Sabrina Whetham

How to Handle Personal Bankruptcy

There are two types of Personal Bankruptcies that an individual can file. Chapter 7 and Chapter 13. Chapter 7 releases the debtor from all obligations and Chapter 13 is a repayment plan of three to five years where the debtor gets to keep all of their assets.

Everyone goes through hard financial times in life. Whether a person has a lot of unsecured credit card debt, unforeseen medical expenses, has lost his or her job or has gone through a divorce, filing for Personal Bankruptcy may be just what they need to get a fresh start.

The individual who files for Personal Bankruptcy that has little or no assets that can be turned into cash to settle their obligations should use Chapter 7. As soon as the attorney files the case with the United State Bankruptcy court, the creditors have to back off. They can have no further communication with the debtor in any form. If there are assets that can be converted to cash, they are sold through public auctions or private sales and distributed evenly between all of the creditors. If there are no assets that can be converted to cash, the debtor is released from any and all debt. Liens can be placed on any property that the debtor has for certain types of secured debts.

Chapter 13 is a type of Personal Bankruptcy where individuals’ debts are set up on a repayment plan allowing them to keep all of their assets. This plan is normally approved for repayment period on a three to five year term. The creditors are barred from taking any further action in the case as long as the payments are being made as agreed. Once the debt is satisfied, the individual is released from that debt.

There may be other ways that an individual can get out of debt without having to file for Personal Bankruptcy. There are some creditors that will settle with their debtors out of court. Or an individual can incorporate the help from debt counseling services. These companies help individuals consolidate all of their debts to get a smaller monthly payment. Another alternative would be to borrow against the equity in your home. In most cases, an individual can borrow a portion to all of the equity that has built up. Consider your options carefully because if you do end up filing bankruptcy anyway, using these options may actually hurt more than they help.

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