Personal Bankruptcy Advice
From Adviceopedia
If you are having financial difficulties, consider seeking personal bankruptcy advice.
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Personal Bankruptcy Advice and Cautions
Before you decide to file for personal bankruptcy, review all your options. Bankruptcy is not always the easy way out. It ruins your credit which takes time to rebuild.
Why File
If your personal debts have become so overwhelming that there is no way you can pay them back, begin seeking personal bankruptcy advice. Some reasons you may want to file include:
- You are unemployed with no incoming finances
- Overwhelming medical expenses
- Overextended credit or abuse of credit cards
- Bad investments
- Other large unexpected expenses
When you file, you have two choices:
- To restructure your debt and come up with a plan to pay it back
- To liquidate your assets to pay off the debt and start fresh within a few months
Legal Process
Filing bankruptcy is a legal process and must be filed in one of the 94 federal judicial districts bankruptcy courts. It can not be filed in a state court.
Chapter 7
If you are looking for a way to start fresh and get out of massive amounts of debt, consider filing Chapter 7. It can wipe out all of your debts in usually a four month time period. However, if you have personal assets, it is not as painless as it may seem. A trustee is appointed to your case and his job is to liquidate all non-exempt property. By liquidating your assets, the money is used to pay back your creditors.
Chapter 7 is the quickest way to get out of debt. However, if you have items you do not want sold, or a regular income, Chapter 13 may be a better route to go.
Chapter 13
If you want to try and repay your loans with a lower interest rate or in better terms, Chapter 13 is the best route to take. This chapter of bankruptcy is often known as a wage earner’s plan and allows you to restructure your finances and pay back your debts.
Under Chapter 13, you have 3 to 5 years to pay back debts under a plan put into place by your trustee. Unlike in Chapter 7, where you sell off your property, the court approves an interest free payback plan. In order to qualify for Chapter 13, you need to have a regular income.
There are many reasons to file Chapter 13 over Chapter 7 including:
- To save your home from foreclosure
- Allows individuals to reschedule secured debts and to extend them (this may help lower payments)
- May protect co-signers because of a special provision that protects third parties who are liable with the debtor on "consumer debts"
- Acts as a consolidation loan where all debt is paid back to your trustee who distributes the payments to your creditors
If you are a business considering bankruptcy, review Chapter 11.
Exemptions
Exemptions include certain property you own that the state code allows you to keep from unsecured creditors. This varies in each state.
Examples of exemptions include:
- Personal items (with little resale value)
- Jewelry, up to a specific value
- Clothing, up to a specific value
- Vehicle, up to specific value
- Tools of your trade or required for your work
- Your residency or estate
The following may also be exempt:
- IRA’s
- Retirement investments
- Un-matured life insurance policy
- Health insurance plans
- Education funds
If you have a lot of investments, seek pension and investment advice before filing bankruptcy.
State Laws
Before filing bankruptcy, check with your state laws. Processes and requirements will differ from state to state. Exemptions are one area that varies in each state.
Hiring a Lawyer
It is recommended that you hire a lawyer for personal bankruptcy advice to make sure you file correctly and make the right decisions. You will need to make sure you have all your financials gathered before taking it to court. A lawyer can advise you on debts you may have forgotten to include, as well as which chapter best suits your situation.
Other Options
If you are in a position of financial despair, but do not want to file bankruptcy, there are other options. Credit counselors can also help you with debt consolidation.
