Friday, May 4, 2012
If you're considering filing bankruptcy, there are several questions you need to ask yourself before you get too far into the process. Choosing between Chapter 7 and Chapter 13 bankruptcy will depend on a number of factors, including your personal situation, your state of residence, the amount and type of your debt, and the total value of your assets.
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Getting Help from the Right People
Regardless of whether you have a considerable amount of non-exempt assets, you should get help for bankruptcy filing from a reputable attorney who specializes in financial matters. Bankruptcy doesn't have to mean losing your home, your car or the bulk of your possessions. In fact, your attorney will help guide you through the process and do everything he or she can to make sure you lose as little as possible.
Chapter 7 bankruptcy
Chapter 7 bankruptcy is usually the best option for those who have a lot of unsecured debt, like credit cards, medical bills and outstanding payday loans, but little in the way of assets. Because Chapter 7 is also known as liquidation, the bankruptcy court will expect you to surrender non-exempt assets to help offset your debt. If you're considering Chapter 7 bankruptcy, talk with your attorney and learn which of your assets are exempt.
While it is often tempting to transfer any non-exempt assets before filing for bankruptcy to save them from liquidation, don't do it. This is illegal and can harm your petition, causing you to be denied and have even more problems in the long run. If you feel you have too much in asset value to lose, you'll probably benefit from filing Chapter 13 bankruptcy instead.
Chapter 13 bankruptcy
Chapter 13 bankruptcy functions much like a consolidation loan, where the court reduces your payments and makes them easier to manage. This type of bankruptcy allows you to hold on to your major assets, such as your vehicles and primary residence, as you will still be paying for them.
This type of personal bankruptcy is an organization of your debts, resulting in a single monthly payment that is usually much lower than your combined original loan payments. Filing Chapter 13 can stop a foreclosure action on your home, forgive delinquent mortgage payments and stay the collection efforts of your creditors.
Once you have completed the filing and had your debts discharged or reorganized, you can get back to planning for your future success. Bankruptcy can give you a fresh start and open the door to financial security.