Bankruptcy. A scary word, but something that unfortunately affects many people’s lives each day.
While all of us would like to think we would never
be in this situation, we really never know.
Question: If I need
to, how can I start filing?
Answer: First, be sure that you have pursued all other debt consolidation or credit counseling options. Some people are able to pay off their debt by negotiating a lower interest rate. If you have exhausted every additional option, then your first step is to find a credible and trustworthy lawyer/attorney. The lawyer will help you take things from that point on.
For some people, debt is so great, that in order to even consider debt free living in the future, they have to look at bankruptcy first. I would never recommend this to anyone, but at times it may be your only option. Here are some common questions answered:
Question: Isn’t this the best solution for excessive debt? At least you can get a fresh start this way.
Answer: Not necessarily. It stays on your credit report and financial record for years, making it extremely hard to borrow money should you ever need to. Plus, it is one of the most life-changing events that can happen to anyone, and can put a great deal of emotional stress on every family member involved.
Question: I know there are different kinds. Explain the difference between Chapter 7 and Chapter 13.
Answer: Chapter 7 is personal, liquidation bankruptcy. It does not allow you to keep your property if there is an unpaid mortgage. However it does allow you to keep some items like your car, basic household furnishings (your children’s beds, etc), and other “necessary” items.
Chapter 7 does not erase child support, alimony, or taxes. Generally people with lower income and higher debt choose Chapter 7.
Chapter 13 is somewhat less serious (although still on your record) than Chapter 7. In this form, you work out a repayment plan for most if not all of your debts. It also lets you keep property (such as your house) that you might lose if filing for Chapter 7.
With updated laws enacted in 2005, most people are required to file for Chapter 13 before they file for Chapter 7, unless their income is very low.
A final piece of advice: Be sure to be completely honest and include all your financial information. Do not leave out anything that could be relevant. Keep records of all proceedings.
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