Bankruptcy is all about worries of money and expenses. It is not surprising to know that most people do not have a complete knowledge about bankruptcy even after they have filed for it. Of all the bankruptcy cases filed, the most common ones are chapter 11 and chapter 13. Both chapter 11 and chapter 13 are for the ease for the people. However, before you file them, you need to have proper information about bankruptcy and its aftermath.
What is bankruptcy?
Bankruptcy is basically your solution by which you can manage to relieve from debts. It is supervised by the court and you get to have a legal permission to arrange for a proper distribution of your assets to your creditors. Mainly there are two forms of bankruptcy, ‘straight’ or ‘liquidation’. However bankruptcy is a solution to you if you have some serious financial problems, it may not be beneficial for everyone.
Who can be eligible for bankruptcy?
Anyone can apply for bankruptcy. However if the court sees that the terms of the bankruptcy laws are not maintained, the approval may be denied. This may be the case when your needs are seen to be more than your income. You need to consider your family, their demands and assets before you file for bankruptcy. However, bankruptcy filing should be the last option on your list; you should think of all the possible ways of avoiding it.
What are the pros and cons of filing a bankruptcy case?
Pros:
• The frequency of bankruptcy cases getting resolved is high which means most of the cases are resolved giving you a fresh start.
• The federal or state law will allow taking some of the property as exempt property.
• In most cases, the creditors cannot claim your assets or property in future.
• The chapters are orderly and give you a complete detail about the amount you have to pay to the creditors.
Cons:
• Filing a bankruptcy case is a bad mark on your records. This would mean you cannot file for loans for at least 10 years. Filing a bankruptcy case may be noted by many commercial companies.
• Ones who co-signed the loan may also have to pay the debt.
• To many, bankruptcy still seems to be a sign of irresponsibility. The proceedings are a source of embarrassment to many as the petitioner has to go through questioning about his financial conditions.
• Tax results are something that can prevail as an aftermath of a bankruptcy case.
When to file bankruptcy?
First you have to find yourself a trusted non-profit counseling service. He will let you know whether there is a need to file for bankruptcy or not. Next step is to attempt the bankruptcy means test. Through this test, the judge will decide whether the proceedings are to be held or not. Now take a look at your income. If it your debt is more than 25% of your income, you can apply for bankruptcy, not otherwise. Consult a good lawyer and take advice. Take all other options into account as much as possible. Do remember that bankruptcy is not something good for your record, so avoid it till the last moment.
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