Making the decision to file personal bankruptcy is a big one, and it should not be taken lightly. Bankruptcy does not simply wipe your credit slate clean - it stays with you for years to come. Before declaring bankruptcy, be sure to look into the alternatives. You may be able to settle out of court with your debtors, and pay back only a fraction of what you owe. There are many companies out there that can help you achieve this goal. Other alternatives to bankruptcy include working with a debt counseling service and getting a debt consolidation loan.
If you are drowning in debt, though, personal bankruptcy may be a solution for you. When no other solution can be found, filing for personal bankruptcy can help you start your financial life over.
Types of Personal Bankruptcy
There are two types of bankruptcy that an individual can file for. These are Chapter 7 bankruptcy and Chapter 13 bankruptcy. Which type of bankruptcy you file for depends, largely, on your situation.
Chapter 7 Bankruptcy
Since October 2005, there are income restrictions on who can file for this type of bankruptcy. If a debtor's income is low enough and they are declared, by a court, unable to pay back debts, they may be able to file for Chapter 7 bankruptcy.
If this happens, most debts will be canceled, but not all. The debtor will also be appointed a trustee. Some assets will be turned over to the trustee, who will sell them. The money received for the assets will go towards paying off debts. Some property is allowed to be kept, but this varies by state.
Chapter 13 Bankruptcy
Often known as the wage earners bankruptcy, Chapter 13 is a kind of reorganization. This type of bankruptcy is best for debtors who are having a temporary financial crisis.
When filing Chapter 13 bankruptcy, the debtor creates a payment plan for his debts. All debts must usually be paid in three to five years. A trustee may also be appointed to supervise the debtor and collect payments. These payments will then be distributed to the proper creditors.
Should You File Personal Bankruptcy?
Declaring personal bankruptcy is a hard decision to make. Know beforehand if it's the right thing to do. Take a look at your lifestyle and the reasons that you are so much in debt. In some cases, filing for bankruptcy may hurt you rather than harm you. You may lose some of your property, such as your car, and your credit history will be less than stellar.
Bankruptcies stay with you for about seven to ten years in most cases. Whenever someone checks your credit, it's there. These days more and more people and businesses are checking an individual's credit history. Landlords, potential employers, and banks may not find that an individual is very favorable with a bankruptcy on their record.
Bankruptcy Lawyers
Bankruptcy is a serious business that is not to be taken lightly. It would be in your best interest to consult with an experience bankruptcy attorney. This attorney must be familiar with bankruptcy law and proceedings.
Picking a low priced lawyer would be perfect - if only it were that easy! Keep in mind that when it comes to bankruptcy attorneys, you may get what you pay for. Just because a certain attorney has a low price doesn't make him or her good. Ask around for referrals. Good referrals can be from family and friends, or another attorney that you trust.
