Personal Bankrupcy

There are two categories of bankrupcy: reorganization (chapter 11, 12, and 13) and liquidation (chapter 7). In a chapter 7 bankrupcy, a trustee collects your non-exempt property, sells it, and distributes the proceeds to your creditors. You may use future earnings to pay creditors in a chapter 11 bankrupcy, chapter 12 bankrupcy, or chapter 13 bankrupcy. There are differences between filing a chapter 13 bankrupcy and a Chapter 7 bankrupcy. Chapter 13 bankrupcy enables a debtor to retain certain assets that would otherwise be liquidated in Chapter 7 bankrupcy.

Filing bankrupcy begins by filing a petition in Federal bankrupcy court. You must file a statement of assets and liabilities as well as schedules listing creditors. Once you have filed for bankrupcy, your creditors are prohibited under bankrupcy law from taking any action to collect discharged debts. This is stated under bankrupcy law 11 U.S.C. § 1301.

Many people believe filing bankrupcy seems like an easiest way out. Bankrupcy should be used as a last resort. Filing bankrupcy is the worst thing you can do to your credit. A bankrupcy can stay on your credit report for up to ten years from the day you file bankrupcy papers. Issuers of credit are free to consider a bankrupcy when evaluating you for a personal loan after bankrupcy. Some credit grantors may give credit only if a predetermined amount of time has passed, or the personal bankrupcy is no longer on your credit report. Attaining a loan after filing bankrupcy isn’t easy and will cost you more in interest rates and fees.

There are other negatives when filing bankrupcy. With a chapter 13 bankrupcy you could end up paying back 50% or more of the debt. Under bankrupcy law, if you miss a payment you could end up in breach of court and forced to pay the whole debt. Bankrupcy law limits your personal spending after you have filed a chapter 13 personal bankrupcy to only items considered essential.

Also, the majority of debtors don’t complete their Chapter 13 personal bankrupcy repayment plans. Although most people filing personal bankrupcy chapter 13 assume they'll complete their plan, only about one third do. A chapter 7 may stay on your credit longer than a chapter 13 personal bankrupcy. Here you would be paying nothing back to your creditors. If you own a home with significant equity, have assets to protect, or have co-signers to a loan, you probably cannot file chapter 7 personal bankrupcy. If passed, recent bankrupcy law proposals will make filing personal bankrutpcy even more difficult.

In some cases filing personal bankrupcy may be necessary. However, as you can see from the personal bankrupcy information we’ve presented, it should be avoided if possible. With more difficult bankrupcy laws and the increased difficulty in securing a personal loan after bankrupcy, filing personal bankrupcy is truly a last resort. A competent debt reduction company can help reduce your debts to a manageable level so you don’t have to proceed with filing personal bankrupcy. For a free consultation from Professional Debt Advisors simply fill out the form to the right or call us at 866-559-3328 we are here to help.

You can find more information on bankrupcy law by contacting your local personal bankrupcy attorney or by researching online.

* We are not attorneys and this information should not be construed as legal advice. This website is for informational purposes only.

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