For some people, filing for bankruptcy can help control debt and stop harassing creditors. For some, it is a fresh start in their credit and finances. However, it may not be the first step you should consider taking in the handling of your out of control finances. Many people don’t fully understand the advantages and disadvantages of filing for bankruptcy. However, more than 2 million Americans filed for bankruptcy in 2012, according to the New York Post. There are some important things that you should know before you file for bankruptcy. Considering these additional notes may help you make a better decision involving your filing. Here are three facts you need to know before filing bankruptcy.
1. Read and Read Again
There is a mound of paperwork involved in filing for bankruptcy. Make sure to read everything thoroughly. The notion is filing for bankruptcy will eliminate all of your debt. That is definitely not true. All of your debts will not be erased or discharged in a bankruptcy case. Tax debts and student loan debts usually remain after filing for bankruptcy. So if you are going to file for bankruptcy, plan ahead, write down all of your debts, and try to pay off any of the non-dischargeable debts before filing. You can also call the creditor to set up payment arrangements.
You will already have to make a complete list of all your assets and debts to add to your case file. Sometimes creating this helps you see the scope of the financial burden. Whether you realize that things aren’t as bad as they seem or you see that that you financial distress is worse than you thought, taking this first step is necessary for you to make your decision about bankruptcy.
2. Watch Your Spending
When filing for bankruptcy it is important to remember not to sell or transfer any property. You need to avoid sending or receiving large amounts of money. According to John E. Dunlap, PC, current bankruptcy law prohibits you from making any large financial transactions in the months prior to filing. This will delay your bankruptcy case and send red flags to the courts. The court may see this as some sort of fraudulent attempt to avoid the consequences of financial responsibility. It may appear as an illegal bankruptcy filing to hide assets from creditors. No matter how great a deal you find, do not buy or sell. It may cause a huge headache later.
3. Dings On Your Credit
There is no way to fully estimate the impact a bankruptcy filing has on your overall credit and fico score. Some say that bankruptcy is one of the worst things you can do to your credit. Filing for bankruptcy will definitely make your scores plummet. According to Forbes magazine, filing for bankruptcy can make your score plummet by at least 200 points. A bankruptcy on your credit report can cause long term damage that will eventually diminish but only after up to 10 years.
At least three years after the date a bankruptcy is first listed on your credit report, its impact starts to slowly diminish. A bankruptcy filing will be considered on your credit report for as long as it appears. The newer the bankruptcy filing the more damaging the impact it has on your credit and fico scores. Its impact on your overall score will lessen over the years. It will eventually, be removed entirely from your credit report. Sometimes but rarely you will have to request that it is removed from your reports. Sometimes it takes up to 12 years for a bankruptcy filing to no longer be a determining factor in your credit and fico scores.
Filing for bankruptcy is a huge and emotional legal process. You may need to seek professional help in determining whether or not to take this step. There are many self-help services that offer bankruptcy forms tailored for your state, but again, a bankruptcy filing can be very complicated and daunting. You may need to consider a lawyer’s help to resolve your bankruptcy case. Check all of your options and research thoroughly before taking this giant leap.