What Does Bankruptcy Actually Mean? 5 Common Questions People Have

Bankruptcy is often necessary in cases where debt is absolutely overwhelming to a person. If there is no logical way that a person can pay off their debt within their lifetime or over the course of many years, bankruptcy is probably the best route. Bankruptcy is a bit stigmatized, but that doesn’t mean that it can’t be the best decision you ever made. These are five questions that people often ask about bankruptcy.

What is Bankruptcy

The most common types of bankruptcy are Chapter 7 and 13 bankruptcy, and they differ greatly. Chapter 7 bankruptcy essentially entails that most debts are wiped clean from a person’s slate. However, he/she must forfeit possessions that are not exempt to collection in order to pay off creditors. Chapter 13 bankruptcy works differently in that a person files for a repayment plan where he/she slowly repays debt over a 3-5 year period. Additionally, they get to keep their possessions.

Is My Spouse Also Essentially Filing for Bankruptcy?

Marriage is not a factor when it comes to bankruptcy. This means that if one spouse has to file for debts of their own, the other spouse is not required by law to be a part of it. However, both spouses might want to file for bankruptcy if they both played parts in the debt.

How Long Does Bankruptcy Stay with Me?

Chapter 7 bankruptcy remains on a credit report for 10 years. However, a chapter 13 bankruptcy stays with a person for 10 person. This is why it’s a good idea to consider whether or not bankruptcy is the right solution for the situation at hand.

How Often Can I File?

Chapter 7 entails that a person cannot file for bankruptcy a second time until 8 years have passed from the date of the first filing. Chapter 13 states that 6 years must pass before it can be filed for again. Sometimes, exceptions can be made for chapter 13. For example, if you made a diligent effort to repay your debtors after filing for chapter 13 bankruptcy and the majority of your income went to your debt, you then might be considered for a quicker second file.

Is Bankruptcy Different in Varying States?

Lastly, bankruptcy does not differ across states. Because bankruptcy laws are federal legislation, they are essentially the same across the board. While one court might interpret a bankruptcy law in a different manner from another court, this does not change that the law is still the same in both cases.

This can be a very complicated process, so after answering these and possibly several other questions, you might want to consider consulting a professional like Exelby & Partners Ltd. These guys specialize in bankruptcy in alberta but might be able to help direct you as to who you would need to talk to locally so that you make the best choices possible when going through something like this.