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gold dollarBankruptcy Questions ... And Some Answers

You may want a few bankruptcy questions answered before filing for bankruptcy. Have you already been advised that this is the best course of action for you, your business, or your family?

To make a more informed decision, and know what to expect if you have already filed, we've tried to answer and deal with some of the bankruptcy questions you may have.

First, you need to understand exactly what bankruptcy is. The procedure is not simply selling everything you have, or having your wages garnished. When filing bankruptcy, you are working out a detailed plan with your creditors - the people and companies that lent you money. The plan may include a repayment of the debt that you owe, or it may include having your debt discharged.

You can do this by filing for:

Chapter 7 bankruptcy, where you sell the non-exempt items that you own in order to have money to pay your creditors.

Chapter 11 bankruptcy, which means you will have to own a business, and can use the business as collateral to reduce your debt.

Chapter 13 bankruptcy, which requires you to receive regular income so that you can have your wages garnished to begin repaying debtors on a regular basis.

Bankruptcy Questions #1: What is the difference between secured and unsecured debt?

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If you have secured credit cards or loans and are filing for bankruptcy, the institution or credit card companies responsible for issuing the loan or credit card can revoke their property during the bankruptcy process.

What Does That Mean?

So, if you have purchased a home or car with a secured loan, you will need to work out a payment plan with the creditor that issued the loan, so that you can either sell the property in order to repay your debt, or pay the debt in regular increments for a set period of time.

Bankruptcy Questions #2: Who can file bankruptcy?

With a few exceptions, just about anyone who has significant debt can file for bankruptcy. However, this decision could affect your ability to obtain credit from various sources in the future, so keep this in mind when filing.

Certain home loan and credit card companies do not offer lines of credit to those that have filed for bankruptcy in the past, or to those who have filed more than once. However, there are companies who are willing to make exceptions, but you must adhere to the conditions of your bankruptcy, and be able to demonstrate responsible spending habits after you have filed.

You don't have to have a specific amount of debt in order to file for bankruptcy, but, if you know that your finances are only temporarily low, it may be better to make arrangements with individual creditors to pay off your debts rather than filing for bankruptcy.

Note: Filing for bankruptcy may NOT relieve you of your obligation to repay your mortgage. If your home is in foreclosure it may still proceed and your credit score may be damaged for the rest of your life. Speak to your Lender or an attorney about a loan modification. You may be able to avoid bankruptcy completely.

If you have more bankruptcy questions, you can always contact Lexington Law Firm for answers.


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