• 20
  • August
    2010

In our last post, we provided some answers for a few common questions people have about filing for bankruptcy. Here is a continuation of that post with a few more common questions and some additional information you can use to help determine if bankruptcy is right for you. Of course, if you want to know more, you should contact a bankruptcy attorney to discuss your particular situation.

What happens to my bills and my debts in bankruptcy? Depending on the type of bankruptcy you end up filing, your debts may be discharged, meaning they are forgiven and you don't ever have to worry about them again, or they may be restructured so that you can pay all or part of them, or they may continue to exist. Mostly, this question depends on the types of debts you have.

Generally speaking, "unsecured debts" can be discharged in a Chapter 7 bankruptcy. These debts include things such as credit card debts, medical bills, and other debts in collection. On the other hand, "secured debts," such as a mortgage or car loan, still exist after bankruptcy; however, bankruptcy may be used to help you catch up on those payments. Some other debts, including most student loans, recent tax liens, and child support, are not almost never going to be discharged in bankruptcy.

What is the downside of bankruptcy? While bankruptcy can be a great tool to help you get your life back on track, there are some consequences you will have to accept. However, you should know that if you are truly in need of bankruptcy protection, some of these decisions might have already been made for you.

Depending on what type of bankruptcy you file, you may have to sell or liquidate some of your assets and your credit report will have a bankruptcy notation on it for at least 10 years. While those things certainly sound negative, keep in mind that in bankruptcy you are allowed to exempt many of your possessions from liquidation. For many people, their financial problems have left them with few assets to liquidate, so that isn't really a problem for them.

As far as the effects on your credit, for many people, bankruptcy does not affect them that much because their credit is already badly damaged. In the end, bankruptcy may help them get on track toward rebuilding their credit rather than being a drag on their credit.

In our next post, we will wrap up with a few more common questions you may have about determining if bankruptcy is the path you want to follow.

Related Resources: Is bankruptcy right for you?