Understanding The Bankruptcy Process

Nobody wants to think about bankruptcy. However, if you are confronted with such a possibility, then it is absolutely vital that you familiarize yourself with the process. If you don't, then you might suffer even more.

What is bankruptcy?

If you owe money that you don't have and that you have no foreseeable means to acquire, then you are probably going to have to declare bankruptcy. However, bankruptcy is not necessary in all situations. On top of that, some debts aren't actually removed by bankruptcy. There are also several different types of bankruptcy that function vastly differently, including Chapter 7 and Chapter 13 bankruptcies.

When should you not file bankruptcy?

If a significant portion of your debt is composed of tax debts or alimony, then you might not want to go down the bankruptcy route. These types of debts are not usually wiped by bankruptcy, which means that you won't really benefit from declaring bankruptcy. If you have a lot of student loan debt, then you might find it incredibly difficult to erase those debts via bankruptcy, although it is not without precedent.

In other cases, you might be able to avoid bankruptcy simply by making changes in your finances. It can be very hard to impartially determine which parts of your budget need to be cut. In these situations, you might benefit greatly from the services of a financial planner, who can help you determine whether bankruptcy is the right choice for you.

Finally, there might be mitigating circumstances in your life which render you judgment proof. If you are judgment proof, then it is difficult or impossible for your creditors to force you to repay your debts. If you are absolutely unable to pay your debts due to a lack of assets and income, then you might not need to pursue bankruptcy at all.

What is the difference between Chapter 7 and Chapter 13 Bankruptcies?

In short, Chapter 7 is a liquidation of your assets and a repayment of your debts through the proceeds. A Chapter 13 is a long-term repayment plan in monthly or biweekly installations.

Chapter 7 is a much shorter process and will be completed in several months. However, a Chapter 7 also means that you will lose a large portion of your belongings. If your steady income isn't high enough, then you will probably have to take a Chapter 7.

Chapter 13 can take several years, but it will leave your assets relatively intact. Given the choice between the two, you will probably want to take a Chapter 13 since it is much less intrusive in your life. For more information, contact Richard S. Ross - Bankruptcy Attorney.