Bankruptcy should be considered a last resort for dealing with your debts. This may be an option you are considering if you are overwhelmed by your debt payments, and you know that it will be a struggle to pay the debts, even when you have cut your spending to a bare minimum.
There are two different types of bankruptcy, and each have a different set of rules. No matter what one you choose, your credit will be negatively impacted by the bankruptcy and you will have a difficult time borrowing money in the future.
Chapter 7 bankruptcy is designed for people who have very few assets and lower incomes. In order to qualify for a Chapter 7 bankruptcy, you need to make below the median income in your state. Then you may be required to turn in your car, and sell off any other liquid assets. The money you receive will be given to the court and divided among your creditors. Once this happens the rest of your debts are discharged, and you no longer need to pay anything to anyone.
Chapter 13 bankruptcy is designed for most consumers. The court will set up a debt repayment plan that will clear up your debts in the next three to five years. This plan allows you to keep your home and your car because you will continue to be making payments. You must make your payments to the court on time during the length of the bankruptcy. Once you have completed the payment plan, the rest of your debts are discharged. You are considered as being the process of a Chapter 13 bankruptcy until you have completed making the payments according to the plan.
Bankruptcy laws were changed in 2005. The bankruptcy laws do make it a bit more difficult to qualify to file bankruptcy. One of the major changes is a requirement people to go through consumer credit counseling within the six months before declaring bankruptcy. There is a list of services that qualify in your state, and you should verify that you are using a service that will qualify you for bankruptcy before you use it. Before 2005, it was easier to qualify for a Chapter 7 bankruptcy, but the means test does make it more difficult to qualify. Bankruptcy laws are designed to help protect the debtors as well as the creditors.
You should contact an attorney to learn how to file bankruptcy in your state. Although some people may say that you can file bankruptcy on your own, you really should contact an attorney. It is a complicated process, and it make take a while for everything to go through. You will need to begin by receiving the consumer credit counseling and working out a possible payment plan. If that does not work, then contact you attorney. You should continue to make monthly payments if possible until your bankruptcy is followed. You should also stop using all of your credit cards and revolving lines of credit.
Business bankruptcy is handled differently from consumer bankruptcy. There are several different types of bankruptcy, and the type of business bankruptcy your company will use depends on factors like whether it is a sole proprietorship or a partnership or corporation. The types of debt that you have will also determine the bankruptcy. These debts are rarely completely discharged. You should contact a business bankruptcy attorney before you go this route.