Bankruptcy is an option for getting out of debt offered to citizens of the United States who are faced with a serious financial crisis. Although both Chapter 7 and Chapter 13 bankruptcy can be extremely beneficial, there are some negative aspects of this solution as well. Unfortunately, due to the high amount of fraud over […]
File Bankruptcy – Will it Work For You
Deciding to File for Bankruptcy Protection is not easy. Most people want to know…
Millions of people in the United States face financial challenges every year. However, with the most recent financial crisis of 2007 and 2008, the country has been devastated. People have not only lost jobs, but also homes, vehicles, and other assets while still trying to deal with financial responsibility to creditors.
Other times, people face financial struggles after a divorce, death of a spouse, or even failure of a business. Although bankruptcy should always be considered as the last resort, it is a government program available when needed.
According to bankruptcy rules, this legal procedure makes it possible for debt to be discharged whereby money owed to creditors would be erased. In addition to personal bankruptcy protection, businesses and organizations can file for bankruptcy protection as well. Bankruptcy serves two primary purposes – eliminating debt whereby the debtor is given the opportunity for a fresh start and paying creditors as much money possible from the debtor’s bankruptcy estate without causing serious burden to the debtor.
The type of bankruptcy filed would depend on financial situation, income versus debt ratio, and amount of debt owed.
File Chapter 7 Bankruptcy
According to new bankruptcy rules, a Chapter 7 filing involves liquidation of debt, a process that can take up to six months to complete. In this case, the debtor would maintain some property deemed acceptable under the “exempt property” criteria while the rest of the unsecured property, if any, would be sold by the trustee of the bankruptcy case to help pay debt to creditors. However, the actual amount owed to the creditors would be based on bankruptcy laws, which vary from state to state.
File Chapter 13 Bankruptcy
For this type of bankruptcy, a person with regular income could have debt to creditors adjusted. However, to quality according to the new bankruptcy laws, the debtor’s income could not be greater than the state’s median and the debtor would be required to complete a “means test”, which is based on its own set of requirements.
For the question, “Should I file bankruptcy”, the answer is typically not an easy one. People who end up filing for protection have exhausted all other possibilities, realizing the only way out of the dire situation is with bankruptcy. This particular government program is something utilized all the time, so for the person, business, or organization that makes the decision to file for bankruptcy protection, there is no reason to feel ashamed, embarrassed, or even defeated.
Regardless of the situation or the type of bankruptcy files, it is important that the new bankruptcy laws under the “Bankruptcy Abuse Prevention and Consumer Protection Act of 2005” be fully understood. A tremendous amount of information can be found through the Internal Revenue Service website but if needed, a bankruptcy attorney would be able to provide more in-depth answers and guidance throughout the process.
There are a number of alternatives to filing bankruptcy. There are numerous decisions to be made with whatever your course of action. The absolute worst decision you can make about bankruptcy, debt and financial concerns is to make no decision at all.
Financial matters frequently paralyze people when it comes to decision-making. You should understand this and have a firm grip on the fact that your financial difficulties will not go away if you ignore them. What may seem like a good idea just to ignore them only compounds the problem in the future. Seek counsel from those people you trust, from bankruptcy lawyers, from financial counselors, or debt counselors.
The people you choose to listen to will have a direct impact on your future course of action, so choose those people wisely. Not everyone who claims to know about financial matters, including bankruptcy, really know what they are talking about. Although the decisions that you make will be difficult, the stress relief from getting a process started can be rather liberating. When you know that you have a plan to recover from your financial situation, you will be better able to focus on your future.