In the United States alone over a million people file for bankruptcy each year. If you’re finding it impossible to pay the bills these days bankruptcy could be an option for you as well. There are two different types of bankruptcy: Chapter 7 and Chapter 13. One allows you to erase all debt in a short period of time and these debts can no longer be pursued by the debtors. The other restructures your debt and gives you the opportunity to pay money you owe in a different manner, judged by the courts.
Chapter 7 is a popular method of filing bankruptcy because it’s the easiest. Sometimes known as “liquidation” Chapter 7 instantly puts a stop to debtors attempting to collect money. Gone will be the harassing phone calls and demands for payment. It generally takes three to six months, from the time the paperwork is filed, until the ordeal is over. Most people, when filing bankruptcy, choose the Chapter 7 option. It’s especially helpful if you have huge bills, like medical or legal bills, that you simply can’t pay.
Chapter 13 is a different arrangement altogether. Instead of erasing all debt it allows the individual to restructure the payments. A court must approve, supervise and enforce the restructuring plan. Some creditors will receive less than what’s really owed them, some debts will be discharged altogether. Other money owed can often be paid over a much longer period of time. Some courts give the individual 3 to 5 years to pay off these debts.
It is becoming more and more difficult to file Chapter 7 bankruptcy. Too many people have used this method to clear away massive amounts of debt only to go out and acquire even more debt. An attorney can help you decide if you should file Chapter 7 – and what you’ll need to do to meet the legal requirements – or if you should file Chapter 13. If you have filed Chapter 7 in the past you cannot file it again for 8 years.
You will have to show the courts some documentation of your debt so it’s not a wise idea to go out and make a bunch of new credit card charges just because you know you’ll be filing bankruptcy anyway. You’ll be required to produce tax returns, proof of income for a period of time, and possibly even a certificate showing you took credit counseling classes – mandatory before filing.
There are approximately seven steps, besides the credit counseling course, that you will need to take to see the bankruptcy through to the end. The credit counseling course must be scheduled through an approved credit counseling agency. You must attend the course within 180 days previous to filing for bankruptcy. After you have gotten the certificate of completion you will then meet with the attorney to draft copies of your paperwork. You’ll have to provide proof of your income for the past six months in order to get approved.
Through your attorney you’ll decide which of your assets are safe. You’ll then file the bankruptcy papers with the court, meet with the bankruptcy trustee, and attend a financial management class. After all the steps are completed the final documentation can be had from the courts.
Just because you file bankruptcy doesn’t necessarily mean you must lose your home and/or your car. On the other hand, it doesn’t necessarily mean you won’t. Much of this is determined by the amount of equity you have in your home, how much is owed on it, and in which state you reside. Your attorney will help you understand the possibilities of keeping your house. Automobiles are basically done the same as homes. Laws vary from state to state, though, so find out what legal standings you have before deciding if bankruptcy is right for you.
Although laws differ in each state you have certain property that is exempt. Depending upon the state’s laws you will be allowed to keep a certain amount of jewelry, home furnishings, animals, crops, musical instruments and even appliances. Luxury items, like furs, art, collections and such will likely be sold by the bankruptcy trustee. Some other things that are generally exempt include tools of your trade, pensions and insurance benefits.
Although credit card debt can be erased by the bankruptcy courts this might not be so if you made a lot of new charges just before filing bankruptcy. Upon filing bankruptcy an “automatic stay” goes into effect and prevents debtors from calling, sending you bills, recording liens against you and reporting any further information to credit agencies.
Dischargeable debt can be immediately forgiven by the court. These types of bills include medical, credit card, contracts, leases and promissory notes. Debts which are not dischargeable include child support, alimony, criminal fines or government fees. Monies owed for student loans, some taxes, and certain lawsuits may or may not be forgiven by the court, depending upon the circumstances and in what state you live.
Bankruptcy fraud is a felony and can cover a wide range of mistakes and intentional fraud. It is not permitted to transfer property and belongings to others before filing bankruptcy and you must disclose all your assets and liabilities. Bankruptcy is a legal affair and your personal and private information will be closely scrutinized. If fraud is suspected you could spend time in prison! Don’t try to get away with cheating – it’ll cost you more in the long run than your actual debts. Bankruptcy is a viable solution for honest people who simply can’t pay their bills.
