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Can I File for Bankruptcy Individually

  • Updated: July 24, 2024
  • Filing for bankruptcy as an individual can severely affect your financial health and credit score.
  • Review your financial accounts and consult a bankruptcy attorney before making this decision.
  • Call The Credit Pros to assess your credit report and explore options to improve your credit after bankruptcy.

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Related content: How Do I File Chapter 7 Bankruptcy (By Myself or With a Lawyer)

You can file for bankruptcy as an individual, but it's important to understand that this decision will significantly impact your financial health and credit score in the long run. Don’t take this step lightly.

First, review all your financial accounts. If you bank with institutions like Navy Federal, open a new account elsewhere to ensure you have access to banking services after you file. Withdraw your funds from Navy Federal to avoid potential freezes and stop automatic payments to prevent overdrafts. Also, review Navy Federal's policies on bankruptcy and get advice from a bankruptcy attorney.

Handling this alone can be overwhelming, so reach out to The Credit Pros. We offer a no-pressure conversation to evaluate your entire 3-bureau credit report and help you understand your unique situation. Give us a call today and let’s safeguard your financial future together.

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    Can An Individual File For Bankruptcy

    Yes, you can file for bankruptcy. The two main types of personal bankruptcy are Chapter 7 and Chapter 13.

    In Chapter 7, you liquidate assets to pay creditors. This is often called "liquidation bankruptcy." While you may need to sell some property, you can keep essential items.

    Chapter 13 involves creating a repayment plan to pay off debts over 3-5 years. Known as "wage earner's bankruptcy," it allows you to keep more assets.

    Before filing, you must complete credit counseling within 180 days. Your eligibility depends on income, assets, and debt types.

    Filing for bankruptcy can offer a fresh start by discharging debts. However, it significantly impacts your credit score and remains on your credit report for years.

    While you can file without an attorney, it's strongly advised to seek legal counsel due to the complexity and long-term financial implications.

    Consider alternatives like debt negotiation or repayment plans before pursuing bankruptcy. Evaluate if you can reduce expenses, increase income, or sell property to avoid filing.

    To wrap up, make sure you explore all options and seek professional advice to choose the best path for your financial situation.

    What Are The Different Types Of Bankruptcy For Individuals

    You have two main bankruptcy options as an individual:

    • Chapter 7 (Liquidation): You can eliminate most unsecured debts by selling non-exempt assets. This is best if you have limited income and few assets.

    • Chapter 13 (Reorganization): You create a 3-5 year repayment plan to catch up on missed payments while keeping assets like your home. This suits those with regular income.

    Key differences:

    • Chapter 7 discharges debts quickly but may require selling property.
    • Chapter 13 lets you keep assets but takes years to complete.

    Eligibility depends on your income, assets, and debts. Chapter 7 requires passing a means test to show you can't afford to repay debts.

    Both types impact your credit score and stay on your report for years. Neither discharges certain debts like student loans or child support.

    We recommend consulting a bankruptcy attorney to determine which option is right for you. They can guide you through the complex process and paperwork.

    In essence, understanding your bankruptcy options and seeking professional advice ensures you make the best decision for your financial future.

    How Does Filing For Bankruptcy Affect Your Credit Score

    Filing for bankruptcy severely impacts your credit score. You will likely see a drop of 100-200 points or more. Chapter 7 bankruptcy stays on your credit report for 10 years, while Chapter 13 remains for 7 years.

    Your starting score influences the exact effect. Higher initial scores typically experience larger drops. Bankruptcy makes getting new credit extremely challenging in the short term since lenders view you as a high-risk borrower.

    However, the negative effects gradually lessen over time if you demonstrate responsible financial behavior post-bankruptcy. You can start rebuilding credit through tactics like:

    • Using secured credit cards
    • Becoming an authorized user on another's account
    • Consistently paying bills on time

    To wrap up, bankruptcy offers debt relief but also damages your credit significantly. Work with a nonprofit credit counselor to create a plan for rebuilding your credit and financial health over time.

    What Debts Can Be Discharged Through Individual Bankruptcy

    Bankruptcy can wipe out many debts, giving you a fresh start. Here's what debts you can typically discharge through individual bankruptcy:

    • Credit card balances
    • Medical bills
    • Personal loans
    • Utility arrears
    • Past-due rent
    • Some older income tax debts
    • Certain business obligations

    However, some debts can't be eliminated:

    • Child support
    • Alimony
    • Recent tax liabilities
    • Most student loans
    • Secured debts (like mortgages or car loans)

    Chapter 7 bankruptcy liquidates assets to pay creditors, then discharges remaining eligible debts. Chapter 13 involves a 3-5 year repayment plan before discharge.

    To discharge taxes, they must generally be over 3 years old. Student loans require proving "undue hardship" - a difficult but not impossible standard.

    On the whole, bankruptcy impacts your credit, so consult a bankruptcy attorney to understand if it's right for your situation. They can explain which of your specific debts may be dischargeable and help you weigh the pros and cons.

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    Are There Alternatives To Consider Before Filing For Bankruptcy

    You have options before considering bankruptcy. Here's what we advise you to try:

    • Negotiate with creditors: You can ask for lower interest rates or reduced payments. Many creditors will work with you to avoid losing money in bankruptcy.

    • Debt management plan: A credit counseling agency can help you set up a repayment plan with creditors, often with lower interest rates.

    • Debt consolidation: You can combine multiple debts into one loan, potentially lowering your overall interest rate and monthly payment.

    • Debt settlement: You can work with creditors to pay less than what you owe, but be aware this can negatively impact your credit score.

    • Sell assets: You may liquidate non-essential property to pay off debts.

    • Increase income: You can take on extra work or start a side business to boost your ability to repay debts.

    • Review your budget: Cut unnecessary expenses and redirect funds to debt repayment.

    • Seek credit counseling: Get professional advice on managing your finances and exploring alternatives.

    • Debt moratorium: Some creditors may allow you to temporarily pause payments during financial hardship.

    Bottom line, it's crucial that you explore these alternatives thoroughly before filing for bankruptcy. Each option has pros and cons, so consider your specific financial situation carefully.

    What Assets Can You Keep When Filing For Individual Bankruptcy

    You can keep certain assets when filing for individual bankruptcy in Canada. Each province has its own exemptions, but generally, you'll retain:

    • Essential household items and furniture.
    • Clothing.
    • Tools needed for your job (up to a set value).
    • A vehicle (usually up to $6,600 in value).
    • Some equity in your home (varies by province).
    • RRSPs and pensions (except recent contributions).

    Your home isn't automatically lost in bankruptcy. If your equity is under the provincial exemption limit, you can keep it while continuing mortgage payments. For higher equity, consider alternatives like a consumer proposal.

    Most people filing bankruptcy keep all their assets. A Licensed Insolvency Trustee can advise on specific exemptions in your province and help determine if bankruptcy aligns with your financial goals given what you can retain.

    In a nutshell, bankruptcy aims to give you a fresh start, allowing you to keep necessities to rebuild your financial life. Explore all debt relief options with a trustee to find the best solution for your situation.

    How Much Does It Cost To File For Personal Bankruptcy

    Filing for personal bankruptcy typically costs $400-$3,000. The exact amount depends on your situation and bankruptcy type.

    For Chapter 7, you can expect:
    • A court filing fee of $338
    • Credit counseling costing $15-$20
    • Debtor education for $15-$20
    • Attorney fees averaging $1,000-$1,750

    For Chapter 13, costs include:
    • A court filing fee of $313
    • Credit counseling at $25
    • Attorney fees around $6,500

    If your income is below 150% of the poverty line, you might qualify for fee waivers or payment plans. Some costs, like attorney fees, can be paid through your repayment plan in Chapter 13.

    While fees seem high, bankruptcy can eliminate thousands in debt. Compare costs to potential debt relief. Consult local lawyers for exact quotes, as fees vary by location and case complexity. Consider all options before filing since bankruptcy impacts your credit and borrowing ability long-term. Weigh benefits against drawbacks for your specific financial situation.

    All in all, filing for personal bankruptcy involves various costs, but it can offer substantial debt relief. Make sure to weigh the pros and cons and consult with a local attorney to understand your options.

    Do You Need A Lawyer To File For Individual Bankruptcy

    You can file for individual bankruptcy without a lawyer, but it's not recommended. Here's why:

    • Legal complexity: Bankruptcy involves intricate laws and procedures. A skilled attorney navigates these complexities effectively.

    • Higher success rates: Stats show lawyer-assisted cases have much better outcomes. In Chapter 7, 96.2% of lawyer-led cases succeed vs. 66.7% for self-filed. For Chapter 13, it's 41.5% vs. 2.3%.

    • Asset protection: Attorneys help safeguard your property and maximize debt relief.

    • Avoiding mistakes: Errors in filing can jeopardize your case or leave you with unresolved debts.

    • Exploring alternatives: Lawyers can advise on options besides bankruptcy that may better suit your situation.

    • Peace of mind: Professional guidance reduces stress and ensures proper handling of your case.

    At the end of the day, while you can file pro se, the benefits of legal representation often outweigh the costs. Consider consulting a bankruptcy attorney to assess your specific needs and options.

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    What'S The Difference Between Chapter 7 And Chapter 13 Bankruptcy

    You might be wondering what's the difference between Chapter 7 and Chapter 13 bankruptcy. Here's how they differ:

    Chapter 7, known as "liquidation bankruptcy," is a faster process (3-6 months) that wipes out most unsecured debts without repayment. You need to pass a means test based on your income and may have to sell non-exempt assets.

    In contrast, Chapter 13, called "reorganization bankruptcy," involves a longer process (3-5 years) with a repayment plan. This option allows you to catch up on secured debts like your mortgage or car loans. It helps you keep assets that aren’t protected by exemptions, provided you have a regular income and cannot qualify for Chapter 7.

    Both types offer immediate relief through an automatic stay, which halts collection actions, foreclosures, and lawsuits. Chapter 7 is more common due to its speed and broader debt elimination, while Chapter 13 offers more flexibility for those with higher incomes or valuable assets.

    Lastly, your specific financial situation will determine the best option. Consult a bankruptcy attorney to assess your eligibility and choose the most appropriate path for your circumstances.

    How Long Does The Individual Bankruptcy Process Take

    The individual bankruptcy process typically takes 4-6 months for Chapter 7 cases. Here's a breakdown:

    First, you complete a credit counseling course and gather financial documents, which takes about 1-2 weeks. Then, your attorney prepares and submits the paperwork within approximately 10 days. Around 40 days after filing, you attend a creditors meeting. The discharge decision usually comes 6-8 weeks after this meeting.

    Factors that can extend the timeline include:
    • Missing or incomplete documentation
    • Complex financial situations
    • Creditor objections
    • Court backlogs

    To speed up the process:
    • Provide all required documents promptly
    • Respond quickly to requests from your attorney or trustee
    • Be thorough and honest in all disclosures

    Finally, while Chapter 7 usually wraps up in 4-6 months, Chapter 13 bankruptcies last 3-5 years as you repay debts under a court-approved plan.

    Can You File For Bankruptcy More Than Once As An Individual

    Yes, you can file for bankruptcy more than once as an individual. However, specific waiting periods apply between filings:

    • Chapter 7 to Chapter 7: 8 years
    • Chapter 13 to Chapter 13: 2 years
    • Chapter 7 to Chapter 13: 4 years
    • Chapter 13 to Chapter 7: 6 years (with exceptions)

    These periods start from the filing date of your previous bankruptcy, not the discharge date.

    Filing again does not guarantee debt discharge. Courts may dismiss cases they consider abusive. Consider these factors:

    • Time since your last filing
    • Your current debt load
    • Your income and assets
    • Your long-term financial goals

    Consult a bankruptcy attorney to clarify your options and develop an appropriate debt relief strategy. They can help you determine if filing again is the best path forward or if alternatives exist.

    Remember, bankruptcy should be a last resort. Explore other debt relief options first, like debt consolidation or negotiation with creditors. If you must file again, be prepared for stricter court scrutiny.

    Big picture—talk to a professional to understand your specific situation and the best steps for your financial recovery.

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