subject: An Experience-based Advice On Bankruptcy [print this page] Whenever a person is in debt and cant seem to find a way out of it, the first thing that comes to mind is usually bankruptcy. The hopelessness of trying to pay for debts that you know you cant afford makes you think like there is no way out except to file for bankruptcy. Although a bankruptcy is designed to help debtors pay off or eliminate their debts, the stigma of even filing for one will stay with you for at least ten years. You might want to arm yourself with knowledge on the various alternatives to bankruptcy because it is not the only way for you to solve all your debts. So before you decide to file for bankruptcy, it might be good for you to get some professionaladvice on bankruptcy.
If you find yourself being in more debt than you can afford, bear in mind that bankruptcy is not your only option. However, if you are very sure that bankruptcy is the best way for you to be rid of your debts, it is recommended that you get advice on bankruptcy before you take any action or file for one. You will most probably get advice from credit counselors who will plan out the best course of action for you to take. The first thing your credit counselor will probably ask you is if you are 100% sure that filing for bankruptcy really is the best thing for you to do and that you really want to do it. Once you filed, there is no backing out of it. So your credit counselor might suggest you explore other alternatives but if you find yourself even thinking about filing, chances are your debt situation is in bad shape.
It is also advisable that you familiarize yourself with the common types of bankruptcy. In cases of individuals, the most common types are Chapters 7 and 13. Generally Chapter 7 bankruptcy means you will be liquidating your assets that are not exempt from collection such as furniture and clothes and use the proceeds from the sales of these assets to pay off your debts. Chapter 13 is different 7 because you wont lose any property as you will be paying off your debts through a plan developed on the basis of your own income. Be aware that different states have different laws on bankruptcy so the list of things exempt from collection might also be different in different states. But most states will allow you to keep your insurance, home equity, tools that are job-related and retirement plans even when you are filing Chapter 7 bankruptcy.
In most cases, you will not actually have the freedom to choose which type of bankruptcy you are eligible to file. There is a means test that you will have to go through to determine which type of bankruptcy you will be eligible for. Generally your income for the previous six months prior to your filing will be monitored by the court and compared to the median income of the particular state. This is followed by a series of calculations and comparisons to really determine the extent of your debt-income ratio. Although most people would file for Chapter 7 bankruptcy because they wont be required to pay back their debts, the laws on Chapter 7 bankruptcy are even stricter now than before. So it might be quite difficult to qualify for a Chapter 7 bankruptcy nowadays.
Chapter 7 bankruptcy might not always be the best solution for all. Sometimes it is recommended that you file for Chapter 13 bankruptcy depending on your situation. One of the reasons is that if you file for Chapter 7 bankruptcy there are instances where you might actually lose your home, depending on the list of assets exempt from collection of your particular state. So if you are filing for bankruptcy because you are behind on your mortgage payments or you have a non-exempt property that you want to keep, your credit counselors will probably advise that you file for Chapter 13 instead of Chapter 7 bankruptcy.
Whatever your choice is, it is always wise to make informed decisions rather than emotional ones. So you may want to consider your options carefully and do a little bit of research. It might not sound like your best option at the beginning, but if you have weighed in other alternatives and listened to advice from professionals, chances are you will probably benefit more from your choice than you originally thought you would.
