If you've run up your debt to a point where you feel you can't get out, personal bankruptcy may be the way for you to get some relief. However, the decision to file bankruptcy is not a light one, and you should give some serious consideration to this before you contact an attorney. It will affect your ability to obtain credit in the future, and may keep your credit frozen for some time. It is important that you do not file bankruptcy unless you have exhausted all other options. If your debt is not too excessive and you have the means to pay it off, start with a credit counselor to see if you might qualify for some other program. If you are planning on buying a new home or vehicle in the near future, you do not want to go this route because even if you do get approved for the loan, the interest rate will be sky high.
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Bankruptcy is a legal process that works one of two ways. You can either have all your debt wiped out and start all over again, or you can have an opportunity to pay your debts off in three to five years without worry of being harassed by bill collectors. Personal bankruptcy simply means that you are doing this for your own credit rather than that of a business.
The two major types of personal bankruptcy are Chapter 7 and Chapter 13. In a Chapter 7 bankruptcy, you ask the court to wipe away, or discharge, your debts. In exchange, you give up certain property to be sold and used to pay your creditors. This is the most popular type of bankruptcy, and it is the one most people file. However, this type is becoming much harder to obtain, especially in certain states since bankruptcy law has some variations from state to state, and you must file in the state in which you reside.
When you file Chapter 7, it does not apply to secured loans such as your car or mortgage, and if you are behind, you usually must pay them off immediately. This means with this type of bankruptcy you have a much better chance of losing your property or car.
With Chapter 13, you file a plan on how you will pay back some of your debt. Certain debts have priority, and usually you must use all your extra income in payments. But this can help you keep your car or home if you have fallen behind on your payments.
If you don't file personal bankruptcy, the creditors have many avenues to try to reclaim their debt, including ones that may leave you without any money at all. These are a few of the things that can happen:
* Repossession of property or vehicles.
* Liens.
* Garnishment of your paycheck.
* Attachments to your bank account.
* Freezing your assets.
* Turning off utilities.
* Eviction.
In other words, the avenue of doing NOTHING if you are facing severe financial problems is a worse route to go than filing bankruptcy, since any or all of the above can occur.
By filing personal bankruptcy, you will avoid these hassles. And in many cases you can begin to reestablish your credit right away. If your debt is wiped out, you may appear to be less of a risk when applying for credit. Many people reestablish their credit and are able to qualify for a FHA or VA mortgage within two years of filing Chapter 7. Filing personal bankruptcy is nothing to be ashamed of. It may be your best bet.
Is Bankruptcy Right For You? Talk to Bankruptcy Attorneys Free and Confidential. Licensed bankruptcy attorneys are available. Attorneys will call you to discuss your case for free. Find out if bankruptcy is right for your situation.
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