Those In Financial Distress Should Learn More About Filing For Bankruptcy

When an individual faces a dire financial situation due to unforeseen medical expenses, excessive credit card debt, loss of employment, and divorce, it is inevitable that they are going to have to make some major changes in order to afford their every day life. Needless to say many of these events create not only financial difficulty but also a tremendous amount of disruption and distress in and of themselves. This makes it especially important that individuals consider all available options and alternatives to filing to make sure whatever action they settle upon is in their long term interest- and filing for bankruptcy is one option they should investigate.
Chapter 7 and Chapter 13 are the two main chapters under which individuals can place their petition under when filing for bankruptcy. Chapter 7 is a liquidation of assets. This type is often referred to as "regular," "straight" or "liquidation" bankruptcy as it discharges all of your unsecured debts without a repayment plan. Under Chapter 7, you must give up any nonexempt property that you own, meaning those select property items which aren't covered by protection under the law. The trustee assigned to your petition may sell this property and divide the proceeds among your creditors. Property that isn't discharged includes secured loans like cars, homes, and some credit card purchases. You can choose to forfeit these assets that provide security for the loan, in order to discharge the debt.
Chapter 13 is reorganization where the debtor creates a three to five year payment plan. When a person is filing for bankruptcy under this type, it involves a reasonable, court-approved repayment plan designed to pay back all or part of the debt over a five-year period. This plan will be based on income level, and covers both secured and unsecured debt. Individuals typically have to pay all of their disposable monthly income to the trustee, who then disperses the money to their creditors. A certain amount will be allowed for entertainment and emergency purchases. The payment plan must pass two tests; the best interest test and the best efforts test. Under law, Chapter 13 cannot last longer than five years. As long as one makes their payments under the payment plan, creditors can't contact them. This plan is an excellent solution as long as one is capable of creating and following a budget.
If one is interested in filing for bankruptcy, then they should learn more about the federal law surrounding the subject. Deciding to file is an important decision and the law and its application to one's particular situation can be very complicated. The forms and requirements for filing can be very complicated, and though it can be done without legal support, it is generally recommended that one consult with an attorney with experience in this field. One can obtain a free consultation from a lawyer in order to discuss their personal situation and determine whether this is the best option available for them.