans or car loans.<
There are other debt relief options too through which you may be able to pay off your debts other than filing for bankruptcy. You will have to first try out the other debt pay off options and only if any of those options do not work out for you, you can file for bankruptcy.
The other debt relief options being the repayment plan, debt settlement and debt consolidation and debt management. In case of the repayment pan, your payment plan is revised and modified by the creditor. This eases your payment mode. In case of debt settlement, your outstanding debt amount gets lowered. This helps you to become debt free easily as you can go on making the payments as it gets lowered through settlement. Debt consolidation lowers the interest rate on your debts.
Moreover, if you file bankruptcy, you may even have to lose your assets and property. Thus, it is important for you to know if you have enough debts to file bankruptcy.
Samantha Taylor is one of the Community Mentors of the MortgageFit forum. She has been contributing ideas to the Community since the year 2005. She has also been making notable contributions through articles written on the mortgage industry and bankruptcy. Some of her popular articles are ‘Mortgage that you can afford’, How much mortgage can I borrow?’ and so on.
