What You Should Know About Bankruptcy
Filing bankruptcy is not only a last resort
legal action; it is also a very complicated legal action that definitely
needs the expertise of a lawyer. When thinking about bankruptcy, you first
need to decide if bankruptcy is right for you. If it is, then you need
the help of an attorney to decide which type of bankruptcy is required
for your particular situation.
The decision to file bankruptcy can be
brought on by many different circumstances. The most common circumstances
are divorce, medical hardships and credit card troubles. In cases of divorce,
bankruptcy is often inevitable. The sudden change in financial level and
the added burden of court costs, extra expenses and child support often
cause one or both parties to get behind on their financial obligations.
In the case of medical hardships, high
medical bills can sometimes overburden people even if they have insurance.
This is even more likely to happen if the person experiencing the medical
emergency is also the family breadwinner.
The most common case of financial hardship
is incredibly high credit card balances. After carrying numerous high credit
balances for a certain period of time, many people find themselves unable
to make anything but the minimum payment and sometimes not even being able
to make that. Then, when the high interest rates are added in, people find
themselves in a situation where repayment is often impossible.
Whether your situation arose from one of
the above financial problems or not, sometimes bankruptcy is the only answer
to your monetary problems. Once you have decided that bankruptcy is the
answer for you, you will need to enlist the services of a lawyer to decide
which type of bankruptcy to file and to help you navigate the many complex
bankruptcy laws and regulations.
There are four main types of bankruptcy,
Chapter 7, Chapter 13, Chapter 11 and Chapter 12. Chapter 7 is the most
common form and can be used by businesses and individuals. Chapter 13 is
the second most common form, but it limited to use by individuals only.
In a Chapter 7 bankruptcy, a debtor's property
is divided into to categories, exempt and non-exempt. Exempt properties
include things that the debtor will be allowed to keep like their home
and automobile. In the case of exempt properties, the debtor is allowed
to keep them as long as he or she continues to pay for them. If a person
cannot continue to make payments, the owner of the loan may repossess the
property, even after a bankruptcy has been finalized. Any non-exempt or
unsecured property will be sold to cover the debtor's financial obligations.
Debts such as credit card debts and medical bills can be written off with
this type of bankruptcy, but other debts like school loans and taxes cannot
be.
In Chapter 13 bankruptcy, the debtor is
required to come up with a way to repay his or her debts, but these debts
usually do not have to be repaid in full. In most cases, a creditor will
agree to take a small percentage of the owed debt as opposed to losing
all repayment all together. This form of bankruptcy is preferable for those
individuals that wish to keep all of their possessions and just need a
chance to catch up on their financial obligations. It does not, however,
excuse a debtor from priority debts like taxes and child support.
In order to qualify for Chapter 13 bankruptcy,
an individual must have a yearly income level that allows for repayment
of each of his debts within three to five years. After three to five years
of consistent repayment, the debtor's obligations are released.
After you have researched bankruptcy and
decided that it is right for you, you need to contact an attorney that
specializes in bankruptcy to help assure that you follow all legal guidelines
and are protected from further collection activity.
Author-Bio: Jody Ehrhardt |
