Debt Management Answers For You…

Bankruptcy is a procedure designed to relieve debt for consumers, and businesses, have fallen on hard financial times and cannot afford to pay their existing debts. While there are many types of bankruptcy out there, the most commonplace are chapter 7 and chapter 13 of the bankruptcy code.

Chapter 7 is the most common for the individual. It is the complete erasing of qualifying debt. The debtor is then released from all repayment obligations. But chapter 7 bankruptcies are not to be taken lightly.

While giving you an immediate fresh start in repairing your finances, the information remains on your credit report for 10 years. You may be looked at as a high credit risk and considered financially irresponsible.

Chapter 13 may be less harmful to your credit. Though there are still marks against you. Since you are working to repay your debts on a payment plan, you do not look like you are financially irresponsible, though you are still considered a credit risk. Also, your qualifying assets will not be sold with the chapter 13 bankruptcy like they would in chapter 7 proceedings.

In December 2007 legislation was approved that now makes it more difficult for individuals to proceed with a chapter 7 bankruptcies. There are now terms to be followed such as pre-filing credit counseling and post-filing financial education. See the links at the end of this post.

So when considering a bankruptcy filing, it’s important you weigh the rules between chapter 7 and chapter 13. Which one will give you the best resolution in solving your financial problems?

Remember, there is most likely a consumer organization where you live that can assist in you in deciding whether or not to file for bankruptcy. If you decide to file they can usually help you with resources as well.

Federal bankruptcy rules:

http://www.law.cornell.edu/rules/frbp/

Local bankruptcy courts in your area:

http://www.uscourts.gov/rules/bk-localrules.html

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