Chapter 11 Bankruptcy Chapter 7 Bankruptcy Chapter 13 Bankruptcy
What is Personal Bankruptcy?
Personal bankruptcy is a legal procedure in which an
individual declares that they are unable to pay off their outstanding debts to
their creditors. The stated goal of
bankruptcy protection is to provide an
honest debtor the opportunity to start over and regain control of his finances.
Even though the idea of a fresh start might be appealing, declaring bankruptcy
should be your last resort. You will lose all of your nonexempt assets, which
are divided up and paid out to your creditors. Your creditors are no longer
allowed to hassle you for payment, but you have lost everything, including your
credit rating. A bankruptcy filing is listed on your credit report for the next
ten years, so you will have trouble restoring a respectable credit rating.
The most common reasons for filing for personal
bankruptcy include divorce, loss
of employment, expensive medical expenses, and excessive credit card debt. Since
these events are emotionally taxing as well as financially, people might not be
thinking clearly when it comes to understanding how to deal with their debt.
There are several alternatives to bankruptcy that you should consider before you
decide to go this route. Take note, however, that declaring bankruptcy helps
only those who have unsecured debt, which is debt that is not tied to any
particular piece of property such as a home or a motor vehicle. If you have
secured debt, then your creditor is in his right to repossess the property if
you are unable to make your payments.
When one needs to file for personal
bankruptcy, you can file for either Chapter
7 (liquidation) or Chapter 13 (reorganization). Chapter 7 bankruptcy means that
your nonexempt assets become the property of the court that sells them and
repays your creditors. Chapter 13 bankruptcy allows you to retain your assets by
helping you reorganize your finances and developing a new payment plan that will
be executed over a three to five year period. The moment you file for
bankruptcy, the bankruptcy court takes charge of your situation and does an
assessment of your current financial situation. You are protected from your
creditors from the moment you file and all communication between them and you
must go through the court.
In order to make the best decision for your personal situation, you should learn
more about federal bankruptcy law and consult a lawyer.