Bankruptcy
Are you overwhelmed by personal debt? Well you are not alone. There are millions of Americans just like you. Perhaps because of the recession or bad money management; or maybe a bit of both, but either way they are looking for someone to cut them a break. For these individuals with non-repayable debts, bankruptcy may be the best solution, giving them a chance to start over.
The two most common types of bankruptcy that individuals can file for in the United States are Chapter 7 and Chapter 13. Chapter 7 bankruptcy clears all eligible debts with 4 or 5 months of filing. If you have assets such as a house, car, boat etc., these items will be confiscated to liquidate and pay to creditors. However, often times the debtor has no assets that he or she would lose and this option is all the more enticing. But the downfall is that filing bankruptcy will unfortunately stay on your record for 7 to 10 years.
Chapter 13 bankruptcy (also known as reorganization bankruptcy) is for people who want to pay off part of their debts over a period of three to five years. This is usually the option that individuals with non exempt assets (a house, car, boat etc.) take in order to keep their assets from being liquidated. So, if you don't want to lose your house when you claim bankruptcy you should file for Chapter 13. But not everyone can qualify for this type of bankruptcy. For this option you must have a steady, predictable income that is sufficient to pay daily expenses with some left over to pay down debts each month. Actually many individuals trying to file a Chapter 7 bankruptcy will be forced into Chapter 13 because of their steady income that gives them the means to eventually pay off their debt.
And once you file bankruptcy the phone calls from creditors will stop. According to bankruptcy law creditors cannot file a lawsuit against you, garnish your wages or demand payments. However, if you have secured debt such as a lien on a car or home, filing bankruptcy provides no protection from these items being liquidated. For bankruptcy protection you must have unsecured debt.
But bankruptcy isn't always the solution. Bankruptcy should be a last resort and used only once other methods of debt control such as debt consolidation have been exhausted. In fact if your debt is somewhat manageable, perseverance in paying it down on your own can help keep your credit rating in good standing, as filing bankruptcy badly affects the credit points of a person. When you file for bankruptcy it is on your record for 7 to 10 years and red flags you as a credit risk for potential creditors. There are, however, secured credit cards available that allow you to slowly re-establish your credit rating during this time; but obtaining a personal loan is highly unlikely.
Filing bankruptcy isn't free either. It costs about $300 and the applicant is never guaranteed approval. If you are in financial distress and are considering filing bankruptcy it is very important to attain a professional opinion and ensure that you are making the right decision based on your unique financial situation. To qualify for a free bankruptcy evaluation with an attorney, click here.