Tuesday, November 6, 2012

A Few Bankruptcy Basics

Many people struggle with their finances each day, and many more will probably be subject to some tough decisions in the coming months. While no one sets out to become financially insolvent, it occurs to the best of us. Even big companies get hit by it, good thing they have a lot more options available such as pre pack liquidation, administration and insolvency. But for normal people, job loss, separation and divorce and medical illness can force even the most financially savvy person into the need for bankruptcy. Luckily, filing can give anybody a brand new start.

Is It Right For Me?

Although there isn't a hard and fast rule for knowing whether bankruptcy is the right choice there are a few signs it could help. Are you more than Three months behind on multiple debt accounts? Have you received collection letters or even notifications of wage garnishment? Is your home at risk of foreclosures? Do you owe more in debt payments than you have in disposable income each month? Do you borrow from one credit source to pay for yet another debt account? If you answered "yes" to any of these queries, it may be time to seek counsel from a bankruptcy lawyer.

Which Type Is Best?

The most frequently sought after type of bankruptcy is Chapter 7. Offering debt resolution through little to no out of pocket costs to the debtor, Chapter 7 is yet a fast process that can have you debt free in about 6 months. However , Chapter 7 bankruptcy includes some additional considerations.

First, not everyone qualifies for Chapter 7. In order to be eligible, you have to pass a means test; which examines your income from the median income level of your state. If your income is less than or equal to this amount, you may be qualified to file. If your income is more than this amount you will not be eligible to file, but may file for Chapter 13 as an alternative. Also, Chapter 7 cannot resolve all debts without risking possession of particular assets. Your house and car may be at risk of liquidation if you do not continue to make payments. Last, Chapter 7 can have a more significant impact on your ability to secure future credit. Whilst filing for bankruptcy doesn't damage your credit, lenders are more hesitant to lend to someone that didn't fulfill their debt obligations.

A lot of people assume Chapter 13 is a second-rate type of bankruptcy, but the reverse is true in most cases. Filing for Chapter 13 might take longer to complete, but the implications for future credit and loans can be far better.

Contrary to Chapter 7, almost anyone can be eligible for Chapter 13 bankruptcy. Because there is no income restriction, Chapter 13 can be a better choice for those with higher incomes. Furthermore, since payments will be made to creditors through a series of affordable payments over the course of three to five years, debts will probably be considered "repaid" rather than "satisfied". This minimizes the implications of future credit and loans.

For learn more, see Finance7.

No comments:

Post a Comment