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Should I file Bankruptcy? Well, some asks this question because they might think they are not liquid anymore. What is Bankruptcy anyway? Bankruptcy is a legal status or by other entity that cannot repay the debts it owes to creditors. It is most imposed by a court order, often initiated by the debtor. It is a system of federal laws that allows individuals and businesses to get relief from debts so they can make a fresh financial start. It was created to help an honest, but unfortunate, debtor forge a new future without pressure from creditors trying to collect pre-existing debts. However, a person cannot file bankruptcy right away.

There are two types of consumer bankruptcy. One is the Chapter 7 that is very known and available to consumers and businesses. That is also called straight bankruptcy. The other one is the Chapter 13 that reorganizes your debt into a manageable debt repayment schedule over three to five years. You’ll “reaffirm,” or repay from 10-100% of what you owe depending on your income, the nature of your debt and how much you owe. Now, what factors to consider before filing for bankruptcy? Let’s discuss each.

First, you have to be sure that you are financially and emotionally willing to part ways with your property. Chapter 7 bankruptcy says that a trustee is appointed by the court to handle your bankruptcy paperwork and oversee the sale of your property. The proceeds from the sale of your property are used to pay off your creditors. In lawsuits, a creditor has lawsuit against you. When you file your bankruptcy petition, an automatic stay goes into place immediately. This prevents creditors from engaging in collection activities during the bankruptcy process. Since, you have engaged into bankruptcy already. It may affect on your credit score. This may be a scar on your credit history. If your credit is in good standing, filing bankruptcy may cause a dramatic decrease in your score and this report stays for seven to ten years badly. You have to be sure before filing. However, it doesn’t mean you just want to file bankruptcy, you can file right away. It is not as simple as that. You have to be eligible to file bankruptcy by measuring your disposable income. Disposable income must be lower than the average disposable income in your given area. Chapter 13 bankruptcies also states that your debt must not exceed a certain dollar amount and you need to have enough disposable income to pay your debts via payment plan over the next three to five years.

Generally, before filing it is good to evaluate options in your case. Beforehand, think the type of debts you have and goals you want to achieve by filing a bankruptcy. It is not easy to lose property and assets but there are pros and cons in filing a bankruptcy. Being patient is a need before deciding. Bankruptcy has multiple effects in your future career, emotional distress and family related decisions. You just have to face it and decide what’s best. Now, if you are being asked. Should you file bankruptcy?[]