The Pros and Cons When Deciding to File For Bankruptcy
In the current economic climate, people are seeing increasing financial difficulties. One of the most commons LOLOL lines is that bankruptcy is the ultimate resort for many people. The question is not so far-fetched; most of us have been guilty of some type of debt problem at one time or another. For some it’s a larger, extended debt, for others it’s because of a medical condition or injury. For many, it’s simply buying a car they desire at a certain payment amount. The most common bankruptcy seeking process is also something many people are aware of, and thanks to ” flexi fee” many businesses are taking into consideration filing for bankruptcy quite often when deciding on what price to charge their services.
Another interesting piece of information regarding both types of bankruptcy is the increased number in people filing for Chapter 7 bankruptcy and those filing Chapter 13 bankruptcy. Most people usually end up filing for the bankruptcy that causes the largest inconvenience and financial losses to their financial situation. Most bankruptcies filed are considered Chapter 7 bankruptcies. The reason for this is the nature of Chapter 7, which normally seeks to liquidate all assets to pay to creditors, it is very uneconomical (at least in theory) to try to liquidate a primary residence, and other substantial assets.
There are many advantages when considering filing for bankruptcy, mainly for bankrupts that have a large amount of medical debt, or people that have just suffered some type of accidental injury or unemployment debt. When considering Chapter 7 bankruptcy or Chapter 13 bankruptcy, the advantages basically are that you do not have to pay back all of the debt you owe over a 3 to 5 year period. You do not have to pay a flat monthly payment, but instead pay anything that is left over after your assets have been sold to pay the debt you owe. This is only applicable if one is considering Chapter 7 bankruptcy.
One of the main disadvantages of filing bankruptcy is that one will generally lose control of most of their assets when they file. These assets do not have to be sold off to pay off debtors, this is primarily for Chapter 7 bankruptcy, but even Chapter 13 bankruptcy has some form of custody and control of assets. So obtaining chapter 7 bankruptcy can in essence give control and custody of your assets to another person or company. There are hoops that individuals have to jump through before they qualify for either chapter of bankruptcy, so it is best to obtain professional advice before doing so.
There are two primary differences between promoting Chapter 7 bankruptcy and promoting Chapter 13 bankruptcy. Chapter 7 is a process in which all of the debtor’s assets are sold off to pay debtors, generally this means everything except for exempt assets. Some person’s assets are actually included in their total assets for their chapter 7 bankruptcy as well. Another distinct difference is that those filing for Chapter 7 bankruptcy do not get to keep the majority of their assets. Instead, most persons filing for Chapter 7 bankruptcy relinquish all of their assets in exchange for a fresh start. Debtors who file for Chapter 13 bankruptcy instead go through a more structured repayment plan. They can keep their personal belongings, but the exceptions are extremely limited. Most filers find that the benefits of Chapter 13 outweigh the risks of falling behind on payments and facing the possibility of asset liquidation.
It is for individuals who have suffered injury or loss in the line of duty that Chapter 7 bankruptcy is most beneficial. The reason for this is that personal injury cases can include primarily any injury that came as a result of the debtor moving from one location to another, or be on disability and therefore unable to work. These cases are the most common of all law suits filed by individual debtors. The most important advantage is that they are dischargeable, meaning that debts that are associated with these cases, such as medical bills and credit cards can be wiped out once the process is completed.
The disadvantages associated with bankruptcy are that it will impact your credit for 10 years and make it almost impossible to obtain loans. An alternatively, Chapter 13 bankruptcy will impact your credit for up to 7 years, but there is a possibility that it can be removed from your credit report once the payments have been made. The reason that it can be removed from your credit report is that while individuals may have filed for bankruptcy fraudulently, there is no such charge in Chapter 13. Additionally, Chapter 13 requires that monthly repayments to creditors be made to a Trustee, who will pay debts of the debtor’s and then distribute the payments to creditors. Because this trust can be paid for the term of the initial repayment period, the debtor is not effectively “Recovered” until the term has been completed.
Whether you are deciding whether or not to file personal bankruptcy, it is wise to seek professional legal advice. Many bankruptcy lawyers offer a free initial consultation, so it is prudent to seek this advice early.