What Bankruptcy Options Do You Have?

Making a Hard Credit Decision

 Bankruptcy Options.

There comes a point in time where everyone suffering from poor credit decisions or financial catastrophe considers the possibility of filing for bankruptcy. Often this consideration is accompanied by feelings of guilt, remorse, self pity, and shamefulness.



Bankruptcy is a serious move which should be carefully thought out before a commitment is made. It is not something to be entered into lightly, or something that offers a quick fix for credit problems.

It is a decision that will remain with you for at least 10 years, and quite possibly, for the rest of your life.

Making the decision to not follow through on your commitments is not an easy thing for any stay at home mom to do.

What are you teaching your children?

Understandably, most children will never know that their parents have decided to file for bankruptcy, but it is something, as a mother, that you know.

It may feel hypocritical to be teaching your children honesty and commitment while you know that you did not follow the same advice.

But there are situations where bankruptcy options are the only options left. Sometimes this happens due to overwhelming medical bills, sometimes it is because of a job loss and subsequent period of unemployment. Sometimes bankruptcy is filed simply because of a long series of very poor decisions.

If you find yourself at a place in your life where bankruptcy options are your only recourse, then get the facts about bankruptcy, and do it right. Forgive yourself for any wrongdoing that got you to this point, and resolve to correct the problems that forced you to face this situation in the first place.

After declaring bankruptcy, most people feel a great feeling of relief. There is no more worry about bill collectors and collection agencies calling. There is no fear that you will receive a knock on your door from a collector, or stress about whom to pay this month. The debts go away, and you are left to pick up the pieces and start again fresh.

Facts About Bankruptcy

Before deciding if bankruptcy options are right for you, double check first with a consumer credit counseling service. There may be better options for your particular situation that will not be as severe.

Then go to this website to check the bankruptcy laws in your state. Total Bankruptcy

Each state is different, and will require different action from you.

The following are some bankruptcy myths exposed:

Myth: You Can File Bankruptcy As Many Times As You Want
This is completely untrue. Bankruptcy is intended as a one time deal, not as something you can do whenever you feel like it. Each state varies as to how many times a person is able to declare bankruptcy, but it is generally low, 2-3 times per lifetime, and there is a mandatory waiting period between filings of several years.


Myth: If You File Bankruptcy on Your Car Loan, You Can Keep the Car
That would be nice, but no, if you owe money on your car, and file bankruptcy, the car will be repossessed unless you make arrangements with your loan company to keep it and keep making payments. This goes for any secured debt: cars, houses, boats, etc.


Myth: Your Credit Will Improve If You File Bankruptcy
This is a hard one. Sometimes, a person's credit will improve when filing for bankruptcy, other times, it will plummet further still. It's hard to say as each individual case will differ.

Bankruptcy will stay on your credit report for 10 years, as opposed to 7 years for bad debts. It will be difficult to obtain any sort of loan or financing for quite some time, and other ****poor credit pitfalls**** may plague you.

But lenders have a tendency to favor those with a bankruptcy over those with very poor credit due to the fact that someone who has declared bankruptcy is unable to do so again for quite some time.

Another thing to keep in mind, attempts to refinance a home after a bankruptcy are not necessarily doomed. If you can show a solid year or two of steady income and a pattern of paying all bills on time, you may be able to do some post bankruptcy refinancing of your home.



Since you cannot file bankruptcy again for at several years, some banks may be willing to consider post bankruptcy refinancing if you have proven yourself responsible.

The Two Types of Bankruptcy

Once the decision to declare bankruptcy has been made, you now need to decide which kind of bankruptcy options you will file.

Keep in mind that debts like student loans, child support and taxes will not be dismissed in either case.


Chapter 13 Bankruptcy

Chapter 13 bankruptcy requires a household income and a  strict budgeting plan, and is administered by a trustee to arrange a gradual repayment of outstanding debts at a set rate for a specific period of time. At the end of the repayment plan, the remaining debt will be discharged.

Basically, what this means, is that all your current debts will be lumped together by the courts, and you will continue to make payments on them. These payments will be drastically lower than what you were making, and the companies you owe money to will not receive 100% of what you owe them in the end.

Your wages will be garnished and payments will be made to a trustee, who will distribute them for you. This will last 3-5 years. After that time, your bankruptcy will be discharged (but will remain on your credit report) and you can get on with your life.

This form of bankruptcy allows you to keep everything you “own” and is looked upon better by credit agencies when viewed on your report. (Though it is still bankruptcy, and is not by any means looked upon favorably.)


Chapter 7 Bankruptcy

Chapter 7 bankruptcy allows for a complete discharge of most debts, but all assets will be liquidated and sold to settle as much debt as possible. Also liens may survive the bankruptcy, so make sure your house will be exempted, or decide if you are willing to let it go before filing Chapter 7.

You will be asked to list all assets that you possess, from your engagement ring to your furniture, to your coffee machine to your kids coin collection. Each state provides some sort of exemption for personal property; they aren't going to come in and hold a garage sale in your house and take everything you own.

In fact, if you have little possessions to your name to begin with, chances are you will not have to give up anything. But if grandma left you her $50,000 diamond watch, then you'll need to sell it to pay off your debts. And it is illegal to give that watch to another family member to protect it.

This type of filing allows you to become immediately free of your debts, without having to repay them at all (except child support, taxes, and student loans).

For those forced into bankruptcy options, whether from unfortunate financial choices, complications arising from divorce or overwhelming medical bills, the key to getting past such an event is self forgiveness.

Acknowledge your mistakes, make a fresh start and rebuild your credit from scratch, avoiding the behavior that hurt you in the past. Make a ten year plan, so that by the time the bankruptcy can be removed from your record you will be in good standing once again.


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