Persons in serious financial difficulty may be at the point that bankruptcy is the only answer. If a person has lost a major portion of their income or owes debts that cannot be paid, then this may be the best financial solution. There are some serious consequences to be considered before filing, so make sure that you speak with a professional before proceeding.

There are several chapters to the bankruptcy code. Each has some advantages as well as disadvantages. Some relate only to specific situations, such as Chapter 12 that applies only to farmers trying to save their operations. It is important to choose the correct chapter before filing, as it can be expensive to convert from one chapter of the code to another.

When filing a Chapter 7 an automatic stay is placed over properties so that debtors can only petition the court for the monies owed them. Chapter 7 prevents wage garnishment and property liens in most cases. Any assets that the person filing Chapter 7 owns over and above exempted properties will be sold and the proceeds divided proportionately among the debtors. The process is over in three to six months. Persons filing are allowed to keep any income generated during the time and any properties acquired during the time. Any inheritances must be turned over to the court. After the filing is discharged, petitioners can begin to rebuild credit.

Chapter 11 includes debt reorganization. This is one of the most complicated of the chapters on the subject and most persons filing for Chapter 11 will need the help of an attorney to work through this complex code.

Chapter 13 filing requires that debtors be able to set up and maintain a payment plan to their creditors. The payment plan should include all disposable income for the individual or couple for the next three to five years. This chapter can stop debt collectors attempts and phone calls. It takes a longer time than a Chapter 7, but allows the petitioner to keep all his or her assets.

In filing the petition, there are some debts that may not be stopped. Student loans and other debts that are owed to the government and civil judgments where the person filing caused injury or death while under the influence of drugs or alcohol are two notable examples where filing the petition will not stop collection efforts.

It is possible to purchase the necessary forms or a computer program that produces the forms. You may also decide that you would prefer to pay an attorney to take care of the paperwork. The more assets or higher your income, the more necessary it may be to need an attorney. The professional often knows how to best present your case to that court.

Bankruptcy has some very serious consequences. Until the case is discharged, the petitioners will not be able to take on any major debts without the approval of the administrator. After being the case has been discharged, the person may have difficulty in obtaining credit for vehicles or homes for as long as ten years.

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Category: Finances
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