Chapter 7 Bankruptcy
A lot of people are running into financial difficulty these days -
especially with a lot of major corporations going through layoffs and
buyouts. What this means is that a lot of people find themselves
suddenly unemployed and it may take some time to get another good
paying job. When financial difficulties come, and they stay around for
awhile, the thought of declaring bankruptcy will come into some
people's minds - especially when the debt starts getting out of hand,
with no light at the end of the tunnel. Here are some thoughts about
bankruptcy that will help you to make that important decision of
"Should I, or shouldn't I?"
What Declaring Bankruptcy Means
Declaring bankruptcy is basically an indication
that you are not able to pay the debts that you have legally incurred.
For this reason, and the legal examination of your bills and the way
you handle your finances, as well as the humiliation involved, makes it
a rather stressful process. It means that you will have to seek credit
counseling, too.
Because so many people are attempting to get out
of their debts, for one reason or another, Congress has passed an Act,
which was signed by President Bush in 2005, to place certain
limitations on declaring bankruptcy and who can do it. This Act, called
the "Bankruptcy Abuse and Consumer Protection Act," seeks to make it
more difficult to declare bankruptcy and to help the creditor to
receive a higher degree of compensation. This Act called for higher
bankruptcy filing fees, credit counseling, and making it more difficult
to file under Chapter 7, making it necessary for more people to file
under Chapter 13 bankruptcy. Many other details are also covered in the
Act that place further limitations on bankruptcy.
Two Types of Bankruptcy
Filing under a Chapter 13 bankruptcy means that
there is a "reorganization" of your finances, and it does mean that you
do repay much of your existing debt. You are required to make a plan
that enables you to pay back a lot of your existing debt in the next
three to five years. This means the sale of some of your properties (or
all of them) in order to satisfy the debt. It is the bankruptcy Trustee
who will make the decision as to what needs to be sold - not you.
Filing under a Chapter 7 bankruptcy means, once
again, that the various assets that you do currently possess will need
to be listed, by requiring you to take a "means test," and then a
decision will be made as to what you can keep and what you cannot.
Everything will fall under an "exempt" or a "non-exempt clause." You
keep the "exempt" items, and lose the rest. The "non-exempt" items will
either be sold, or you will be required to pay them back. Some things
that are not exempt are child support and education costs.
The cost for declaring bankruptcy can run up to
about $1,500 for personal bankruptcy. This includes the filing charges,
and the lawyer’s fees. The fees, however, are dependent upon how much
of an income you have, and it will vary from one state to another. The
process of obtaining a legal declaration of bankruptcy, assuming
everything is in order, can take up to six months.
After The Declaration Of Bankruptcy
Once you have obtained a legal declaration of
bankruptcy, all of your creditors know where they stand. For some, the
debts are discharged, and others have received what will be paid to
them, or they know what will soon be coming to them. However, it also
means that your credit rates have been destroyed, and it will take
years to fully repair it. The bankruptcy is placed on your credit
rating and will remain there for the next ten years.
What Other Options Are There?
If you are now in a position where you need to
consider bankruptcy, then there are some other options that may yet be
available to you.
1. Get Credit Counseling
By this, it means work through a debt negotiation
company who will take your case to the various creditors in an attempt
to work out some kind of a deal. This could be a good step in the right
direction because creditors know that if you declare bankruptcy, then
they may not get anything. Oftentimes, they will work with you.
2. Renegotiate Your Loans
Once again, by talking with your creditors, you
may be able to renegotiate for better loan terms. This could give you a
greater leeway financially that could provide just enough of an edge to
enable you to get through it with having to declare bankruptcy.
To learn more about debt relief
and how to get started, please visit Debt Relief.bz
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