Types of Personal Bankruptcy

Reduction in income, loss of job, divorce, medical expenses due to injury or illness which can cause you days of absence from work, aside from the possibility of you not having insurance coverage, can all result to failure (on your part) to settle your monthly financial obligations like payment of utility bills, mortgage, car loan, personal loans to friends and family, credit card bills, and so forth. Problems, however, do not end here for, before you realize it, your debts would have increased to an amount that would be impossible to settle, considering your financial situation. This will soon be followed by phone calls, emails, text messages and even notices of lawsuits – tactics used by creditors and collecting firms to force you to pay your debts.

If you can no longer meet your obligations to your creditors and lenders, know that you have the ability to free yourself from all or a part of your debts – this is stipulated under the U.S. Constitution. This ability is made possible by filing for bankruptcy, one of the legal means introduced by the government through which individuals and business firms can free themselves from overwhelming debts for a chance at regaining control over their finance. The Bankruptcy Law or Bankruptcy Code was made into law by the U.S. Congress in 1978; it contains various chapters, each designed to address individuals’ and businesses’ specific financial situations.

By the end of 2015, the U.S. Bankruptcy Courts said that 844,495 cases of bankruptcy were filed in the U.S. Under Chapter 7 bankruptcy, the chapter most commonly filed, there were 535,047 cases; Chapter 13 had 301,705 case; and, Chapter 11 had 7,241 cases filed under it.

Chapter 7 or Chapter 13 of the Bankruptcy Code are the specific chapters that you may choose if you need to file for personal bankruptcy. Chapter 7, specifically, allows you to have all or part of your debts discharged, after you repay some of the debts using your liquid assets.

Liquid assets, which are considered as non-exempt assets, are assets that can quickly be converted into cash, such as savings and checking accounts. Besides these, there may also be a need for you to surrender some of your non-exempt properties, like a second house or a vacation house, some jewelry, another car, etc., to a court-appointed trustee who will take charge in the selling of your surrendered properties and in paying your non-dischargeable debts to your creditors.

To be able to file Chapter 7 bankruptcy, however, you will first have to pass a means test. This test is designed to make sure that your income does not exceed the limit set under this chapter. Failing the means test may disqualify you from filing for bankruptcy under Chapter 7, but not for bankruptcy under Chapter 13.

Chapter 13 allows you to design a three-year, or five-year (if allowed by the courts) payment proposal during which time you can settle you debts. This is to make debt payments more affordable for you. Many individuals decide to file under Chapter 13 instead of under chapter 7 because under the latter, they will not be required to surrender any of their assets or properties. If they are operating a business, they will also be allowed to continue operations, a benefit not included under Chapter 7. Chapter 13, however, requires that the amount of your secured debt does not exceed $922,975 and your unsecured debt, not more than $307,675.

Personal bankruptcy protection can be a powerful tool in preventing creditor harassment, repossession and foreclosure, and other challenges that serious debt problems can cause.


Breaking the Bankruptcy Cliché

Let’s assume you’re trying to find the possible situation to be free from your debts. Just about everyone will be faced with overwhelming debt at some point in their lives. This could stem from an accident that demands medical expenses, or maybe student loans; mortgages on houses are also a definite origin of overwhelming debt. For every person who is experiencing financial difficulties, there are always different options and paths to take. If you are, however, in debt that leaves you very stressed to the point of panic and sleeplessness, there is an option for you that might help ease your worries – it’s called filing for bankruptcy.

Now, you might be thinking to yourself, “That’s crazy talk!” And there is no blaming for you; there has been a significant amount of stigma against the term. Most people think bankruptcy is hitting rock bottom into poverty and utter defeat. This is simply not the case at all and is a common misconception.

A Waco bankruptcy lawyer can tell you that filing for bankruptcy could even save your credit score and give you that fresh slate you’ve been wishing for. As a matter of fact, some of the best bankruptcy lawyers, paralegals, and any other sort of law practitioner who specializes in bankruptcy law have been on the other side of the bench too! These are the lawyers you will want to represent you in a case like this as it is further comfort and reassurance that you are being represented by people who don’t only understand just the law but also understand what it is like to be in your shoes.

Bankruptcy can only mean that you’re dealing with hard financial times and that’s okay – most Americans will end up facing these same problems, under different circumstances, just the same. There are different solutions for every case. Want to find out if filing for bankruptcy can help your case or hinder it? Well, you can consult with a legal expert and have them look into your individual case in order to find out what best route to take!