Bankruptcy

Bankruptcy is a good alternative for those individuals that have absolutely no way to repay their debts; however in today’s economy, people are throwing the term around much too loosely and assuming that all their debts will be magically forgiven. Bankruptcy is a serious matter and it is very important that people who are considering it fully educate themselves on the negative effects it can have on one’s life. With that being said, there are two different types of bankruptcy that the average consumer can apply and qualify for:

Chapter 7

Commonly known as “liquidation”, Chapter 7 usually takes four to six months from the date of filing to the final discharge. You can file only once every six years. This form of bankruptcy basically allows filers to give up assets in exchange for complete discharge of their debts.

Chapter 13

Also known as “debt adjustment”, Chapter 13 allows individuals to temporarily halt foreclosures and collection actions while they draft and execute a plan to repay a percentage of or all of the debts over a three- to five-year period. While debtors are allowed to keep all of their property, the court approves a new interest-free plan for repayment of the outstanding debt. A written plan is created giving details of all the transactions that will occur and the duration. The repayment must begin within thirty to forty-five days after the case has started. Many times the court will deduct payments directly from paychecks making it very difficult to manage your own money.