How Does Bankruptcy Work?

Of course, bankruptcy is your last resort.

It is tough but provides a legal remedy for your financial situation.

Bankruptcy is a 3-step process:
You must first file in federal or state court saying you are “insolvent” – meaning you have no cash or assets (things you can sell) to pay your bills.

You have to arrange a repayment plan with creditors and the court.

You “discharge” – meaning settle your debts with creditors for usually a lower amount than the original bill.

This gives the creditors some of their money back.

Pros and Cons:

Pros:
Legal protection from creditorsTakes care of most of your debtYou may get to keep your homeMay stop financial ruinEnables a fresh start
Cons:
Bad CreditStill have to pay some debtHave to go to courtMay loose your assetsLoss of privacy (usually they print your bankruptcy in the paper)
What if I don’t file bankruptcy – what could happen?

Bad credit rating – making it hard to ever borrow againCreditors may sell your property you put up as collateral – like your car or houseLawsuit – and if you lose, you’d have all the legal costs from both sides plus your billsGarnishment – your wages could be garnished up to 10% to pay creditorsTypes of BankruptcyChapter 7 – straight bankruptcyThis is when you sell everything and pay back creditors.

You can keep your house, but must pay taxes, alimony, fines, and student loans.

Chapter 13This allows you to keep your stuff, but the court appoints a trustee to help you with your wages and pay back your creditors usually within a 3 to 5 year window.

Hopefully, this information has helped your situation, but please, it is always smart and sometimes required by law, to consult with an attorney before filing.

Stuart Simpson collects information and tries to find ways for people to stave off bankruptcy at http://www.bankruptcy-chapter7.com

Stuart Simpson