Personal Bankruptcy: What are your options?
admin on March 13th, 2009
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- Chapter 7 Bankruptcy
- Chapter 11 Bankruptcy
- Chapter 13 Bankruptcy
These terms strike fear in the hearts of worried citizens all over the country as they take the difficult steps of running their home financial figures, figuring out which bills not to pay in today’s economy instead of working on which bills they should pay. What’s the difference in bankruptcy options?
You are faced with a decision to declare bankruptcy and wonder if what you have always heard and never imagined would happen to you - are they true? Is it really about being protected? Will bankruptcy be a "black mark" on my financial history or remain in your "permanent record" forever? These thoughts which are swirling around in the heads of Americans in numbers we’ve not seen in a very long time can be overwhelming.
Should you file for Chapter 7 Bankruptcy? As a for instance, if you’re currently unemployed with no source of income, Chapter 7 would be a realistic option unless you have family contributions or other sources of income. If you’re a homeowner and not willing to surrender the home, preferring instead to maintain current mortgage payments - you would have to have some source of income or other financial assistance to pay them.
What about Chapter 11 Bankruptcy? This is generally not a personal bankruptcy option. It is a chapter of the United States Bankruptcy Code which permits reorganization under the bankruptcy laws of the United States. Chapter 11 bankruptcy is available to any business , whether organized as a corporation or sole proprietorship, and to individuals, although it is most prominently used by corporate entities. In contrast, Chapter 7 governs the process of a liquidation bankruptcy.
What is a Chapter 13 Bankruptcy? Well, this is another personal bankruptcy option. This is an option whereby the consumer can reorganize their debt load. The Chapter 13 is based on whatever available income there is in the family. The process calculates your current monthly income and all of your expenses and what remains can be distributed to your unsecured creditors.
How will bankruptcy affect your future? Can you survive a bankruptcy? Should bankruptcy be avoided at all costs? It is most certainly survivable and a person can emerge from a bankruptcy situation with a fresh start financially. However, what needs to change is your spending habits. You have to assess what your needs are and separate them from the things you want. Want vs. Need. An honest assessment and preparing to live within your means is of paramount importance in order to come out of a bankruptcy smarter and with a focus of avoiding the mistakes and circumstances which brought you here in the first place. The key is to learn from your history so that you are not "doomed to repeat it."
Critical Tip: Don’t tap into your retirement fund(s) in order to try to keep your head above water at this critical time. Retirement funds cannot be seized in a bankruptcy proceeding! Leave them alone so that they may serve their purpose - availability during your retirement years.
