When you’re struggling financially, you might have someone recommend bankruptcy. Perhaps you see it as a negative option so you’ve never considered it. In some situations, it’s the best option, so you might want to speak with a lawyer to get your questions answered. The following are some common questions to get you started.
What Is Bankruptcy?
Bankruptcy is a process that allows debtors to walk away from certain debts so they can begin anew. In the case an individual honestly can’t pay a creditor back, that individual goes through the bankruptcy process to obtain a more clear and secure future. There are several laws and procedures surrounding bankruptcy to ensure everything has been tried before the creditors are put in this situation.
Are There Different Types of Bankruptcy?
There are a handful of different types of bankruptcy, though the most common are Chapter 7 and Chapter 13. There is also Chapter 9, Chapter 11, Chapter 12 and Chapter 15. The type of bankruptcy you file will depend on a variety of factors including whether it is personal, for your business, what type of debt you have, and how likely it is that you could pay some of it back.
Can You Keep Any Credit Cards?
When you file for bankruptcy, you have to report all of your debts. Most creditors will immediately cancel your card upon receiving notification that you are filing for bankruptcy. In rare situations, the card will just be suspended until the case is complete, after which the creditor will determine what to do next.
If you have a business credit card that is not tied to your personal finances, you might be able to keep it. For example, if you are an authorized user on a corporate card that is billed to your employer, you would most likely be able to keep using that card. If you are an obligor on that particular account and you are responsible for keeping it balanced, chances are the creditor will close that account as well.
What Happens After Bankruptcy?
When your bankruptcy case is complete, you can actually get a new credit card. The creditor might have a lower limit on your card, but you can typically get one because you’re starting fresh. Creditors understand that many who file for bankruptcy have made significant changes in their spending habits and will be more likely to stay current. If not, you can’t file for Chapter 7 again until eight years have gone by, and credit card companies know that.
Bankruptcy can be hard to face, but with the right professionals on your side, you can get through it. Contact a bankruptcy lawyer, similar to a lawyer for how bankruptcy affects tax debts from The Law Offices of Marty D. Martin, to have your questions answered today.