Bankruptcy: What You Need to Know

Personal bankruptcy is a legal way to give people with overwhelming debt a fresh financial start. Many people do not realize that there are five types of bankruptcy options available under the U.S. Bankruptcy Code; however, for most consumers there are really only two viable options; Chapter 7 and Chapter 13 bankruptcy.

Chapter 7, bankruptcy is entitled Liquidation: In a Chapter 7 bankruptcy, a court-supervised procedure occurs during which a court-appointed trustee collects the assets of the debtor's estate, converts them to cash for repayment, and makes all necessary distributions to the debtor's creditors; however this is all done within the debtor's right to retain certain exempt property. Traditionally, there is little or no nonexempt property in a chapter 7 bankruptcy. Due to this fact, there may not be an actual liquidation of the debtor's assets. In this case, it is called a "no-asset bankruptcy." It is important to realize that a creditor that is trying to collect on an unsecured claim will only get a distribution from the bankruptcy estate if the case is an "asset bankruptcy" and the creditor can provide proof of their claim with the bankruptcy court. In almost all chapter 7 bankruptcies, the debtor will be grated a discharge that releases them of personal liability for most dischargeable debts. The entire process normally takes just a few months from the time the bankruptcy petition is filed.

Chapter 13, bankruptcy is entitled Adjustment of Debts of an Individual with Regular Income: A chapter 13 bankruptcy is traditionally used for people who have a regular source of income or a full-time job. For many people, chapter 13 is preferable to chapter 7 because it allows the debtor to keep some assets. A chapter 13 bankruptcy allows the debtor to repay creditors over time. This time traditionally varies from three to five years. This type of repayment proposal takes place at a confirmation hearing. During this confirmation hearing, the court will either approve or disapprove the debtor's repayment plan. This decision largely depends on whether the repayment plan meets the Bankruptcy Code's requirements for confirmation. In a Chapter 13 bankruptcy the debtor is usually able to remain in control of their possession and property while making payments to creditors; however, payments are made via a court trustee. Unlike chapter 7 bankruptcy, the debtor does not receive an immediate discharge of their debts. Under chapter 13 bankruptcy, the debtor must complete the repayment plan before the discharge is granted; however, the debtor is protected from lawsuits, garnishments, and other creditor action while the plan is in effect.

It is important to remain cognizant of the fact that not all debts are discharged under bankruptcy. The debts that are able to be discharged will vary under each chapter of the Bankruptcy Code. However, the most common types of non-dischargeable debts are tax claims, debts that are not presented by the debtor to the court while filing for bankruptcy, debts for spousal or child support or alimony, debts to governmental units for fines and penalties owed to government entities, debts for personal injury caused by the debtor's operation of a motor vehicle while driving intoxicated, debts for willful and malicious injuries to person or property, debts for government funded or guaranteed educational loans, and debts for certain condominium or cooperative housing fees.

In order to file for bankruptcy, you must file a petition in federal bankruptcy court. You must file a statement of assets and liabilities as well as schedules listing of your creditors. Once you have finished filing bankruptcy, your creditors can no longer take action against you to collect discharged debts.
Negative Aspects of Bankruptcy
In chapter 13 bankruptcies, you may end up paying back 50% or more of your current debts. Additionally, if you miss a regularly scheduled payment at anytime during your chapter 13 bankruptcy repayment plan, you could end up in violation of the court and forced to repay all the debt!

One of the most difficult parts of bankruptcy is learning to live with the fact that filing bankruptcy limits your personal spending to items that the court considers absolutely necessary. In most cases, debtors do not complete their chapter 13 bankruptcy repayment plans. Most people filing chapter 13 bankruptcies think they will be able to complete their repayment plan; however, only about a third of them actually do. Additionally, chapter 7 bankruptcy may stay on your credit longer than a chapter 13 bankruptcy. This time ranges from 7-10 years for most people. Many people do not realize that if you own a home with a sizable amount of equity, have a fair amount of assets to protect, or have co-signers on a loan, you most likely will not be able to file chapter 7 bankruptcy under current law. Now that the new bankruptcy legislation has passed, it will be even more difficult to file for bankruptcy.

Many people think that filing bankruptcy is the silver bullet that will fix all of their debt and credit related problems; however, filing bankruptcy is the worst thing you can do to your credit. Most lending institutions will consider your bankruptcy when evaluating you for a personal loan even after the bankruptcy has expired. Qualifying for a loan after filing for bankruptcy can be very difficult and could cost you considerably more than a person that has not filed for bankruptcy.

It is understood that some situations will require you to file for bankruptcy. However, you should avoid bankruptcy if at all possible. A good debt settlement company can help eliminate most, if not all, of your unsecured debt so that you do not have to file for bankruptcy. If you require additional information on the subject of bankruptcy you may want to contact a bankruptcy attorney in your area.

The Serious Business of Bankruptcy

The federal government makes available a way for those who are struggling under the weight of impossible debt to have a new start by freeing them of their financial burden. A bankruptcy isn't easy, but can make it possible to live a normal life again, freed of the heavy burden of crushing debt. When you are facing what seems like an intractable fiscal problem, filing bankruptcy might be the answer.

There are any number of reasons why you may find yourself deeply in debt. Some of the most common are losing a job, hospital bills and spending beyond your means, usually with the "assistance" of credit cards. Filing bankruptcy doesn't mean that you are an irresponsible person, simply that circumstances beyond your control have led to an unmanageable level of debt.

Being deeply in debt can be utterly miserable. You begin to fear opening your mailbox and become anxious every time the phone rings. It seems that no matter much you pay on your credit cards, it just isn't enough and the balance keeps growing. Your credit suffers and it seems like there is no way out.

By filing bankruptcy, you gain a chance to get a fresh start by reducing or eliminating your debts. With out of control debt, it becomes impossible even to lead a normal life. However, something which bankruptcy will not permit you to do is to avoid paying debts which you are capable of paying.

This means that some of your money and perhaps property will be handed over to your creditors in a fashion considered fair by the U.S. Bankruptcy Court. The court will decide what you may keep and what will be sold to help settle your debts. You might also have to pay off debts with cash on hand if your liquid assets are over a certain predetermined amount.

Bankruptcies are sorted into types known as chapters. These different chapters are designed to address different situations which are varied enough to justify a different approach. The most common types filed are chapter 7 and chapter 13 bankruptcies.

Chapter 7 bankruptcy is called a "straight bankruptcy" and results in all debt which cannot be settles through the sale of your assets being written off. Chapter 133 bankruptcy, by contrast organizes your debts into a payment plan which fits your situation. In either case, the calls and mail stop flooding in and you can breathe easier. Once you notify a court that you intend to file for bankruptcy protection, the calls will stop, as will other collection efforts including legal actions, evictions, foreclosures and repossessions - the relief is almost instant.

Other bankruptcy chapters are target for specific needs, such as chapter 11 for businesses and chapter 12 for farmers. These are aimed to eliminate certain types of debt.

Filing bankruptcy can be complex and is a serious business, You should always work with an attorney who specializes in bankruptcies if you are considering this move.

Need More Free Information On Foreclosure Go To Forclosure Warriors.com Copyright 2008 All Rights Reserved. Or Find Our Foreclosure Guide At Brys Web Guides.com