Top 3 Facts You Need to Know About U.S. Bankruptcy Code

Bankruptcy is More Common in the USA After Pandemic

Bankruptcy laws are designed to help people who can no longer pay their loans. Bankruptcy is a viable option if your loans become unmanageable. In 2013, there were an estimated 1,071,932 bankruptcy filings in the United States and that number is expected to skyrocket in part due to the mandatory shutdown of non-essential small business throughout the United States caused by the Pandemic that traveled around the globe from China starting in 2019. 

One: Understand Chapter 7 Vs. Chapter 13

Chapter 7 also known as, “liquidation” or “straight bankruptcy”, is the most common type of bankruptcy. It is normally designed for individuals and doesn’t wipe out all your debt. If you earn too much money, you may not be allowed to file for Chapter 7, which means you will most likely be required to file for Chapter 13 instead and according to the professionals at Belsky, Weinberg & Horowitz, LLC – Baltimore Bankruptcy Lawyers, if you do decide to file for Chapter 13, the amount of money you make in income will surely have a big impact on the way your debt is restructured. Chapter 13 allows individuals to reorganize their debt and make payments to their creditors over an extended period of time and the debtor’s assets are not liquidated. Any additional debt owed after the required payment period is often discharged.

Two: Filing for Bankruptcy is Not Free

You will be required to pay court costs and other fees at minimum but without a doubt the largest cost of filing for bankruptcy will be hiring a lawyer, which is highly recommended, though not required by law. Since most lawyer’s bill by the hour, if your particular case is complex, your overall costs are likely to add up quickly. Since the process is stretched out over the course of several years, the cost for filing Chapter 13 bankruptcy is usually quite a bit higher than the cost of filing for Chapter 7 bankruptcy.

Three: The Long-Term, Non-Monetary Costs of Bankruptcy.

Keep in mind that bankruptcy records are public when you make the decision to file and that your credit score will most likely decrease tremendously. It will also no doubt affect your ability to obtain loans or gain access to credit for up to a decade. This is something to consider if you plan to do something like purchase a home, start a business or finance educational costs within the next 10 years. 

For the most part, bankruptcy laws are uniform throughout the United States however, it is a complex process so you would be well advised to consult with a bankruptcy attorney and hire legal counsel to assist you with the filing. Your bankruptcy lawyer can help alleviate stress by guiding you through the entire process and its aftermath. In the end, the most essential thing to remember about filing for bankruptcy is that it doesn’t wipe your slate clean, it merely gives you a chance to restructure your debt.

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