When making the really tough financial decisions, there are 5 questions to ask a bankruptcy lawyer. The decision to file bankruptcy will affect your credit for the next two to five years. The more information you can learn about your choices, the better.
- The first question you should ask the bankruptcy lawyer is what type of bankruptcy is right for you. There are two basic types of bankruptcy. Chapter 7 is a total liquidation bankruptcy. Assets over the allowed amount will be sold to pay off the debt. In Chapter 13 bankruptcy, the debts are reorganized in a fashion that allows for repayment of the debt. Payments are made to a trustee, who them forwards the money to the creditors.
- Ask the bankruptcy lawyer what kind of debt is covered under the bankruptcy. For instance, past due child support or taxes are not covered under Chapter 7, but could be included in the repayment of creditors under Chapter 13.
- What happens to your secured debt is another question you should ask the bankruptcy lawyer. Generally, any secured debt has the right to be collected on by the creditor. For example, if you have a car loan, that loan is secured by the car. If you stop making payments or file bankruptcy on the loan, the creditor will repossess the car.
- You should also ask your bankruptcy lawyer what happens at the meeting of the creditors. This is also called the 341 meeting. At the meeting a trustee goes over all the information you provided to ensure it is true and correct. Your creditors may appear to negotiate new terms for your debt.
- Finally, ask your bankruptcy lawyer what happens after the bankruptcy is discharged. The lawyer should explain your rights to you and what creditors can and cannot do. Your lawyer may also explain how to start rebuilding your credit or guidelines to help raise your credit score.
Filing bankruptcy is not a decision that should be made lightly. It will affect your ability to obtain credit for a few years. Credit may be available to you right away, but the interest rates will be considerably higher.