In 2010, basketball superstar Antoine Walker declared Chapter 7 bankruptcy. This came as a surprise as only two years earlier he reportedly had a fortune worth $108 million. The basketball star has since emerged from bankruptcy and has learned some healthy financial habits along the way.
File for bankruptcy when the time is right
If you are considering filing for bankruptcy when you file matters. If you are facing foreclosure, garnishment or repossession it may make sense to file for bankruptcy right away, as doing so puts an automatic stay on collection actions. If you are not facing such emergencies, you may want to file for bankruptcy once your debt is unmanageable and has peaked, meaning that you are not still in the process of working out your debts.
Should you file for Chapter 7 or Chapter 13?
One decision you’ll have to make when filing for bankruptcy is deciding whether to file for Chapter 7 bankruptcy or Chapter 13 bankruptcy. In a Chapter 7 bankruptcy, your non-exempt assets are sold to pay back your debtors on a priority basis. Following that, many (but not always all) of your remaining debts may be discharged. Chapter 7 bankruptcy can be finished in a matter of months. While you may lose some assets, it quickly wipes your financial slate clean.
In a Chapter 13 bankruptcy, you retain ownership of your assets. Instead, you enter a court-approved three- to five-year repayment plan in which you make regular payments to pay back what you owe. At the conclusion of the plan, many (but not always all) of your remaining debts may be discharged.
Rebuilding your finances
Once you complete the bankruptcy process, it is time to rebuild your finances. This means developing a sensible budget and following it. In addition, as you take on new debts, ensure they are ones that will help you, such as a secured credit card. Rebuilding credit takes time; a Chapter 7 bankruptcy filing stays on your credit report for 10 years while a Chapter 13 bankruptcy stays on your credit report for seven years. And understand that while you may not be able to live the exact lifestyle you did before filing for bankruptcy, you can still live a comfortable lifestyle in Indianapolis that is also affordable.