It may be a good time to consider bankruptcy when all creditors and negotiations have failed and foreclosure proceedings and repossession is looming in front of you. You are just not able to pay any of your bills. Personal bankruptcy is an official manner to help people with uncontrollable debt to start a new financial life. There are five kinds of bankruptcy under the U.S. Bankruptcy Code, but most people can avail two options, Chapter 7 and Chapter 13 of the bankruptcy laws.
Chapter 7 is for people who want a new start and is also known as “liquidation” bankruptcy. This means that the individual must give up all assets which are not protected by bankruptcy exemptions. Chapter 13 on the other hand is called “reorganization” bankruptcy and can be filed for a number of reasons. It is typically done to stop foreclosure of home, consolidate debts or avert IRS collection.
People have to be aware that all kinds of debts cannot be expunges under these section of bankruptcy codes. The most common kinds of non-dischargeable debts include tax claims, debts regarding alimony, child or spouse support, debts due to government or guaranteed educational loans, debts on some cooperative housing or condominium fees.
To claim bankruptcy, an individual requires filing an appeal in the federal bankruptcy court. Statement of liabilities and assets and list of creditors have to be filed. With the filing of bankruptcy, creditors cannot take action to collect discharged debts from you. You can start the filing process once you have taken a decision. You can go for emergency filing to obtain an automatic stay in case creditors are hounding you or garnishment or foreclosure is very close. This will stop creditors from taking any action till it is heard by a bankruptcy judge. Bankruptcy filing typically has many pages with information but an emergency bankruptcy filing is just one page with a list of creditors. You can file remaining part of your petition within two weeks to keep the case alive.
If you have filed for bankruptcy, it does not suggest that you will not be able to get any credit for next ten years. Actually, some companies find bankruptcy a responsible method of discharging debts and even if creditors dread bankruptcy, they realize that when they lend to people who have declared bankruptcy they can stay worry free on bankruptcy for seven years.
At one time bankruptcy was considered to be the lowest disgrace for anyone but today it has become quite common. Businesses file for bankruptcy to evade legal judgments and individuals use it to safeguard themselves.