All the information you need to make an educated decision
Bankruptcy Options
Bankruptcy can be a great alternative for individuals and businesses in desperate need of financial relief. Filing can provide borrowers with clean financial slates either by discharging debt so that the one no longer is liable for its repayment, or by instituting a realistic repayment plan under the discretion of the bankruptcy court. These opportunities, of course, come with some costs, and it is imperative that filers turn to bankruptcy only as a last resort.
Filing bankruptcy is a very serious move, and you must consider your options in comparison to your financial future. Bankruptcy will be listed on your credit reports for ten years (three years more than more than most negative items), it may affect your ability to get credit or loans, and it may affect your ability to file bankruptcy in the future.
If bankruptcy truly is the only choice for your situation (and certainly there are situations that qualify), then you should decide with a bankruptcy professional which type of bankruptcy is best for you. There are two main types: liquidation and reorganization.
Liquidation bankruptcy results in a discharge of debt so that the filer no longer is liable for repayment. Property of the filer is "liquidated" and then sold, to pay off as much of his or her unsecured debt as possible. Debts that remain after the liquidation generally are discharged.
The goal of reorganization bankruptcy, on the other hand, is to rid oneself of debt by following a court-ordered repayment plan to creditors. Depending on income and debt load among other financial factors, any number of one's creditors may receive payment in full, partial payment, or no payment at all. Debts left unpaid generally are discharged.
There are four common forms of bankruptcy filings: Chapter 7 (liquidation for individuals and businesses), Chapter 13 (reorganization for individuals), Chapter 11 (reorganization for individuals and businesses), and Chapter 12 (reorganization reserved for individuals in the farming and fishing industries).
No matter which form you choose, it is important to understand what bankruptcy can - and cannot - do for you. It is very good for getting rid of credit card debt, for example, but some debts are considered almost obligatory, and therefore very rarely are discharged. Tax debts, federal student loans, child support, and spousal support all are such debts. If your debt load is comprised of such elements, look for an alternative to bankruptcy.
Bankruptcy vs. credit counseling
Are you thinking the only way out of debt is filing for bankruptcy? Before you do, consider contacting a credit counseling service for help. This article compares credit counseling to filing for bankruptcy.
When debt help is not enough: 3 reasons for filing bankruptcySituations can arise that make paying your bills impossible, or that render you ineligible for participating in debt relief efforts such as credit counseling. When you're enduring any of these circumstances, consulting a bankruptcy attorney can provide information about your rights and the consequences of filing bankruptcy.
Is bankruptcy right for you?Long-term unemployment, health problems and fallen home values can make debt management a nightmare. Here are some tips for deciding if bankruptcy is your best debt management option.
What Happens to Cosigners When You File For Bankruptcy?Bankruptcy is a very powerful financial tool that can affect the lives of those surrounding the debtor. Cosigners of debt should pay special attention as they are often not protected by someone else's bankruptcy.
Your Credit Rights After Bankruptcy: Discharged Debts and Zero BalancesRebuilding your credit should be at the top of your priorities after filing for personal bankruptcy. During this process, keep a close eye on your credit report as items can often be reported incorrectly by the credit reporting agencies. In general, all discharged debts should be reported as zero balances after bankruptcy. Often they are reported incorrectly and can end up hurting your credit more than necessary. To avoid these mistakes, understand your credit rights as a consumer even under the stain of bankruptcy.
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