Theres aparticular scenefrom The Office that I love.
Michael Scott, regional manager for paper company Dunder Mifflin, is having some money troubles.
On the advice of a colleague, he walks into the office and yells: I.
Assuming this has done the trick, Michael begins cutting up all of his credit cards.
Not so fast.Declaring bankruptcyisnt quite that easy.
Heres a quick primer on what happens when you file for bankruptcy.
What is Bankruptcy?
Bankruptcy is a legal process that allows consumers to eliminate orrepay some of their debts.
Probably not as good as youd like.
It always seems like an uphill battle to build (and keep) a decent amount in savings.
But what if your car breaks down, or you have a sudden medical bill?
For individuals, there are two types of bankruptcy under the law:Chapter 7andChapter 13.
Chapter 7 is the most common key in of bankruptcy.
Last year,the U.S. Courts recorded 519,130 Chapter 7 filingsand 299,515 Chapter 13 filings.
Did you know?
After you file, a bankruptcy trustee may sell some of your assets to repay your creditors.
There are no debt limits for Chapter 7 bankruptcy.
Why Would You File for Bankruptcy?
The most common types are credit card and medical debt.
For example: Eviction, foreclosure, wage or bank account garnishment.
Youre typically considered judgment proof if your main source of income is some form of public assistance.
People who file bankruptcy are people who have some income that might be in danger.
Their wages are being garnished, they have a bank account, they have a house.
What Happens When You File for Bankruptcy?
With each punch in of bankruptcy, youre required tofile a petitionwith thefederal bankruptcy courtin your district.
Many people consult abankruptcy attorneybefore filing and work with one throughout the legal process.
Youll pay a handful ofadministrative and filing feesfor your case.
Expect to fork over roughly $300 to file bankruptcy.
Thecourt will appoint an impartial trusteeto administer your case.
An automatic stay goes into effect, which prevents creditors from trying to collect the money you owe them.
You may, however, need to attend ameeting of the creditors.
What Will Bankruptcy Do to My Credit Score?
Yes, bankruptcy cansignificantly lower your credit score.
But not all financial experts are convinced that bankruptcy is the worst thing you could do for your credit.
Bankruptcy may be the first step to help you rebuild your life and your credit.
Your Turn: Have you considered bankruptcy?
Find her on Twitter: @sarahkuta.
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Balance Transfer = Credit Card Cheat Code
