When Is Personal Bankruptcy a Good Thing?
Are you having some financial difficulties (or even impossibilities) and considering bankruptcy? Well, before you make your final decision, you need to learn when personal bankruptcy is a good thing, and when it could be a bad thing. Simply put, bankruptcy is a huge step, and if you are not careful you can easily find yourself making a huge financial mistake that could potentially make your life worse. Bankruptcy should always be used as a last option, and not as your first. Here are a few guidelines that you can use to ensure you know if this is the step for you or not.
- Know your laws. While there are federal rules and structures that are in place to guide bankruptcy, there are also sometimes some local ones as well that can effect how you proceed. The easiest way to make sure that you are meeting all the legal requirements is to, sad to say, spend a little bit of money that you may not have. By hiring a professional bankruptcy attorney you will have your rights protected, as well as ensure that that you don't forget any crucial steps, or any legal paperwork that you may need to fill out.
- Know your needs. A very crucial step in filing for bankruptcy is to actually determine what your needs are. This can be done by talking to an approved credit counselor; you should be able to get a few names or agencies from your bankruptcy attorney, or from your local judicial offices. These agencies will be able to help you identify whether you actually need to file bankruptcy, and what type of bankruptcy will work for you.
- Chapter 7. This type of bankruptcy is also known as liquidation bankruptcy. It tends to be one of the more common types of bankruptcies that are filed, and requires that you do some things that you may not want to. Typically, what this means is that you will have to liquidate almost all of your assets in order to meet as many of your debts as possible. Generally speaking, you can only hold onto about $20,000 in personal items, which could include a car if you are willing to continue making payments. Some items that are generally considered exempt are any that are below $1000 in value (because it can be more trouble than they are worth to sell) and any items that are essential to the running of your household (such as appliances, furniture, electronics and even computers).
- Chapter 13. Also known as a reorganization bankruptcy, this particular type of bankruptcy allow you the chance to pay back what is owed over a period of time. This particular type of bankruptcy is significantly different from Chapter 7 since you don't really need to liquidate anything (unless you want to) in order to meet your needs. One of the most common uses for a Chapter 13 bankruptcy is to help forestall or even stop a foreclosure in that it will allow you to restructure what you owe, and pay it off in a more efficient manner.
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Declaring bankruptcy is a big step. Don't do it unless you're sure it's the best thing for your unique situation.