subject: Get Answers To Common Bankruptcy Questions [print this page] You should opt for bankruptcy in case you are sure that you don"t have any other option left and there is the only option (bankruptcy) available in front of you. Anyways, the bankruptcy process is very complicated and many bankruptcy questions may crop up in your mind. Here we try to provide answers to common bankruptcy questions that come to your mind. In case of any further query, you can consult a bankruptcy attorney.
What is bankruptcy?
Bankruptcy is a very complicated legal process in which a person who is facing huge difficulty in paying his or her bills gets a new repayment plan. Once you file bankruptcy, an automatic stay is put on you which stop all legal actions taken against you by the lenders such as garnishment, collections, foreclosure etc.
What bankruptcy does?
Bankruptcy may help you in the following ways.
It eliminates all or most of your obligations. In financial terminology, it is called discharge of dues. The aim is to offer you a new financial repayment plan.
Puts an end to creditors actions such as wage garnishment, debt collection harassment etc.
Keeps foreclosure at bay and offers you the chance to repay the missed payments.
What are the different types of bankruptcy?
Two major types of bankruptcy are listed below.
Chapter 7 bankruptcy is also known as the straight bankruptcy or liquidation. Here you file a petition to the court to discharge your debts. Here, you have to give up your property so as to get the discharge. Property that does not fall into the exempt category is sold and the money that is collected is then distributed among the creditors. If you want to keep your property such as a car or a home with you, then a Chapter 7 bankruptcy is not the right choice for you.
Chapter 13 bankruptcy is a kind of reorganization plan to pay off your dues. Here you have to file a plan which indicates how you will repay a part of your previous dues over a period of 3 to 5 years. This is useful to keep your valuables such as car or home with you which might otherwise be lost. You should opt for Chapter 13 bankruptcy in case you own your home and are in danger of losing it because of money problems. Again, if you are behind on debt payments but can catch up if given some time, then Chapter 13 bankruptcy is a good choice for you.
What should you do before filing bankruptcy?
You must go for a budget and credit counseling from an approved and professional counseling agency within 6 months before filing for it. The agency will help you finding the right plan and it will assist you in the entire process.
Though the negative effects of bankruptcy are very serious and you must put in honest efforts to avoid bankruptcy, but you also need to keep in mind that bankruptcy is not necessarily to be avoided at all costs. Sometimes, bankruptcy may prove to be the best choice for you.
