Filing For Bankruptcy What You Need To Know
Are you in piling amounts of debt and see no future in yourself? Unfortunately, you may be on the verge of bankruptcy, which should only be relied upon as a last resort when you can’t determine your debts. In fact, in order to file for bankruptcy, you need to meet certain criteria before you can declare yourself bankrupt. The guidelines vary between different countries and jurisdictions so you should consult your local sources before making any decisions. Be aware of the type of bankruptcy and what sort of criteria is required for each, before consulting with the appropriate registered services to make your case.
The first step is credit counseling, which basically organizes your balance according to income and personal expenses. Expenses that are not well-known would be removed and this amount usually depends on family size – again seek advice on bankruptcy regulations for your country. Once this is done, the amount of salvage income you have after the deduction of expenses is obtained. This would tell the authorities whether you qualify for bankruptcy, or you may be able to pay off your debts with the available balance. After you have successfully qualified, you have to attend court and prove that you are unable to pay off debts on your own. Some debts may be exempt from bankruptcy so they cannot be included into the bankruptcy filing, for example student loans.
In the U.S. system, there are two different types of bankruptcy – chapter 7 allows all the debts to be resolved and liquidated; whereas chapter 13 involves the generation of a repayment plan to pay off current debt. Chapter 7 cannot be filed if you breach the income limit or possess disposable income that allows you to repay expenses. Conversely, filing for chapter 13 when you don’t have enough financial income would result in the courts rejecting your case. The credit counseling should help you distinguish which option you should take. Each of these choices have advantages and disadvantages of their own.
Although chapter 7 might seem the obvious choice, the bankruptcy is attached to your credit report for ten years, meaning it is difficult to obtain loans or mortgages. With a chapter 13, the time period is seven years, and your credit rating is nearly erased after the repayment, but it does require some form of income for this to work. It is for these reasons that filing for bankruptcy should only be used as a last resort, as paying debts the hard way may actually lead to a better long term outcome.
If you are worried you are falling into debt, don’t hesitate to file for protection as this does not automatically mean filing for bankruptcy. The initial budgeting process helps to identify any overspending on non-essential items and maximize your chances from going bankrupt. If you apply early, then there might still be something that can be done to erase the debt. You would also receive expert advice and information from people who are skilled in personal finance. If you were forced to file for bankruptcy, at least you can teach yourself how to manage your finance so as to prevent this from ruining your life.
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Filed under Declare Bankruptcy Student Loans by on Jan 22nd, 2012. 