Each year, millions of Americans file for bankruptcy, many of them from Kentucky. Knowing what to expect and the process before filing for bankruptcy can help you make an informed decision.
In this blog post, we will discuss the steps to filing for bankruptcy in Kentucky, as well as the types of bankruptcy you can file for. Considering bankruptcy due to overwhelming debt? Read on!
What Is Bankruptcy?
Bankruptcy is a way to pay down some of your debts over time or eliminate others entirely if you are struggling financially. In either case, declaring bankruptcy grants you an automatic stay, which prevents your creditors from trying to collect your debts.
Reasons Why You May Consider Filing for Bankruptcy
There are many reasons why you might think about declaring bankruptcy. Bankruptcy may result from falling behind on bills, struggling to pay for loans, or using credit cards to pay for all your basic living expenses.
Other reasons to consider bankruptcy include:
- Being harassed by creditors
- Being threatened with foreclosure on your home
- Having a hard time making your debt payments
You should consult a bankruptcy attorney if you find yourself in any of these situations.
Alternatives to Bankruptcy
Filing for bankruptcy is not an easy decision to make. Before making any major decision, it is important to know your options.
There are good alternatives to bankruptcy, such as credit counseling and debt settlement. However, it is always a good idea to consult a financial advisor before making any decisions.
You can reduce interest costs by consolidating your debt into just one monthly payment and repay it faster. Lastly, it is always worthwhile to try to negotiate with creditors. A successful agreement can prevent bankruptcy, despite the complexity of the process.
The Types of Bankruptcy for Consumers
There are two types of bankruptcy that consumers can file in Kentucky: Chapter 7 and Chapter 13.
Chapter 7 bankruptcy, also known as liquidation bankruptcy, allows you to discharge or get rid of certain types of debt. The process is cheap and can be completed quickly since creditors don’t get paid. This type of bankruptcy is suitable for people with fewer assets because people with more assets risk losing them. Additionally, if you’re behind on your mortgage or car payment when you file, you may lose them since there are no payment plans for catching up on delinquent mortgages.
Conversely, Chapter 13 debtors must repay their debts within three to five years. Moreover, Chapter 13 provides benefits that Chapter 7 does not. Among the benefits are keeping all your property, avoiding foreclosure, and avoiding repossession. It is also possible to force a creditor to accept a payment plan if the debt cannot be discharged in bankruptcy.
How to File for Bankruptcy in Kentucky
If you are considering filing for bankruptcy in Kentucky, it’s important to know the steps involved. The steps to take have been detailed below.
- Gather Your Kentucky Bankruptcy Documents: This includes copies of your tax returns for the past two years and your last 60 paycheck stubs.
- Take a Credit Counseling Course: Find course information here.
- Fill Out the Bankruptcy Forms: You can download the forms free through USCOURTS.gov.
- Pay Your Filing Fee: There is a $338 fee for Chapter 7 bankruptcy filings. If you earn less than 150% of the poverty guidelines and cannot afford the filing fee, you can request a fee waiver.
- Print Your Bankruptcy Forms: Use black ink to print all forms on white, 8.5″ x 11″ paper.
- File the Forms With the Kentucky Bankruptcy Court: The Western District of Kentucky allows electronic filing, and the Eastern District has implemented virtual filing protocols.
- Mail Documents to Your Trustee: After filing for bankruptcy, you will be assigned a trustee.
- Take Another Course: Take a debtor education course within 60 days of the creditor’s meeting.
Attend Your 341 Meeting: Your creditors will attend this meeting and ask questions.
What Happens After Bankruptcy?
The majority of unsecured debts are forgiven in bankruptcy, so you won’t have to pay them back. However, student loans, child support, and alimony cannot be forgiven through bankruptcy. A bankruptcy filing may also result in the forfeiture of some belongings.
How Does Bankruptcy Affect Your Credit?
If you file bankruptcy, your credit score will be affected for seven to ten years, depending on the type of bankruptcy you file. Therefore, you may have difficulty getting a loan or credit line in the future.
Rebuilding A Credit Score Post Bankruptcy
Bankruptcy is not a death sentence, despite what many people believe. You can rebuild your credit by:
- Making on-time payments.
- Maintaining a good payment history.
- Getting a secured credit card.
- Becoming an authorized credit card user.
- Applying for a small loan.
- Reviewing your credit report for errors often.
Sell Your House and Avoid Bankruptcy in Kentucky
Having to consider bankruptcy is never something anyone wants to do, but if it happens, we can help! When you sell your house fast for cash in Kentucky, you’ll save your credit score from the damage that comes with bankruptcy.
At Favor Home Solutions, we buy houses as-is to make the process as easy as possible for you. Our team will work within your preferred timeline throughout the process to ensure you feel supported and at ease. We want to help you avoid bankruptcy and move on to the next chapter of your life as quickly as possible by making a fair cash offer for your house. Contact us today!