There are basically two types of bankruptcy that one can file-chapter 7 and chapter 13.It is very important to understand the after effects of bankruptcy before one files it. This means that one has to qualify for in order to file a chapter 7 bankruptcy, because this requires liquidation of debts. This is done mainly to avoid any type of fraud and abuse and another most important thing is that there should be a bank attorney to fix out things in the right way. Following are certain points which are required to be kept in mind before filing bankruptcy:
Eligibility: One has to pass through different tests to qualify for the bankruptcy program that has been discussed earlier .There is a lot of calculation to be done as the state laws apply differently for the different states.
Whether or not bankruptcy had been filed before: It is very important to find out whether bankruptcy had been filed before or not, because once chapter 7 bankruptcy had been filled, one cannot file another bankruptcy for the next 8 years, there can be a conversion to chapter 13 bankruptcy, and then to chapter 7 but there also the eligibility factor applies. It is therefore important to note that it would lower the credit score because; both the chapter 7 and chapter 13 bankruptcy will appear on the credit report.
Non dis chargeable debts: There are apparently 2 types of debts, obligatory or non dis chargeable debts and the dis chargeable debts. Obligatory or non dis chargeable debts include child support, alimony, income tax and student loan. It is useless to file a chapter 7 bankruptcy as with these kinds of debts, as these debts will remain as usual even after discharge.
Non Exempt Property: There are two types of property, mainly exempt and non-exempt. In chapter 7 bankruptcy the non-exempt property is at risk of liquidation. So, it is important to evaluate as to how much of the property is at risk, before filing for bankruptcy.
Take care of your co-signers: One should take care of their co-signers or the people who are held liable for the debts, because although some of the debts will be discharged the co-signers will still be held responsible. It is a fresh start for the individual, but the co-signers will still be held liable for the debts.
Although bankruptcy does solve a lot of problem for people in distress, still one should know how to take care of the things that should have been taken care of before filing bankruptcy. It might be advantageous for one but non advantageous for the others, so we should always try to find the alternative to bankruptcy.