Griffin Knights Realty Corp

Bankruptcy Basics

Filing bankruptcy is a very serious matter, and you should consider your options in comparison to your financial future. Bankruptcy will be listed on your credit reports for 10 years; it may affect your ability to get credit or loans.


Also, certain debts can not be erased under any bankruptcy filing, including alimony, child support, property settlements, criminal judgments and fines, student loans, and most taxes. A bankruptcy filing will not allow you to keep property that secures a loan, such as an automobile or home, unless you repay the loan.

Before you consider Bankruptcy keep the following list in mind:

Calculate the amount of all your debts.

Write down the interest rate you currently pay on each of your debts.

Begin reviewing your household budget with the intention of freeing up additional money for debt repayment.

Review copies of your current credit reports to learn what, if any, damage your debt has already caused to your financial reputation.

Consider the potential drawbacks of filing for bankruptcy, including the difficulty of getting affordable credit in the future.

The most relevant bankruptcy filings are Chapter 7 and Chapter 13.

Chapter 7 is what people have in mind when they consider bankruptcy. It is liquidation bankruptcy and results in a discharge of debt so that the filer no longer is liable for repayment. The homeowner's property is "liquidated" and then sold, to pay off as much of his or her unsecured debt as possible. Debts that remain after the liquidation generally are discharged. The entire filing and liquidation process generally takes about three to six months.


Chapter 7 is very popular because it does not require that you repay debt. For this reason, however, there are eligibility requirements that many people do not meet. If it is judged that your income is high enough such that you can make some payments, you may not be able to file for Chapter 7.

Chapter 13 is an alternative for you if you do not qualify for Chapter 7. It is a form of reorganization in which you follow a payment plan with your creditors under the discretion of a bankruptcy court. Depending on your circumstances and your debts, you will pay in full, partially pay, or not pay at all any given number of your individual debts. Any debts that are not paid through the plan most likely will be discharged.

In order to file Chapter 13, you must first seek credit counseling from an approved organization. Upon completion, you will be given certification to file with a bankruptcy court to begin your case. The entire process generally takes about three to five years.

Though the stigma surrounding bankruptcy has lifted, it should still be seen as a last resort after all other methods of settling debt have been exhausted. The thought of your debt being erased may be attractive, but the financial hardships bankruptcy can create far outweigh any benefits.