Bankruptcy
More and more these days, people at first sign
of financial trouble consider bankruptcy as an
end-all solution to their credit problems. In
some circles, filing for relief is considered
a basic part of financial strategy: when worse
comes to worse, just file and walk away. While
bankruptcy may be appropriate for some, there
are other alternatives available that can help
accomplish the same goal of getting you out of
debt without taking the drastic step of declaring
a chapter 7 or chapter 13.
What
is bankruptcy?
Bankruptcy
is a legal way for those burdened by too much
debt to wipe the slate clean or reorganize their
payment schedule and start over again. In the
case of chapter 7, it's a way to legally not pay
your creditors and start anew. In the case of
chapter 13, it's a way to reaffirm your commitment
to repay your debts, only this time on new terms.
These are the 2 most common forms of bankruptcy
used in dismissal or reaffirmation of consumer
debt.
Each
chapter has it's own merits, but each comes with
far reaching consequences that can affect you
for years to come. Bankruptcy may be a viable
alternative for some, but before considering the
drastic step of filing there are other options
available.
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Chapter
7
Chapter
7 bankruptcy, or "straight bankruptcy",
requires the debtor to liquidate all non-exempt
assets to pay off their creditors in order of
precedence. This form is generally used by those
who lack sufficient income to cover outstanding
debts after taking care of basic necessities.
This is the most popular form because it allows
the debtor to wipe the slate clean and get a fresh
start. There are however, certain obligations
that are not dischargeable, for example:
Alimony
and child support
Back
taxes and student loans
Recently
made purchases for substantial amounts
Property
executed contracts involving titles or liens
Before
considering this drastic step, you should take
an inventory of the types of debt owed. This form
of bankruptcy should be considered an option of
last resort after all other avenues have been
pursued. Keep in mind, bankruptcy, either chapter
7 or chapter 13, doesn't come without some long-term
consequences.
Chapter
13
Those
who have too much disposable income to file chapter
7 or have assets they want to protect may want
to consider chapter 13. With chapter 13, the debtor
reaffirms their commitment to repay all or a part
of their debts. This code allows the debtor to
restructure their payments and set up a new payment
schedule (usually 3-5 years) that is more manageable.
This form of bankruptcy is used when the petitioner
has property they want to keep like a mortgage
that is about to be foreclosed on and other non-exempt
assets that would be liquidated under chapter
7. Filing under this code will halt all collection
and foreclosure proceedings and allow the debtor
to catch up on their payments and reinstate their
original agreement.
Your
payments will be made to a Trustee who will disburse
them in a manner called for in the court-approved
plan. During this time the Trustee will have control
over your finances and any credit-related matters
will have to be cleared through him.
Repercussions
Keep
in mind bankruptcy doesn't come without some trade
offs. For example, filing puts the world on notice
about your personal financial affairs. Since it's
a civil court proceeding it becomes a matter of
public record. In some cases, (chapter 13) even
your employer can be involved because this chapter
requires deductions from you paycheck.
Bankruptcy
also stays on your credit report for up to 10
years and can hinder your ability to get a job,
establish new credit, get insurance and even a
place to live. Furthermore, you will have to pay
court, filing and attorney fees up front. You
will also lose control over your finances since
a Trustee will be appointed to oversee the completion
of your filing. This in addition to the fact that
filing doesn't necessarily get you out of all
your obligations, bankruptcy is not that end all
solution that it's portrayed to be.
There
is one way to get the financial relief you seek
that doesn't involve the hassles of attorneys,
court appearances, creditor meetings and judges.
Click on the link below and find out what thousands
before you have already discovered. Receive a
free consultation from a debt consolidation specialist
who understands your credit problems!
Click
here for your free debt consolidation quote
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