By: Mike Stetzer
Many of us are struggling with debt in this economy.
With the massive unemployment rate, low credit availability and the off-the-chart numbers of foreclosures, more and more people are finding that filing bankruptcy is the right choice for them and their financial futures.
If you’re bombarded by bills and are looking for a way out, filing bankruptcy might be an option for you.
Keep in mind, filing bankruptcy isn’t right for everyone, and you should carefully weigh your options before making any financial decision.
We’ve put together some bankruptcy information below to help you determine whether bankruptcy could be a debt-relief option.
Personal bankruptcy is a legal process provided by the bankruptcy court that was designed to offer a discharge (elimination) of debt through Chapter 7 of the U.S. Bankruptcy Code or a reorganization of debt under Chapter 13.
Chapter 7 bankruptcy is typically the option for people who have lots of unsecured debt and have little income.
Unsecured debt is debt not tied to property, such as:
A successful Chapter 7 bankruptcy filing results in the debt discharge, where the person’s debt is discharged and they are no longer responsible for it.
Because the debt is wiped out, the new bankruptcy law now requires people take a “test” to qualify to file Chapter 7.
If the test finds they are eligible to be forgiven of their debts, they are allowed to file.
But not everyone wants to file Chapter 7 bankruptcy. There is a chance of liquidation of the filer’s assets to payoff their debts. However, this is a rare occurrence because most people who file Chapter 7 don’t have significant property for the court to sell.
If Chapter 7 isn’t for you, then you may want to examine the Chapter 13 bankruptcy no-interest repayment plan may be an option.
Chapter 13 bankruptcy was created to help people reorganize their secured debts so they can get back on track.
Secured debts are debts that are tied to property, such as a mortgage or car loan.
Under Chapter 13 bankruptcy, filers are placed on realistic repayment plans that generally last between three and five years.
At the end of the repayment plan, the filer’s unsecured debts may be discharged (eliminated) if the filer made all payments according to the schedule.
Chapter 13 bankruptcy is often attractive to people facing foreclosure because they are typically allowed to keep their property during the repayment period.
Talk to a bankruptcy attorney to find out if Chapter 13 bankruptcy could protect your property.
If you’re not sure which type of bankruptcy (if any) could help you, a bankruptcy attorney may be able to help.
A bankruptcy attorney can examine your financial situation, determine your eligibility to file and explain your options.