Bankruptcy

Should You File for Personal Bankruptcy

The decision to file for personal bankruptcy is difficult. There is often a social stigma. Plus, bankruptcy can have a long-term effect on your credit score.

But there are times when personal bankruptcy is the best and only option.

For example, medical bills can pile up following an injury or illness. Perhaps you’ve been fired or laid off. The birth of a child or the death of a contributing wage-earner can affect your ability to pay the bills. Or perhaps you’ve made some bad financial decisions.

Whatever the reason, creditors and collection agencies are now hounding you.

Factors to Consider

The decision to file for bankruptcy depends on many things: how much you owe, the type of debts you have, your current income, your savings, and available alternatives to bankruptcy. Bankruptcy stays on your credit report for 10 years.

Personal bankruptcy rarely erases child support, alimony, fines, taxes and student loan obligations.

Alternatives to Personal Bankruptcy

Sometimes you can satisfy your creditors on your own with better budgeting. Another route is credit counseling. A good credit counseling service looks at your income and expenses, helps you fashion a workable budget, and then contacts all of your unsecured creditors to negotiate lower balances and interest rates. But beware of scams.

Debt settlement is another alternative. If you can come up with cash, then you might be able to settle your unsecured debts for significantly less than the full amount.

Two Types of Personal Bankruptcy

Chapter 7 is meant for people who have large amounts of debt and low income. You must give up much (but not all) of your property to pay off your debts. After that, however most of your debts will be wiped out.

If you make enough money to repay at least some of your debts, you may be able to file under Chapter 13. As long as you make the agreed-upon payments for three to five years, you should be able to keep your belongings.

Both types of bankruptcy can help you get rid of unsecured debts and put a halt to threatening foreclosures, repossessions, garnishments, utility shut-offs and debt-collection activities.

Get Counseling First

With limited exceptions, people who plan to file for bankruptcy protection must get credit counseling from a government-approved organization within six months before they file. They also must complete a debtor education course after filing and before their debts are discharged.

Do Not Try to Hide Your Assets or Income before Filing for Bankruptcy

This is fraud. If discovered, it will cause the bankruptcy court to dismiss your case or deny your request for discharging your debts. You can also be criminally prosecuted and spend up to five years in prison.

Call a Personal Bankruptcy Lawyer

The laws surrounding debt settlement or personal bankruptcy are complicated. There are many scammers just waiting to take advantage of frightened debtors. Plus, the facts of each case are unique. This article provides a brief, general introduction to the topic. For more detailed, specific information, please contact a personal bankruptcy lawyer.

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