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Considerations Before Filing Bankruptcy

(Disclaimer: This article is not intended to be legal advice. Please consult a bankruptcy attorney prior to making any legal decisions.)

Filing bankruptcy is not only a last resort legal action; it is also a very complicated legal action that definitely needs the expertise of a lawyer. When thinking about bankruptcy, you first need to decide if bankruptcy is right for you. If it is, then you need the help of an attorney to decide which type of bankruptcy is required for your particular situation.

The decision to file bankruptcy can be brought on by many different circumstances. The most common circumstances are divorce, medical hardships and credit card troubles. In cases of divorce, bankruptcy is often inevitable. The sudden change in financial level and the added burden of court costs, extra expenses and child support often cause one or both parties to get behind on their financial obligations.

In the case of medical hardships, high medical bills can sometimes overburden people even if they have insurance. This is even more likely to happen if the person experiencing the medical emergency is also the family breadwinner.

The most common case of financial hardship is incredibly high credit card balances. After carrying numerous high credit balances for a certain period of time, many people find themselves unable to make anything but the minimum payment and sometimes not even being able to make that. Then, when the high interest rates are added in, people find themselves in a situation where repayment is often impossible.

Whether your situation arose from one of the above financial problems or not, sometimes bankruptcy is the only answer to your monetary problems. Once you have decided that bankruptcy is the answer for you, you will need to enlist the services of a lawyer to decide which type of bankruptcy to file and to help you navigate the many complex bankruptcy laws and regulations.

There are four main types of bankruptcy, Chapter 7, Chapter 13, Chapter 11 and Chapter 12. Chapter 7 is the most common form and can be used by businesses and individuals. Chapter 13 is the second most common form, but it is limited to use by individuals only.

In a Chapter 7 bankruptcy, a debtor's property is divided into to categories, exempt and non-exempt. Exempt properties include things that the debtor will be allowed to keep like their home and automobile. In the case of exempt properties, the debtor is allowed to keep them as long as he or she continues to pay for them. If a person cannot continue to make payments, the owner of the loan may repossess the property, even after a bankruptcy has been finalized. Any non-exempt or unsecured property will be sold to cover the debtor's financial obligations. Debts such as credit card debts and medical bills can be written off with this type of bankruptcy, but other debts like school loans and taxes cannot be.

In Chapter 13 bankruptcy, the debtor is required to come up with a way to repay his or her debts, but these debts usually do not have to be repaid in full. In most cases, a creditor will agree to take a small percentage of the owed debt as opposed to losing all repayment all together. This form of bankruptcy is preferable for those individuals that wish to keep all of their possessions and just need a chance to catch up on their financial obligations. It does not, however, excuse a debtor from priority debts like taxes and child support.

In order to qualify for Chapter 13 bankruptcy, an individual must have a yearly income level that allows for repayment of each of his debts within three to five years. After three to five years of consistent repayment, the debtor's obligations are released.

After you have researched bankruptcy and decided that it is right for you, you need to contact an attorney that specializes in bankruptcy to help assure that you follow all legal guidelines and are protected from further collection activity. 

Lafayette Financial

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1427 Finley Lane, Alamo, CA 94507
(925) 935-7727 (P)
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