Filing Bankruptcy
Filing bankruptcy can be a very intimidating and frustrating experience. Most individuals facing bankruptcy find themselves harassed by creditors, unable to make monthly payments, and often without the means to provide daily support.
These conditions alone make bankruptcy unpleasant. However, filing for bankruptcy can also be a way for people to get away from debt to a brighter, more financially stable future.
Five Types of Bankruptcy Filing Options
Chapter 7 Bankruptcy:
Chapter 7 bankruptcy (also called "straight bankruptcy") is known as a liquidation proceeding. This means that you turn over your property and assets to a trustee who then pays off your creditors. Debtors can expect to be cleared of debt within three to five months.
Chapters 9, 11, and 12:
These 3 types (also known as "reorganization bankruptcies") do not usually
pertain to individuals. For example, Chapter 9 is used for city
bankruptcies; Chapter 11 is used for corporations or individuals with very
large debts (usually above $300,000); and Chapter 12 is used for
farmers.
Chapter 13:
Is also known as a "reorganization bankruptcy", it is the most common from
of bankruptcy. This type of bankruptcy filing does not get rid of all
debts; instead, individuals get their debts reduced and take part in
payment plans to their creditors over a period of three to five years. In
most cases, debtors get to keep important assets like their home or
car.
What Filing Bankruptcy Can Do For You
Although filing bankruptcy can be incredibly costly and time consuming,
there are a number of benefits.
Creditors are forbidden by law from pushing lawsuits, making contact, or garnishing wages once a debtor has filed for bankruptcy.
Bankruptcy is only noted on your credit record for ten years, giving you the opportunity to once again have a "clean slate."
Most individuals who file bankruptcy still qualify for certain types of credit cards and loans long before their ten years is up.
There are many regulations separating spousal credit issues, meaning that you may not be responsible for all of a spouse's debt.
Assets (houses, cars, etc.) that fall in the personal exemption category may not get confiscated.
It is important to note that not all types of debts are covered, and even after a bankruptcy has been completed, there may be remaining issues that require your time and money. Therefore, the decision to file bankruptcy should never be taken lightly and always under the consultation of a professional in the field.
