View All Your Alternatives Before You File Personal Bankruptcy

Finding yourself overwhelmed with debt and having a hard time meeting your financial obligations may tempt you to believe that you must file personal bankruptcy. Prior to making this kind of huge decision, you need to recognize and understand some facts about the bankruptcy process and different options that are available.

There are two main kinds of personal bankruptcy cases. Chapter 7 is a complete debt elimination bankruptcy and Chapter 13 which is a reorganization bankruptcy. Each kind of bankruptcy has its own procedures and outcome.

One of the items that is important to note is that it is not your determination as to which chapter you file. Naturally, most people would choose to file chapter 7 and have their debts just disappear, but the court makes that decision, not you, dependent on how your financial position is shown to the courts. It is for this particular reason that it is definitely to your benefit to have a qualified lawyer cover your bankruptcy operation, if you choose to go forward with it, since they are familiar with what the courts need to see in your paperwork.

Chapter 7 is a complete absolution of debt by the court system. You must file all your current bills with the court and if you are awarded a bankruptcy, all your debts will be dismissed. It sounds good, but it is not. When you file this kind of bankruptcy the court will appoint a clerk to you who will look into all your assets and income. They will carefully catalog all your personal property and they, not you, will decide what must be sold or auctioned to repay some or all of your debts before going to the proceedings. Each state has various laws that set the value of personal property you are allowed to keep. The numbers can be as low as $1500.00 and this will include items such as your wedding rings and family heirlooms.

You need to also be conscious that there are certain kinds of debt which cannot be eliminated by bankruptcy.

Chapter 13 bankruptcy is very similar to chapter 7. The deviation is that in this kind of filling you are trying to setup new arrangements with your creditors for repayment. Many people who file reorganization bankruptcy are doing it so they can keep their home. The court will select a clerk to this kind of case as well. They will find any property or assets to be sold or auctioned to repay your unsecured debt and they will measure your debt to income ratio. This person will combine your debts and set a monthly payment figure that is necessary to cover your debts. You will need to pay the court this amount every month to cover your debts if awarded the bankruptcy. The court will not take anything except repayment into consideration when they come up with this figure.

There are other options that you can look into to assist you to figure out your debt troubles. You must be very conscious of all the issues that are related with personal bankruptcy. Bankruptcy will demolish your credit for some years and the outcome of the debt forgiveness may actually be tougher than the troubles you are experiencing nowadays.