When you have financial problems that are overwhelming, you are under stress to resolve them. You have basically two options: a debt consolidation plan or bankruptcy. When you choose the debt consolidation plan, you work with a company to negotiate structured payments with your creditors. When you file for bankruptcy, you are taking a legal action. This action has to be approved by the court.
Filing bankruptcy means that you are legally insolvent. There are two types of bankruptcy: involuntary bankruptcy where creditors or lenders file a petition against you and voluntary bankruptcy where you file a petition claiming that you are unable to pay your creditors.
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The court determines whether or not you claim can be proved based on the information you provide. If the court determines that you are unable to repay your debts, your debts will be discharged.
If you file for Chapter 7 bankruptcy and it is approved, all of your assets can be sold to satisfy your creditors. There are some assets that are exempt under federal and state statutes. Chapter 13 bankruptcy allows you to repay your debts through a trustee. In either case you should seek the advice of a credit counselor and a bankruptcy attorney.
A credit counselor will work with you to assess your financial situation and offer advice as to how you can remedy the problem. If you have no income or insufficient income to meet your obligations, you may be advised to consider bankruptcy.
Before filing for bankruptcy, you should consider that it will be difficult for you to get a loan, find an apartment, buy a car, or buy a home. The record of your bankruptcy is maintained on your credit file for a period of up to 10 years.
If you decide to file for bankruptcy, it is best to get the advice of an attorney who specializes in bankruptcy. The attorney will ask for detailed information regarding your income and assets. Based on that information, they will work up a model to assist you in determining whether you should file bankruptcy under the statutes of Chapter 7 or Chapter 13.
When you work with a debt consolidation company to negotiate a repayment plan or apply for a debt consolidation loan, there is an opportunity to repair your credit file. When you file for bankruptcy, your credit file becomes negative.
The only way your debts are eliminated is under Chapter 7 bankruptcy. There is a price to pay. Before you make this decision, you should explore all the options available to you.
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