How to Declare Personal Bankruptcy?

How to declare personal bankruptcy, either the Chapter 7 elimination of debt or the Chapter 13 repayment plan, is a way to find relief from debt and stop further collection efforts by creditors.  While each type of personal bankruptcy has its different advantages and disadvantages, both a Chapter 7 bankruptcy and a Chapter 13 bankruptcy will permit individuals to find amnesty from debt.  The decision can be complex. Most people do not like picking up the phone and calling the bankruptcy lawyer to discuss personal bankruptcy.  But, once they have discussed their situation with a competent attorney, they can rest assured that they are making the best decision for their situation.

Personal bankruptcy normally is considered the debt management option of last resort because the results are long-term and far-reaching.  A bankruptcy stays on your credit report for 10 years, making it difficult to acquire credit, buy a home, or sometimes get a job.  Though, it is a legal procedure that offers a good start for people who can not satisfy their debts.  Individuals who follow the bankruptcy rules receive a discharge or a court order that says they do not have to repay certain debts.  The two types of bankruptcy may get rid of unsecured debts and prevent foreclosures, repossessions, garnishments, and debt collection activities.  Both also provide exemptions that allow people to keep certain assets, although exemption amounts vary.  Take into consideration that personal bankruptcy usually does not erase child support, alimony, fines, taxes, and some student loan obligations.  And unless you have a suitable 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 lien on it.

Most creditors will work with debtors, even waiving part of a delinquency or waiving interests on a debt, provided the debtor agrees to make payments on the debt.  Sophisticated creditors know that some debts can be difficult to collect, even if you do not declare bankruptcy.  Collection agencies frequently take a percentage of the debt they collect as payment, litigation can be timely and expensive, and forcing a bankruptcy may result in an even lesser recovery.

People think of Chapter 7 bankruptcy if they hear the term bankruptcy.  The point of chapter 7 is to try and clean up your debts without any kind of repayment plan.  The new bankruptcy law established a means test which means that you have to go through a more serious process in which you file your income and expenses.  If your income is smaller than the median income for your state, then this test will not apply to you because it is obvious that you do not make much money.

Declaring personal bankruptcy is a hassle condition, but if you do not do that, the hassle from the debt collectors could be even worse.  While many people regard bankruptcy as a negative
resolution to a problem, it may actually be considered a positive step towards clearing up your financial future.

Do not be anxious about having a completely destroyed credit rating for the rest of your life.  This is a myth.  When you have cleared your bankruptcy, usually a 7 to 10 year process, your credit history is wiped out and you may start all over again. Yes, it may seem like a long wait, however in the meantime you will have learned some important money management lessons and will be in a good position to reestablish your credit. For more information about bankruptcy, you can visit

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