Bankruptcy is like getting a divorce from your creditors. There are
two primary types of personal bankruptcy: Chapter 7 and Chapter 13.
Each is filed in federal bankruptcy court. Bankruptcy cancels your
debt. If you have unsecured debt like credit cards Chapter 7 might
be the choice for you. Usually, this type of bankruptcy (sometimes
referred to as a "straight" bankruptcy) is a routine process
that is relatively inexpensive. The bankruptcy process takes about
four to six months, normally requires a single trip to the court house,
and requires that you complete a two-page petition and other supporting
forms. When you file a bankruptcy petition an "automatic stay"
goes into effect immediately. This immediately prevents your creditors
from trying to collect what they owe. At the end of the bankruptcy
process, most of your debts are wiped out and you no longer legally
owe your creditors. Unfortunately, many people choose bankruptcy as
an easy way out and do not consider all the drawbacks
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Nearly every American walks around with some debt. According to
the federal government, paying more than 40% of your gross income
to pay your debt burden is an indicator of financial distress. Most
of us have mortgages, many of us have auto loans or college bills
and we surely cannot forget credit cards. The total amount of credit
card debt in the United States exceeds 750 billion dollars and the
average household has over $9,000 in credit card debt spread over
thirteen credit cards! For example, the average forty-year-old person
making $50,000 to $100,000 has about $108,000 in debt. Chances are
a lot of it is credit card debt. To add to this misery, unemployment
rates are at record levels and bankruptcy filings have skyrocketed.
Let's face it, two years ago many of us were saying "Let the
good times roll." Now many Americans are wondering how to get
rid of credit card debt. Perhaps you are considering credit counseling,
debt consolidation, or bankruptcy. If you are considering bankruptcy,
What is the advantage of Chapter 13
over a Chapter 7?
A Chapter 13 bankruptcy is ideal for debtors who either have too
much income to file for a chapter 7 bankruptcy or have debts that
are not dischargeable. Chapter 13 bankruptcy is also ideal for debtors
who are behind on their home or business payments. A chapter 13
bankruptcy allows them to make up their overdue payments over time
and to reinstate the original agreement.
Can all debt be included in bankruptcy?
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 child support, alimony, fines,
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. Also debts incurred in recent
months cannot be included.
Will I lose everything including my
home in bankruptcy?
Each state has established exemptions from bankruptcy court and
all consumers should review their state exemptions before contemplating
bankruptcy. One final point... if
bankruptcy is inevitable, keep your head held high. It is not the
end of the world... it just feels like it. Even bankruptcy does
pass and you should never lower your head because circumstances
overwhelmed you. Just learn from your experience. That's all.
If I have a cosigner on a loan, will
the cosigner be affected by bankruptcy?
You should be aware that any cosigner automatically becomes liable
for the full amount of a co-signed debt. If this is not what you
intend, you should not file or you should make arrangements with
the court for repayment. But even debts you do not want included
(such as a loan from a friend) must be included since the court
does not accept any partiality
Bankruptcy is terribly intrusive because you are required to publicly
disclose your financial activities over the previous two years.
You must also disclose the current property that you own. Additionally,
bankruptcy is emotionally draining because many people interpret
bankruptcy as meaning failure. Bankruptcy also leaves a long lasting
mark on your credit report and does not rid you of student loans,
certain child support obligations and certain tax debt.
What other options should be considered?
· First consider whether the debt problem is temporary or
will the circumstance last a while. Permanent disability may be
far different than job loss. Both are devastating situations but
one may or may not require bankruptcy and the other may only require
negotiating with creditors.
· Creditors are human beings. They are also business people.
They do not want to see bankruptcy for you. They know customer relations
are their lifeline and bankruptcy is profit out of their pocket.
Therefore, see if they will work with you to lower payments, skip
a payment, change billing dates, anything. Do whatever is necessary!
· If all else fails send a smaller than minimum payment.
You can not get in trouble for making a bone fide attempt to repay
creditors no matter how small the payment.
· Instead of thinking of all the debt you have or the high
interest or high balance debt, think of the debt that can be paid
off fastest. Is there any way to pay one debt off quickly by selling
something and then use that added income to apply towards the next
fastest payoff. In other words, do not try to chop down the whole
rose bush. Work with cleaning off one or two unsightly limbs first
and see where you are. It is far to easy to get tangled up in the
thorns and not be able to envision a clean emotional environment.
Get professional help from FIRE International, a legitimate financial services
Pay Less Each Month and Payoff Your
FIRE International and its staff of expert debt negotiators pride themselves
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Years of success with our debt settlement program is the result
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Our financial advisors are available Monday through Friday 9:a.m.
to 5:00p.m. EST Call 800-767-3473 for a free debt settlement consultation
to inform you about the benefits our debt settlement can provide
to you. Review our debt settlement program details, and then, to
relieve your debt burden, click here for a free consultation.