Personal bankruptcy generally is considered the debt management option of last resort because the results are long-lasting and far-reaching. A bankruptcy stays on your credit report for 10 years, and can make it difficult to obtain credit, buy a home, get life insurance, or sometimes get a job. Still, it is a legal procedure that offers a fresh start for people who can't satisfy their debts. People who follow the bankruptcy rules receive a discharge which is a court order that says they don't have to repay certain debts.
The consequences of bankruptcy are significant and require careful consideration. Other factors to think about: Effective October 2005, Congress made sweeping changes to the bankruptcy laws. The net effect of these changes is to give consumers more incentive to seek bankruptcy relief under Chapter 13 rather than Chapter 7. Chapter 13 allows you, if you have a steady income, to keep property, such as a mortgaged house or car, which you might otherwise lose. In Chapter 13, the court approves a repayment plan that allows you to use your future income to pay off your debts during a three-to-five-year period, rather than surrender any property. After you have made all the payments under the plan, you receive a discharge of your debts.
Chapter 7, known as straight bankruptcy, involves the sale of all assets that are not exempt. Exempt property may include cars, work-related tools, and basic household furnishings. Some of your property may be sold by a court-appointed official, a trustee, or turned over to your creditors. The new bankruptcy laws have changed the time period during which you can receive a discharge through Chapter 7. You now must wait eight years after receiving a discharge in Chapter 7 before you can file again under that chapter. The Chapter 13 waiting period is much shorter and can be as little as two years between filings.
Both types of bankruptcy may get rid of unsecured debts and stop foreclosures, repossessions, garnishments and utility shut-offs, and debt collection activities. Both also provide exemptions that allow you to keep certain assets, although exemption amounts vary by state. Personal bankruptcy usually does not erase child support, alimony, fines, taxes, and some student loan obligations. Also, unless you have an acceptable plan to catch up on your debt under Chapter 13, bankruptcy usually does not allow you to keep property when your creditor has an unpaid mortgage or security lien on it.
Another major change to the bankruptcy laws involves certain hurdles that you must clear before even filing for bankruptcy, no matter what the chapter. You must get credit counseling from a government-approved organization within six months before you file for any bankruptcy relief. You can find a state-by-state list of government-approved organizations at the U.S. Trustee Program, the organization within the U.S. Department of Justice that supervises bankruptcy cases and trustees. Also, before you file a Chapter 7 bankruptcy case, you must satisfy a ?means test.? This test requires you to confirm that your income does not exceed a certain amount. The amount varies by state and is publicized by the U.S. Trustee Program.
There are many different things that you can do to prevent your home from foreclosure. One of the many options that you might have considered is to file for bankruptcy. Before you even think about doing that it is well worth learning a little more about foreclosure and what you can do to stop it. You might have heard about people that have filed for bankruptcy in the past and managed to save their home as a result. This doesn't mean that filing for bankruptcy is a wonderful idea that will solve all your problems right away just because it seems like a way to get out of paying all your existing debts including your mortgage.
Remember that foreclosure notices are sent out all the time and in a lot of cases those that end up getting those notices could have avoided it if only they knew more about it beforehand. It is much better to prepare yourself in advance for this situation so you don't have to just let it happen to you.
Of course there will always be people that are just downright irresponsible and are not bothered at all whether they pay their bills or not. While people like that do deserve everything that comes their way the unfortunate thing is that they also make life much harder for the rest of us. Other people might just have had a run of bad luck that has left them in financial difficulty through no fault of their own. Help for people in this situation is widely available but you do need to know where to look to find it. You could trying reading a few books on the subject or spending some time doing some research on the internet to find out more about foreclosure and exactly what you can do to prevent it from happening to you.
One of the main peoples that people opt for bankruptcy as a way out is because it provides a way to clear off their outstanding unpaid debts and once they are out of the way then they could possibly be able to save their home. Don't think for a minute that bankruptcy is ever an easy way out though. It really should be right at the bottom of the list of things you are willing to try in order to get your finances back into shape.
Foreclosure can be easily understood when you choose to speak with a professional about the threat that you are facing and there is also legal help available for anyone who is feeling as though they might potentially have no other choice but to file for some type of bankruptcy.
You need to do everything in your power to prevent foreclosure happening to you. Never assume that everything will be just find because it may not turn out that way. Anything could happen such as a you lose your job or have some kind of terrible accident leaving you unable to work. It is therefore essential that you spend some time now doing some research on the subject so that you can be assured that you will be fully prepared if you ever need to be.
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