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How a bankruptcy proceeds

People in Kentucky who are struggling with debt may file for Chapter 7 or Chapter 13 bankruptcy based on their income. With Chapter 7, a person's assets are liquidated to pay off creditors although some assets may be considered exempt. With Chapter 13, a person may pay off creditors with a payment plan that last for three or five years.

People may be concerned about how bankruptcy will affect their credit record, but if a person's credit is already poor because of unpaid debt, it may not have a significantly more negative effect. Furthermore, a Chapter 7 bankruptcy only stays on the credit report for 10 years while a Chapter 13 stays for seven years. There are certain debts, such as taxes and child support, that cannot be discharged in bankruptcy. Student loan debts usually cannot be discharged either. There is an exception for loans that cause extreme hardship, but this is rarely granted.

People must undergo credit counseling before they are permitted to file for bankruptcy, and this might help a person avoid filing. A person who does decide to file for bankruptcy may want to work with an attorney because bankruptcy paperwork is complex, and any errors could delay the case.

Filing for bankruptcy may provide a fresh start financially. It also puts an immediate stop to creditor harassment and other actions such as foreclosures and legal action. This might help take a lot of stress off a person who has been struggling financially because of divorce, job loss, medical issues or other reasons. People who file for bankruptcy might also want to begin thinking about how they will rebuild their credit afterward. For example, there are secured credit cards to help with this. Simply paying bills on time is another way to rebuild credit.

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