Free Debt Help - File for Bankruptcy
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This step should only be used when you are physically unable to pay off your debts. There are two main types of personal bankruptcy and both will severely hurt your credit. However, bankruptcy is also a very useful and legal way to eliminate a lot of your debt and give you a second chance to get out of and stay out of debt.
What to expect when you file for bankruptcy?
· Bankruptcy is a legal method of debt relief that involves working with your creditors, judges and most likely, with lawyers. To file bankruptcy, you need to file a petition to the Bankruptcy Court in your community. These petitions are often complicated and, unless you are very resourceful, you’ll probably need to hire a lawyer or other debt help service to help you with the process.
· Bankruptcy usually eliminates a lot of the debt you owe to your creditors and protects your personal assets and belongings (your home, car, furniture, etc.).
· The two primary types of personal bankruptcy that can be filed are Chapter 7 and Chapter 13.
· Chapter 7 bankruptcy is the most common form of bankruptcy. It eliminates nearly all of your unsecured debt and protects you from your creditors. This form of bankruptcy is best for individuals with large credit card debt and other unsecured bills who also have very few assets. Your personal belongings and household goods are exempt assets and will not be taken away. Chapter 7 can only be filed by individuals (not businesses or partnerships), and cannot be filed more than once in a six year period. Generally speaking, if after you pay your essential monthly living expenses, you do not have enough money to pay your debt, then this may be a good option for you. Chapter 7 bankruptcy will stay on your credit report for 10 years.
· Chapter 13 bankruptcy is less lenient than Chapter 7 and is typically for individuals (not corporations or partnerships) who have high income or a lot of assets (especially assets that are not exempt from bankruptcy). Also, if you are behind on your mortgage or business payments and you want to avoid foreclosure, this could be your best choice. In Chapter 13 bankruptcy you propose a 3 – 5 year repayment plan to your creditors, offering to pay off all or part of the debts with your future income. Chapter 13 bankruptcy will hurt your credit report for at least the next 7 years.
· Some debts are not dischargeable through bankruptcy. These include state and federal taxes, student loans from less than 7 years ago, and debts induced by fraud.
· Filing bankruptcy will severely impact your credit report for the next 7 to 10 years. You will also have to check the bankruptcy box on nearly any type of loan application you apply for over the next 7 to 10 years.
· Bankruptcy will protect your from creditors and bill collectors. By filing bankruptcy, federal law imposes an automatic stay against your creditors that makes it illegal for them to take any action to collect their debts. However, once the bankruptcy is over, creditors that were not covered by the bankruptcy may continue to collect their debts.