Filing Personal Bankruptcy
There are two primary types of personal bankruptcy and you will need to choose which one is best for you. The first is a Chapter 13 bankruptcy and the other is Chapter 7. Both must be filed in a federal bankruptcy court. You may need the advice and services of an attorney. Its best shop around because fees can vary. When filing bankruptcy, no matter which option you choose it's a drastic step that should be a last resort and only after carefully considering the consequences.
Chapter 13 bankruptcy will allow, assuming that you have a steady income and manageable debt, to keep certain types of property, such as your mortgaged home or automobile. With Chapter 13, the bankruptcy court approves a plan that allows you to pay off your debt over a time period of 3 to 5 years, as opposed to surrendering your property.
Chapter 7 bankruptcy, which is known as straight bankruptcy, requires liquidating all of your assets that you are not allowed to retain. Property you can retain may include automobiles, work related tools and household furnishings. Certain property may be liquidated by court appointed officials or turned over to your creditors. With a Chapter 7, your debt that is included will be discharged.
Chapter 13 or Chapter 7
Both types of bankruptcy may free you of your debt that is not secured and stop foreclosures proceedings against you, utility shut-offs, wage garnishments, repossessions, and the activities of debt collectors. They also offer certain exemptions that may allow you to keep certain assets, though the amounts of the exemption are likely to vary. Filing personal bankruptcy in most cases will not erase fines, taxes, alimony, child support and some student loans. In addition, unless you have come up with a reasonable plan to repay the debt you owe under Chapter Thirteen, filing bankruptcy most often will not allow you to keep property when the lender has a secured interest unless both you and the lender have agreed to repayment terms. Examples would be a mortgage or auto loan.
Bankruptcy and Co-Makers
You must be aware that anyone who has cosigned a loan with you will become obligated for the amount of the joint debt unless they are included as part of your bankruptcy filing. If this is not your intent, you should reconsider filing or make arrangements for repayment of the debt. In addition, debts you may not want to have included (a loan from an friend) will be included because the court will not allow for any partiality.
Some debts that you have recently incurred may not be allowed to be included. Some credit card companies state that from 30-40% of their losses are fraudulent due to bankruptcy and will not think twice before screaming fraud to the court. An example would be, if you planning to take vacation on your credit card and then declare personal bankruptcy, this may constitute fraud. You must also be fully aware that a bankruptcy will stay on your report for 10 years and will have a huge effect on your credit score making it much more difficult if not impossible to get a loan. It will also insure that you will pay a higher rate of interest if you are able secure a loan. Also, be aware that bankruptcy laws vary state to state. Be sure the information you have is applicable in the state that you reside.