Don’t Let Your Debt Problems Pile Up
Debts can be devastating and they can turn your finances topsy-turvy. So, before debt problems take control of your life; try not to reach a point where you have no other alternative to get out of debt but to file bankruptcy. Bankruptcy can also be a solution to help you get out of debt.
Most of the debtors avoid filing bankruptcy due to the consequences they have to face. However, if you have tried out all debt relief programs and tried to solve debt problems on your own and failed to get the desired results, you will have no other option but to file bankruptcy.
How does bankruptcy help you to solve debt problems?
When you file bankruptcy, one important factor that you should keep in mind is that it is a federal court proceeding and it is best if you have legal representation. This is because there are many legal aspects that need to be addressed that is best handled by a bankruptcy attorney.
You can file Chapter 7 or Chapter 13 bankruptcy depending on your current financial condition. The new federal bankruptcy laws have made bankruptcy filings very rigid. Earlier you could file bankruptcy easily. The new federal bankruptcy laws have also introduced few changes.
One of the most prominent changes is the means test. You will have to undergo a means test if you intend to file Chapter 7 bankruptcy. In means test, your income will be compared to the median income of a similar household in the state in which you are residing. Your income has to be lower than the median income for you to qualify for Chapter 7 bankruptcy. And if your income is more than the median income you qualify for Chapter 13 bankruptcy.
Chapter 7 bankruptcy
In Chapter 7 bankruptcy, your non-exempt debts will be liquidated so that your creditors can be paid off. You can enjoy either state or federal exemptions. The entire process is usually taken care of by a court appointed trustee. Under certain circumstances, some of your debts may be discharged in Chapter 7 bankruptcy.
Chapter 13 bankruptcy
In Chapter 13 bankruptcy, a repayment plan is worked out so that you can make payments as per the new repayment schedule. You need to have a stable income in order to file Chapter 13 bankruptcy. In other words, your income should support the repayment plan.
Chapter 7 as well as Chapter 13 can help you to solve your debt problems depending on the one you qualify for. However, it harms your credit score. If you file bankruptcy, it stays on your credit report for a period of 7 to 10 years.
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