Bankruptcy

Bankruptcy has become fairly common in today's economy. Let's discuss what each kind is.

First there are two kinds of Bankruptcy. Chapter 7 and Chapter 13.

In Chapter 7 you are basically “restructuring” you debt. Big companies do this all the time. Their assets are frozen and the judge gets to decide how and when they pay back the outstanding debt they owe. Usually a lot of the fees and interest is taken off the account and they start with a clean slate. The company keeps all of the assets most of the time.

Now Chapter 13 is a little different, normally for individuals. In chapter 13 you don’t get to keep the assets if they are “secured debt” meaning that something of value backs the loan. A home mortgage for example is a secured debt, if you stop making the payments the bank takes your home, really quickly sometimes. For a business it might be a loan on a building or car or even computers or furniture. Anything that the bank could take back and sell. Therefore anything can be taken in a chapter 13 if it is a secured debt.

If it is not a secured debt, like anything you charge on your Visa card, the creditors cannot take it a way from you. So when you are dealing with a credit card, bankruptcy is a different story. There is no way to tell if that $1000 on your Discover card is a bunch of cheeseburgers, or the new living room set you just bought. So rule of thumb, if you buy it on plastic you keep it.

You should contact an attorney for a consultation if you are thinking about filing. There is are lot of “do it yourself” kits out there. But you need to make sure that it is done correctly if you are going to do it. Make sure it is a clean slate, with nothing left out for you to have to worry about.

Your credit is going to be (and probably already is) BAD, so make sure that you get everything taken care of.

You can only file for this protection every 7-10 years in most states. So if you are in a position where you need to file make sure and change your habits! Don't ever do this again.

Also be aware that filing adversly affects other areas besides getting a loan. For example many employers will check your credit before you are hired. If your credit is bad, you might be turned down. Employers sometimes see this as irresponsibility, dishonesty, or poor money management.

In addition insurance rates, apartment rentals, etc.

This decision will affect most areas of your life.

But if you follow the debt steps you should not ever need to use this extreme measure.

Below you will find some steps from wikihow on how to file bankruptcy. Make sure to follow them.

Wikihow Bankruptcy Steps



"A man in debt is so far a slave,"
Ralph Waldo Emerson.


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