The number of people with debt trouble that opted to file for bankruptcy is increasing
. Most of them want all their credit to be discharge and start with a clean slate. Others want to stop Foreclosure on their house and prevent other properties like the car from being repossessed.
There are two types of Bankruptcy that people can apply for; the Chapter 7 and the chapter 13.
Chapter 7 bankruptcy is a way to obtain total release for all or some of your unsecured debts. The requirement is you need to pass the means test. You will need to go through credit counseling to check if you really cannot pay your debt with your current income. If you were not able to pass the mean test you will can still apply for chapter 13. This type of bankruptcy is applicable for people with steady source of income but cannot make monthly payment. Chapter 13 is also called "debt reorganization".
Filing for bankruptcy maybe a good option but there are disadvantages you have to consider. First, all your non-exempt property is sold by the trustee to pay off some of your debt. If your goal is to stop foreclosure of your home, Chapter 7 is only a temporary solution. Once the court grants that motion of the lender to lift the temporary automatic stay, the foreclosure against your home can proceed. If you file for Chapter 13, you still have to pay child support and alimony, and monthly mortgage for your car and house.
One common misconception about bankruptcy is all debts will be discharged; not true at all some debt can be collected after your case is closed. In fact, anyone who cosigns a loan for you may be liable unless they also file for bankruptcy. Bankruptcy will harm your credit rating and can stay on your record for 7 to 10 years.
Another option you can choose is debt settlement; this is basically negotiating with the bank to reduced your loan for easier payment. With this plan, you do not have to file for bankruptcy or be forced to sell some of your assets or foreclosed your property. The damage in your credit score will be minimal as compare to bankruptcy. If the negotiation went well your debt could be, reduce from 40 to 60 percent.
Before making any decision on how you can released your self from debt study all the options available to make sure you came up with the right solution.