Before You File for Bankruptcy, Read This First
1 02 2010Though you’ve mismanaged your finances big time and your debts have become unwieldy, learn from these mistakes and look for ways to repair the situation. Since handling such a situation may have gone beyond your means, one of the options you have is the bankruptcy alternative. Filing for bankruptcy, your creditors won’t have to expect payments from you.
Bankruptcy laws in the United States are defined by the Bankruptcy Code, which explains the various types of bankruptcy. The bankruptcies of individuals are covered in chapters 7 and 13. In bankruptcy under chapter 7, for the sake of discharging your debts, your assets will be used. But only bankruptcies under chapters 11 and 13 will be used if the individual has some stake in a corporation or a partnership or if the person does not want to lose assets. Chapter 13 has a debt repayment plan recourse.
Each type of bankruptcy is covered by a separate chapter and you should be thorough with all the types so that you can choose the bankruptcy type that is suitable for you. You can have the benefit of temporarily halting foreclosures from a chapter 13 bankruptcy while chapter 7 will be most suitable for unsecured debts. You’ll have relief from creditors once you initiate bankruptcy proceedings. Collection activities including foreclosures and repossessions will halt.
After bankruptcy, life may be definitely free from tension but there are certain other attendant complications. You won’t be able to avail of newer credit. There may even be difficulties in obtaining employment or a residential lease because some employers and landlords may decide on the basis of your credit records where your bankruptcy history will be reflected for the next 10 years.
Also, though you’ll be relieved of your unsecured debts don’t expect relief from certain obligations. During the bankruptcy process, there will be a specific review of every debt. Some creditors may try to prevail upon the judge so that their accounts may be spared from the bankruptcy process.
A bankruptcy attorney is the first person to be consulted when getting into the process. The Court that deals with bankruptcy cases is the United States Bankruptcy Court, although there are also some state laws that apply in bankruptcy actions.
For certain people, options other than bankruptcy are also available. One alternative is to come up with an appropriate repayment plan with your creditors. Creditors may not refuse your plan because they are afraid that they will lose more money if you file for a bankruptcy. You can also consult a debt counselor to draw up a repayment plan. Such options help you avoid the stigma of bankruptcy.
In certain cases, when a person doesn’t have a stable income or an asset, it may be the better recourse if s/he refrains from taking any action particularly since your credit history won’t have any details of debts older than 7 years.
