What You Need To Know About Bankruptcy | Filing for Bankruptcy
Bankruptcy is a legal way to give people who are ridden with overwhelming debt with a fresh start financially. Many people do not know that there are types of bankruptcy options available under the U.S. Bankruptcy Code. Most commonly known options are Chapter 7 and Chapter 13 bankruptcy.
In order to file for bankruptcy, you need to file a petition for that in federal bankruptcy court, by giving a statement of all your assets and liabilities as well as schedules listing of your creditors. Once you finish filing bankruptcy, your creditors can no longer take any action against you to collect the debts. But there are some negative aspects of bankruptcy too, which is you might end up paying back 50% or more of your current debts.
One of the most difficult parts of bankruptcy is you have to learn to live with the fact that it limits your personal spending to items that courts consider absolutely necessary. Most of the people consider filing bankruptcy as a final solution to fix all of their debt, but the worst thing is that many lending institutions will take into account your bankruptcy when evaluating you for a personal loan. Getting loans can be a big headache after you file for bankruptcy and can cost you more than the person who has not filed for bankruptcy.
Let’s analyze what chapter 7 and chapter 13 of Bankruptcy says.
- Chapter 7: This option entitles liquidation. According to this a court appoints a trustee who collects the assets of the debtor’s, converts them into cash for the repayment of debts and makes necessary distribution to the debtor’s creditors. The debtor will be granted a discharge that releases him of personal liability for most of the dischargeable debts. This entire process normally takes a few months from the time of filing of the bankruptcy petition.
- Chapter 13: This option entitles to adjustment of debts of an individual with a regular income. It is used for individuals who have a regular source of income or a job. For many, this type of option is preferable because it entitles the debtor to keep some assets with him and also allows the debtor to repay the debt to creditors over a period of time. This repayment proposal takes place at a confirmation hearing and largely depends upon whether repayment plan meets the bankruptcy code’s requirements for confirmation. This option allows the debtor to able to remain in control of his possessions and property, while repaying the payments through a court appointed trustee. Another important thing is here debtor is not discharged immediately of their debts, he has to complete the repayment plan before the discharge order is granted. Advantage of this option being that here debtor is protected against the lawsuits and other creditor action while the plan is still in effect.
One can understand that in some situations, one requires to file for bankruptcy, but one should always try to avoid bankruptcy if its possible (read on new Bankruptcy Law). A possible help can be in form of a good debt settlement company helping you in eliminating the most of the debts. Its advised that if you are going for filing a bankruptcy, better consult a good bankruptcy attorney at your place.
However before you even consider Bankruptcy you should try Debt Consolidation without a Loan. Visit a reliable Debt Settlement and Consolidation Company or for a Mortgage loan or Auto loan check out DebtU for great rates.
Frequently Asked Questions about Bankruptcy and How to File for Bankruptcy
