Filing personal bankruptcy can be a tough situation for many people, who may not know exactly how to handle filing personal bankruptcy. Personal bankruptcy marks both end of a financially burdensome lifestyle and the beginning of the unknown. For many people, it suggests a stigma that they may have tried everything in their power to avoid, yet had no other choice but to succumb to.
How to Handle Financing Personal Bankruptcy
Often times people do not take into consideration the possible ramifications of filing personal bankruptcy before they actually file. On many occasions the benefits may out weigh the ramifications, but there are certain things that need to be considered prior to filing for personal bankruptcy.
- First and foremost, you need to know whether or not your debts are dischargeable in bankruptcy court. Sometimes if you file bankruptcy, all of your debts will not be discharged. For example, student loans and tax debt are not dischargeable. If this is the case, then you should reassess your financial situation.
- Second, you need to decide if it is worth it in the long run to keep your debt. A lot of times, debt is not a bad thing. Debt can help you re-establish your credit, as long as the payments are affordable. One of the ramifications of filing for bankruptcy is that all of your debt could be discharged, which would make it harder for you to get something practical like a car loan once the bankruptcy is placed on your credit report. Since this is the case, you might consider retaining your current car loan.
- Once you take those factors into consideration, then you can decide which chapter of the U.S. Bankruptcy Code you would like to pursue. It is very common for people to choose to file either a Chapter 7 bankruptcy or a Chapter 13 bankruptcy.
A Chapter 7 bankruptcy is a personal bankruptcy that is said to liquidate your debt. Usually, any assets (with a few exceptions such as some home equity) that you have will be given to the trustee who is appointed to oversee your property for purpose of selling them to pay off your creditors. When filing a Chapter 7 bankruptcy, most of your debts are cancelled after the assets are sold and payment is made. This is known as a straight bankruptcy.
If you choose to file a Chapter 13 bankruptcy, you will not necessarily be eradicating your debt. Actually you will be instituting a court approved repayment schedule in order to satisfy any and all debt that you have. Most people opt for the Chapter 13 as a temporary option to fix their debt issues because they are expecting to grow their incomes significantly in the future.
Getting Help
Whether you decide to file a Chapter 7 or a Chapter 13, definitely consult with a bankruptcy attorney. A bankruptcy attorney can provide you with full details on how to handle filing personal bankruptcy so you can be better prepared.
