When debt is overwhelming, and you see no reasonable way to get a handle on it, bankruptcy is usually a good option. However, you must have the right information to ensure your filing is a success.
According to Kiplinger, there are some key bankruptcy facts that every person should know. Keeping the following points in mind will help you navigate the process efficiently.
Exercise caution with spending before you file
The court will typically look at the 70-90 day period prior to filing to look for abnormal spending habits. If you make lots of purchases on credit cards or withdraw funds from a retirement account, the court might find fault with your actions. They may choose to undo transactions or require you to pay back credit card debt. These actions are often considered fraudulent, which can jeopardize your filing.
Bankruptcy cannot eliminate all debt
Certain types of debt are not usually included in bankruptcy filings. This includes parental obligations, like child support. You will also need to pay back the taxes you owe. In many cases, student loan debt is also left out of filings. Unsecured debt, which can include credits cards or medical bills, is usually eligible for discharge.
Chapter 13 can help you hold onto a property
You can usually retain your primary home and vehicle with chapter 7. However, non-exempt property, such as a second vehicle, is usually up for grabs to pay back creditors. With chapter 13, you can retain all or most of your property. That is because chapter 13 is a debt reorganization plan, which helps you pay back money owed to creditors over a certain period.
When you have accurate information about bankruptcy, you can make an informed decision. You can also approach the next stage in your financial future with a clean slate.