Bankruptcy
Personal bankruptcy generally is considered
the debt management tool of last resort because the
results are long lasting and far reaching. A bankruptcy
stays on your credit file for 10 years, making it
difficult to acquire credit card, buy a house get life-insurance, or sometimes get a
employment. However, it is a
legal procedure that offers a fresh start for people who
can't satisfy their debts. Individuals who follow the
bankruptcy rules receive a discharge—a court order
that says they do not have to repay certain debts.
There are two primary types of personal bankruptcy:
Chapter
13 and Chapter 7. Each must be filed in federal
bankruptcy court. The current fees for seeking
bankruptcy relief are $160: a filing fee of $130 and an
administrative fee of $30. Attorney fees are additional
and can vary widely. The consequences of bankruptcy are
significant and require careful consideration.
Chapter 13 allows you, if you have a
regular income and limited debt, to keep property, such
as a mortgaged house or car, that you otherwise might
lose. In Chapter 13, the court approves a repayment plan
that allows you to pay off a default during a period of
three to five years, rather than surrender any property.
Chapter 7, known as straight
bankruptcy, involves liquidating all assets that are not
exempt. Exempt property may include cars, work-related
tools and basic household furnishings. Some property may
be sold by a court-appointed official —a trustee— or
turned over to creditors. You can receive a discharge of
your debts under Chapter 7 only once every six years.
Both types of bankruptcy may get rid of unsecured
debts and stop foreclosures, repossessions,
garnishments, utility shut-offs, and debt collection
activities. Both also provide exemptions that allow you
to keep certain assets, although exemption amounts vary.
Personal bankruptcy usually does not erase , alimony, fines, child
support, taxes, and some student loan
obligations. Also, unless you have an acceptable plan to
catch up on your debt under Chapter 13, bankruptcy
usually does not allow you to keep property when your
creditor has an unpaid mortgage or lien on it.
Answer to bankruptcy filing, foreclosure, bill collectors,
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