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Bankruptcy for Dummies

Bankruptcy. Whether or not we realize it, we hear about it a lot in our daily lives. Many once successful companies have declared bankruptcy amid financial troubles, and you may know someone who chose to go through the process themselves.

Many of us hear the term bankruptcy, but very few of us actually understand what the term means and what it involves. This could hurt us in the future if we decide to declare bankruptcy or one of our loved ones has elected to initiate the process. Keep reading to learn more!

Well, what is bankruptcy?

Bankruptcy is first and foremost, a legal process. Individuals file for bankruptcy when they are unable to pay back their debts to their creditors. The bankruptcy process is initiated by the person owing the debt through a court order. If you or someone you know is interested in filing for bankruptcy, you should reach out to a bankruptcy lawyer like the Central Texas Bankruptcy Attorney as soon as possible.

What do I lose?

You’re probably concerned about what you will lose if you choose to file for bankruptcy. The good news is that you do not lose everything if you elect to go through the bankruptcy process. You are legally permitted to protect your exempt property. This can range from anything from your house to your vehicles to your retirement accounts. Please be rest assured that filing for bankruptcy does not mean that you will lose everything. Don’t let that fear stop you from making the best decision both for you and your family.

Does it affect my future?

Not necessarily. Many individuals are able to get new credit cards and even purchase a new home or vehicle after filing for bankruptcy. In fact, some individuals have been able to do so during the bankruptcy process. You will not be unable to live a normal life after filing for bankruptcy. As you may know, bankruptcy remains on your credit report for 10 years.

It is also important to note that bankruptcy does not totally ruin your credit score. The best way to keep your credit score within a healthy range is to make smart financial decisions once you complete the bankruptcy process.

How Long Does the Process Last?

How long your bankruptcy lasts depends on a variety of factors. First, bankruptcy processes vary from state to state — so make sure to speak to your attorney about the laws in your state. The length of your bankruptcy process also depends on what type of bankruptcy you choose to file.

There are two main types of bankruptcy: Chapter 7 and Chapter 13 bankruptcy. Within Chapter 7 bankruptcy, your assets are completely liquidated and your trustee sells them to your creditors. In Chapter 13 bankruptcy, you create a payment plan to pay back your creditors over an agreed-upon length of time.

Again, my biggest piece of advice is to speak to an attorney about your own unique situation. They will be able to answer all of your questions and give you the best advice possible.