PERSONAL BANKRUPTCY EXPLAINED
OK, let's talk about bankruptcy. In this article I will attempt to give you the basics regarding personal bankruptcy. Keep in mind that laws vary from state to sate and that this website is for informational purposes only. If you need to file for bankruptcy you need to seek the help of bankruptcy attorney.
I want to explain the bare mechanics of what bankruptcy is but the real goal here is to alleviate some of the emotional stress involved if you are in a position that you have no other choice but to file.
Let's suppose for a moment that you are in a position that you need help. You are in over your head and you've read all of my information on Debt Management and working with your creditors to get your situation under control. Let's suppose that even with these options that you just can't do it. You know that bankruptcy is your only option but the idea of filing makes you stressed out and sick to your stomach. You feel like you've failed and maybe even like you've let down your family.
The first thing that I want to say is: just stop! If this is the worst thing to happen to you, you are in pretty good shape! Honestly, people do recover from bankruptcy; this is not going to ruin your life. If you are in a position that you simply have no alternative bankruptcy is going to improve your life and let you put a great deal of stress behind you once and for all.
Bankruptcy is designed as a way out for folks that have no other choice. There are far too many people who use it as an escape or cop out simply because they are in over their heads and they don't care. That's wrong and that's abusing the system. My opinion is that if your situation is hopeless do it but if you simply don't want to pay your bills, you really need to find some pride.
It will take a while for you to get your credit back on track again but it will happen. You will be forced to endure incredibly high interest rates and credit denial but you will recover. You really will. Again, this is a last resort not an easy way out.
Now the facts:
There are two types of personal bankruptcy, Chapter 7 and Chapter 13. Chapter 7 Bankruptcy and Chapter 13 are legal proceedings that are available to a person to cope with a financial crisis. Personal bankruptcy must be filed in a federal bankruptcy court. You will have to pay about $175.00 - $200.00 in court fees. The attorneys fees are separate.
Chapter 7 bankruptcy involves the liquidation of all your assets except those that are not exempt from the bankruptcy settlement. Exempt property usually includes cars, some household furnishings, and property that you use for work for example, if you are a painter your brushes and painting equipment that you use to perform your work would be exempt from the bankruptcy settlement. Exemption amounts vary from state to state.
Under this plan the court appoints a trustee to handle the process of liquidating all of your non-exempt property. This means that they either sell or turn your property over to the creditors. The court then discharges your debts and that's it, you are debt free. The law allows you to file a Chapter 7 bankruptcy once every six years.
A Chapter 13 bankruptcy allows you to keep some property. For instance a car or a mortgaged house (provided there are no liens on it) as long as you are employed. A Chapter 13 bankruptcy is a court-ordered and approved repayment plan to your creditors. This plan allows you to use your future income to pay back your debts over a 3-to-5 year period without surrendering any property. Once you make all of your payments your debts are discharged by the court. If you are thinking about filing a Chapter 13 I advise you to first consider a Debt Management Program. My thinking is why make payments through the court system when you can make payments to your creditors through a Debt Management program and have everything paid off in the same 3 to 5 years and not have bankruptcy on your credit report when you are done?
Both types of bankruptcy take care of unsecured debts and stop repossessions, foreclosures, garnishments, collections activities and utility shut-offs. Both allow people to keep certain assets, although exemption amounts vary. A bankruptcy will not erase child support, taxes, student loans, alimony or fines.
Bankruptcy should be used only as a last resort.
A bankruptcy remains
on your credit report for a period of 10 years and makes getting new
credit accounts very difficult. You should also know that although your
bankruptcy disappears from your credit report after 10 years, you will
probably be asked by future employers or lenders if you have ever filed
for bankruptcy. If you are in a position that you have no other choice
except to file for personal bankruptcy you will survive but I promise
you that there will be consequences.
You will be able to get credit. There are lenders who will extend new credit to you for credit cards, cars and even homes but because of the bankruptcy you will pay extremely high and embarrassing interest rates. In other words there is going to be a very high price to pay other than the attorney fees.
These are the facts about personal bankruptcy. I need to stress again that I am not a attorney and if you need to file for bankruptcy you need to get some professional legal advice before taking action.
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