Many people who struggle with debt petition for bankruptcy each year. This provides the opportunity to start fresh and move on to a future that isn’t filled with the stress of unmanageable financial obligations. However, bankruptcy shouldn’t be taken lightly, and before deciding if it’s the right solution for your situation, you must understand exactly how it works. To clear up any confusion you may have, here are the answers to some of the most common questions people have about filing bankruptcy.

What to Know Before Starting the Bankruptcy Process

What are my bankruptcy options?

There are two types of personal bankruptcies that individuals may file: Chapter 7 and Chapter 13.

Chapter 7 is referred to as “liquidation” or “straight” bankruptcy. While it can discharge all your unsecured debts, it might require selling your property to pay back a portion of what you owe creditors. Additionally, you’re only eligible to file Chapter 7 if you pass a means test that shows you make insufficient income to take care of your financial obligations. Chapter 13 is known as “debt adjustment,” and it requires the debt to be paid off eventually. Individuals filing for Chapter 13 bankruptcy must have a steady income, and they must be able to make payments on their debt according to a court-approved payment schedule that lasts three to five years.

Will I lose all my assets from filing bankruptcy?

Every state has a list of asset exemptions that are protected from creditors in a Chapter 7 bankruptcy. In New York, you’re allowed to keep the items you need to maintain a household and job, including up to $82,775 in home equity value, up to $4,425 for a motor vehicle, and $11,025 for household goods and clothing. In many cases, debtors don’t end up losing much, if anything. Chapter 13 bankruptcies don’t require the liquidation of assets.

Does bankruptcy eliminate all types of debt?

Bankruptcy will only get rid of unsecured debts, such as medical expenses, personal loans, and credit card bills. In some cases, it’s possible to eliminate student loan debt if undue hardship can be proven. Other types of secured debt that bankruptcy won’t help with include child support, alimony, taxes, mortgage loans, and court-ordered judgments.

Will bankruptcy ruin my credit forever?

Typically, a bankruptcy will show up in your credit history for 7 to 10 years, which can make it difficult to receive approval for new lines of credit. However, it’s possible to recover from bankruptcy quickly when you take the right steps. Pay all your bills on time, and consider opening a secured credit card to start reestablishing yourself as a responsible borrower.

Get help determining if bankruptcy is the right step for you by contacting Upstate Legal Center of John V. Shepard. Based in Rochester, NY, they’re proud to offer sound legal advice and effective representation to residents throughout Monroe County. With more than three decades of experience, they’ll provide the support and guidance you need to navigate the bankruptcy process smoothly and successfully. To begin discussing your debt relief goals, call (585) 429-5422 and schedule a consultation. You can also visit the website for more information.