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Should I File For Bankruptcy?  

When you are overwhelmed with debt and people calling you all the time demanding their money, which you cannot pay, bankruptcy may seem like a good idea. At this time, the most important question in your life will be "Should I file for bankruptcy?"

Bankruptcy Benefits

Bankruptcy, depending on the type, may be the only option for those who feel overwhelmed with debt and nowhere to turn. Many people faced with huge debts are intimidated, embarrassed and reluctant to take this option, but as with all things there are pros and cons and each should be carefully studied before making a decision. Some of the benefits are:

• ensures you wiping out some or all of the debts depending on the type of bankruptcy 
• stopping the harassment by your creditors 
• reduced accumulation of debts 
• extension of repayment periods with the protection of the court 
• protection from garnishments 
• protection from lawsuits regarding the debt 
• new beginning 
• stress reduction 

The different types of bankruptcy offer different types of protection for the debtor and creditor. A qualified bankruptcy attorney can help the debtor make decisions that are beneficial for them and their financial problems.

Bankruptcy Long-Lasting Effects

For example:

• ruining a person's credit record; hence, making it difficult and occasionally impossible to have credit cards and bank accounts for certain periods of time. 
• It can also result in the loss of some valuable property such as cars, real estate, and home along with other valuables. This can contribute in making the life of the petitioner difficult. 

Other than physical property, purchasing or renting cars, homes, acquiring insurance and even getting a job may also be affected.

Alternatives To Bankruptcy

• wise budgeting 
• credit counseling 

When all the alternatives have failed in saving their financial status, then it may be necessary to seek the help of a bankruptcy attorney to help them through the process.

Common Types Of Bankruptcy

There are a number of bankruptcy petitions that can be filed. However, only two are commonly used: Chapter 7 and 13. Both of the primary bankruptcies have to be filed in a federal court of law.

There are also conditions that have to be satisfied for the cases filed to be eligible.

Once the bankruptcy file is presented to a court of law, there is an instantaneous protection order issued by a court protecting you from getting harassed by the creditors.

When filing for bankruptcy, you are supposed to participate in credit counseling education that will help you in getting organized financially.

You will be required to take a means test which is meant to determine the amount of your income and your capability of repaying or not repaying your debt.

The income amount is important since it helps in determining not only your ability to take bankruptcy, but also what type: Chapter 7 or Chapter 13. The court, not you, will make that decision.

Chapter 13

A common belief among individuals is that bankruptcy is generally associated with liquidation of property. However, of late, there are some revisions that have been done to the laws in Chapter 13 to help in preventing liquidation of property when it is not necessary.

Chapter 13 provides a chance for debtors who have valuable assets and a steady income to repay their debt over time.  Chapter 13 bankruptcy only allows the rescheduling of your income so that it can be distributed over all the debts held.

The debtor is supposed to declare the amount of income expected in the future so that the court can determine what debts will be forgiven and which will be paid over a certain time span.

Chapter 7

Chapter 7 of the bankruptcy rules involves liquidating all non-exempted property held by the bankrupt party and using the cash redeemed in repayment of some of the debts.

When you are filing for bankruptcy as a way of getting rid of some debts, it is essential for debtors to understand that there are some debts that are rarely affected by bankruptcies.

Examples of such debts include:

• mortgage arrears 
• student loans 
• taxes 
• child support 
• court fines 
• lawsuit arrears from injuring a person as a result of driving under influence 

In some cases the judge may deny your bankruptcy files. A bankruptcy attorney can help you determine which debts can be forgiven and whether you are eligible for a Chapter 7.

When filing Chapters 7 and 13 bankruptcies, a trustee will be assigned by the court. The purpose of the trustee is to conduct independent and fair research that will be reported to the judge.

The trustee is also responsible for deciding the property that can be liquidated to pay off some debts, and approves repayment deals debtors may make with the creditor.

Only after extensive research on how to file bankruptcy and consultation with a reputable bankruptcy attorney, can you be confident enough to answer the question, "Should I file for bankruptcy?"