When individuals or businesses are facing financial difficulties and inhibiting debt they may seek to obtain relief through the legal process of bankruptcy. A person may file for Chapter 7 bankruptcy and be able to eliminate all or part of the debt. However, they may choose to file for Chapter 13 which stretches out the payments on existing debts.
The process of filing for bankruptcy is also designed to provide protection from creditors. In this case, secure creditors have the assurance of being reimbursed because they are able to hold a lien on property. Thus, this option of payment is likely to be more accepted. Most creditors cannot attempt to collect any form of payment from you while the bankruptcy case is pending. Any discharged or excused debts are also unable to be collected from creditors. However, it's best to understand that not all debts are discharged.
Approximately 90 percent of all bankruptcy cases are caused by unemployment, medical bills, or divorce. While every situation is different the most common feature of bankruptcy is a large amount of debt incurred. The high interest rates of credit cards may also be a contributing factor.
Filing for bankruptcy is usually a last resort decisions which is made personally. The first step however, from freeing yourself from financial burden is making the best possible decision with the least bit of strain. Once this is done, you can petition the court. Basically the petition is seen as a request for protection and relief from creditors. It's only logical that you must provide some personal details such as assets, liabilities, income, and expenditures. Most often they will have had to undergo credit counseling within the allotted time.
Of course the most significant advantage to filing for bankruptcy is getting a fresh financial start. Another advantage is that after filing, most collection efforts will stop. It is also unlikely to affect your employment status. in most cases it will also end all garnishments. However, keep in mind that laws vary from state to state. Some states may even allow you to keep all equity in your home while others, may exempt a certain amount.
If filing for bankruptcy is in your future it's best to hire a bankruptcy lawyer. Use caution when associating with petition preparers, typing services, or paralegals. Filing on your own is most often not advized but should you choose to do so educate yourself on the laws and processes in your state.
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