3 Things You Should Know Before You File For Bankruptcy

Posted on: 15 March 2016


No one ever plans on getting into debt. But sometimes life throws you a curveball and you have to do what is necessary to get by. If your financial situation has gotten bad enough that you are considering filing for bankruptcy, there are some things you should be aware of before you file the papers. A good bankruptcy attorney will be able to fill you in on even more details but here are 3 key pieces of information that anyone filing for bankruptcy should keep in mind.

Bankruptcy May Not Discharge All Debts

There are different types of bankruptcies that can be filed and, depending on which type you choose, there may be certain debts that you will still be obligated to pay. For example, if you owe taxes or child support, it is unlikely that these will be discharged. The exact rules vary by state so it's important to have a good bankruptcy lawyer by your side so you can go over the fine print before you show up in court.

Credit Counseling May Be Required

When filing for bankruptcy, you may be legally required to be counseled on your situation by an approved agency before the bankruptcy is allowed to go forward. The U.S. Justice Department's website has a list of approved credit counseling agencies that you can use for this purpose. Showing up in court without having gone to one of these agencies in advance may just delay the proceedings.

Your Co-Signers May Still Be On The Hook

While a bankruptcy can discharge a debt that you owe, you should be aware that if any loved ones or friends co-signed with you on a loan or another financial arrangement, the bankruptcy will not relieve the other person from the obligation. If you are going bankrupt and you know that you are going to file, you should talk to anyone who may have co-signed with you about the situation. You may end up putting some stress on a close relationship but it is better to address this head on than to simply go to court and wait for your loved one to find out after the fact.

Filing for bankruptcy can help you reset your financial life but it doesn't cure everything. Some debts, such as child support, may not be dischargeable. You should explore all other options before filing for bankruptcy and a credit counseling center can help with this. If you have any co-signers on any of your loans, you should be upfront about your intentions as soon as possible and before you head into court.