Can Bankruptcy Really Bring Some Ease to Your Debt Problems?
Sarah Dinkins
November 24, 2006
Those who have no other way to repay their debt can think that bankruptcy may be an option to make a fresh start. Though this can be true in your case under certain circumstances, truth is that in most cases filing for bankruptcy can result in more difficulties and you may take many years to recover from a wide of the mark decision such as this.
Every year, more than a million people file for personal bankruptcy to save them selves from drowning in debt. However, filing for bankruptcy is not a simple task. To file for bankruptcy, a debtor must first file a petition with a federal bankruptcy court. The court appoints a trustee, who oversees your case with your creditors and allows an "automatic stay" order, which holds them back from seizing your bank accounts, repossessing your vehicle or house.
Types of Bankruptcy
There are two types of bankruptcy that one can file for:
1) Chapter Seven or "straight" bankruptcy.
2) Chapter Thirteen, or "wage-earner" bankruptcy.
Each one operates in a different way:
Chapter 7: Liquidation
An individual or business can request the court to eliminate their debts. After filling details of your property, income, and basic monthly expenses, you attend a hearing with your trustee. This meeting will decide which non-exempt property should be sold to arrange for the proceeds which will go towards paying off creditors. Depending upon the State you belong to, some property will be partially exempted (equity of your home, life insurance, retirement plan assets and most furniture and household goods).
Chapter 7 bankruptcy takes six months and costs $175 which can be waived for people on public assistance or below poverty level. If already applied for in the last six years, or if someone co-signed a loan for you, or if you landed a luxury debt after filing, you’re not eligible to apply again. If the court feels that you are capable of repaying your debt in the next five years, they could recommend your case for Chapter 13 instead.
Chapter 13
A steady high enough income to cover monthly expenses and due, is a prerequisite to qualify and then a repayment plan will be fixed to payoff debts over the next five years. The filing fee is $160. Payments are made to your trustee, who pays your creditors. Secured debts (home and car loans) must be under $750,000. If your unsecured debts (credit cards, department store cards, medical bills, student loans) are under $250,000 you can keep your property under certain circumstances.
The Right Decision
Bankruptcy can have a damaging effect in the long run. The effects can remain on your credit report for as long as 10 years, even if you don't go through with the process. You will see the effects when applying for a high salaried job, or insurance above a certain figure. A bankruptcy on your credit report tells everyone you’re incapable of good financial management.
As an alternative to bankruptcy you can negotiate with creditors or seek help from debt-management counselors. Many non-profit organizations offer guidance and information for free. Always seek help before filing for bankruptcy. And always make yourself this question: Will filing for bankruptcy solve your problems?
Every year, more than a million people file for personal bankruptcy to save them selves from drowning in debt. However, filing for bankruptcy is not a simple task. To file for bankruptcy, a debtor must first file a petition with a federal bankruptcy court. The court appoints a trustee, who oversees your case with your creditors and allows an "automatic stay" order, which holds them back from seizing your bank accounts, repossessing your vehicle or house.
Types of Bankruptcy
There are two types of bankruptcy that one can file for:
1) Chapter Seven or "straight" bankruptcy.
2) Chapter Thirteen, or "wage-earner" bankruptcy.
Each one operates in a different way:
Chapter 7: Liquidation
An individual or business can request the court to eliminate their debts. After filling details of your property, income, and basic monthly expenses, you attend a hearing with your trustee. This meeting will decide which non-exempt property should be sold to arrange for the proceeds which will go towards paying off creditors. Depending upon the State you belong to, some property will be partially exempted (equity of your home, life insurance, retirement plan assets and most furniture and household goods).
Chapter 7 bankruptcy takes six months and costs $175 which can be waived for people on public assistance or below poverty level. If already applied for in the last six years, or if someone co-signed a loan for you, or if you landed a luxury debt after filing, you’re not eligible to apply again. If the court feels that you are capable of repaying your debt in the next five years, they could recommend your case for Chapter 13 instead.
Chapter 13
A steady high enough income to cover monthly expenses and due, is a prerequisite to qualify and then a repayment plan will be fixed to payoff debts over the next five years. The filing fee is $160. Payments are made to your trustee, who pays your creditors. Secured debts (home and car loans) must be under $750,000. If your unsecured debts (credit cards, department store cards, medical bills, student loans) are under $250,000 you can keep your property under certain circumstances.
The Right Decision
Bankruptcy can have a damaging effect in the long run. The effects can remain on your credit report for as long as 10 years, even if you don't go through with the process. You will see the effects when applying for a high salaried job, or insurance above a certain figure. A bankruptcy on your credit report tells everyone you’re incapable of good financial management.
As an alternative to bankruptcy you can negotiate with creditors or seek help from debt-management counselors. Many non-profit organizations offer guidance and information for free. Always seek help before filing for bankruptcy. And always make yourself this question: Will filing for bankruptcy solve your problems?
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