Filing bankruptcy is a major decision that requires careful thought and consideration. Before you make that decision, it's in your best interest to be aware of a few things that could impact your financial affairs, both now and in the long-run. Below are three important things to know before filing bankruptcy.

3 Considerations to Make Prior to Filing Bankruptcy

1. You Have Options

There are different types of bankruptcy available to consumers, the two most prominent being Chapter 7 and Chapter 13. With Chapter 7, most unsecured debt is eliminated by the courts. With Chapter 13, your debt is restructured into a payment plan in which you repay what you owe, typically over three to five years. Chapter 7 is better suited to those with limited or no income, while Chapter 13 is ideal for those with some disposable income. Research each option thoroughly, and find the one that works best for your financial situation.

2. Your Credit Will Take an Initial Hit

Yes, it's true that filing bankruptcy will negatively impact your credit score in the short-term. Also, a bankruptcy stays on your credit report for approximately 10 years. But there's good news, too: You can immediately start taking steps to rebuild your credit after filing. Obtaining a credit card with even a small limit, or a secured card in which you prepay funds, are both excellent ways to start repairing your credit after a bankruptcy. Securing a car loan post-bankruptcy will also strengthen your credit significantly.

3. You Must Qualify for Bankruptcy

Not everyone is going to meet the qualifications for bankruptcy. Those who want to file Chapter 7 must first pass a means test, which weighs income level against outstanding debt. Those pursuing Chapter 13 must establish that they have the income and resources to meet their regular budgetary obligations while repaying what they owe. Discuss your circumstances with your bankruptcy lawyer, and you will be sure to find solutions that lead you to a debt-free life.

Brian Kawamoto, Attorney, is a bankruptcy, estate planning, and tax attorney who has been serving the Aiea, HI, area for 25 years. Call (808) 486-6107, visit his firm's website, or connect with them via their Facebook page to schedule a consultation.