Monday, April 29, 2013

Should You File for Bankruptcy?


If you have accumulated overwhelming debt, you probably feel like you're in a lose-lose situation, but remember this: bankruptcy isn't the end of your finances. Bankruptcy laws are designed to help debtors by giving them a fresh financial start. On the other hand, bankruptcy isn't for everyone. In fact, unnecessary bankruptcies are filed every year. If you're facing money problems, make sure that bankruptcy is the best option for your circumstances.

First, understand the different types of bankruptcy. Generally speaking, you will probably qualify for either chapter 7 or chapter 13 bankruptcy. Chapter 7, also called liquidation bankruptcy, discharges your debt and liquidates your assets in order to pay you outstanding financial obligations. Typically, tax debt, child support and student loans will not be discharged. If you do not qualify for chapter 7, you may be able to petition for chapter 13 instead. Unlike chapter 7, chapter 13 allows you to keep your assets and establish a payment plan to satisfy you're your outstanding debts. In short, chapter 13 does not put your house, car, or other assets at risk of being liquidated.

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After you have a clear understanding of the different chapters you could petition for, ask yourself if there is any other way that you could escape your debt. For instance, have you considered applying for a loan modification? A loan modification allows you to re-evaluate your mortgage payment so and establish a new payment plan. Loan modification may be used as a form of foreclosure defense. If you think that you might be able to pay your other debts if your mortgage payment was less, contact your lender and talk about reaching a modification agreement. Under certain circumstances, you may be able to reduce your monthly payments and re-adjust your budget you fit your financial situation.

Of course, filing a petition may be the only way to ease your financial difficulties. There are many warning signs that may indicate the need to file bankruptcy. If you have fallen behind in your credit card payments, care payment and house payment, you may need to begin the petition process. If creditors begin harassing you at home or at work, or you monthly credit card payment minimum keeps increasing because you can't pay it off, you may need to seriously considering filing a petition. Before you file, though, make sure that you actually qualify for chapter 13 or chapter 7 bankruptcy. There is no need to file if you don't qualify. Even still, unnecessary petitions are submitted every year.


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