Bankruptcy basics – When should you file bankruptcy?

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Sometimes bankruptcy is your only option. You should first assess your situation.

Bankruptcy seems scary. The word “bankruptcy,” itself, sounds so frightening. Every day, the media tells horror stories about seemingly solid businessmen going from bankrupt to bedrock. It seems that gossip columns don’t stop revealing the latest celebrity who is just inches from going bankrupt. You may be worried that you might go under. But, how can you know when it is time to declare bankruptcy and throw in the towel? Find more bankruptcy information at Bankruptcy HQ.

How to assess Your Financial Situation

Here are some questions to help you assess the financial danger zone.

  • Are you willing to only make minimum monthly payments on your Credit Cards?
  • Are bill collectors calling your home?
  • Does the thought about resolving your financial affairs make you feel overwhelmed or scared?
  • Do you use credit card to purchase your necessities?
  • Are you considering debt consolidation?
  • Do you wonder how much debt you really owe your creditors?

If you answered yes, to one or more of these questions, you might want to think about your financial situation. Simply stated, bankruptcy refers to when you owe greater than you can comfortably pay.

Take stock of all your liquid assets to see where you stand financially. Include retirement funds, stocks bonds, real estate and vehicles. Add up the approximate cost of each item.

Next, gather and add up your credit cards and bills. Declaring bankruptcy can be an option to help you get out of a financial bind if the value of your assets exceeds the amount of your debt. The bankruptcy process should not be taken lightly. However, bankruptcy is not a quick fix for all your out-of control debt.

How do I declare bankruptcy?

One of two options is available to you for declaring bankruptcy. Most people file bankruptcy voluntarily. Creditors may ask the court to make a person bankruptcy.

There are many options for filing bankruptcy. Each has pros and cons. A lawyer may be a good idea to help you choose the right option for your situation.

Filing for Chapter 7 Bankruptcy

There are many reasons why people file Chapter 7 bankruptcy. No matter what reason you have, you are not the only one. There are many reasons to file for bankruptcy, including marital problems, unemployment, high medical bills, overextended credit and marital difficulties. Sometimes, Chapter 7 is referred to simply as “straight bankruptcy”. Chapter 7 bankruptcy allows you to liquidate your assets and pay off your debts as quickly as possible. The creditors receive the cash you have left over. Creditors like banks and credit card companies get it.

You will receive a notice de discharging within four months. Your credit report will keep the record of your bankruptcy for ten years. However, that does not necessarily mean doom. Many Chapter 7 filers bought houses with recent bankruptcies. Chapter 7 is a fast and fresh start for many.

Chapter 7 bankruptcy is not right for everyone. Nearly all assets are sold to pay creditors. Chapter 7 is not the best option if a debtor has a business, a family home or other assets that he or she would like to keep.

Filing for Chapter 13 Bankruptcy

If you have assets that you want to keep, filing Chapter 13 bankruptcy might be a better option.

Also known as a Chapter 13 bankruptcy, a Chapter 13 bankruptcy can also be called a reorganization bankruptcy. People can pay off their debts in Chapter13 over three to five year periods. Chapter 13 allows individuals with a steady, predictable income to apply for a grace period. All outstanding debts are discharged at the end the grace period.

After the bankruptcy has been approved by the court creditors can no longer contact the debtor. The court may allow the debtor to continue working on and paying off his or her debts in the following years while still allowing him to keep his property and possessions.

Bankruptcy Declare: It’s scary, but sometimes necessary

Sometimes it can be difficult to admit that you need help with debt relief or that you are unable to do it on your own. Our government has bankruptcy laws that protect both creditors and individuals. It may be time for you to confront your financial reality if you are struggling with your debt. Maybe you have tried to ignore the ringing of your phone or the pile of unpaid bill that won’t go away.

You could be doing yourself a disservice if you don’t file for bankruptcy. A good lawyer can help you get the financial support you need to make a fresh start. In other words, you may not need to throw in the towel.

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