Personal bankruptcy is another term for consumer bankruptcy. Personal bankruptcy results from financial mismanagement, poor investments, job loss, divorce and situation out of your control. Personal bankruptcy is often seen as a measure that will limit your personal and professional life, but this is not true. While personal bankruptcy is a serious matter that contains long-term effects, it is also a voluntary acceptance and declaration of your debts. Personal bankruptcy is a step towards healing your financial problems.
Personal bankruptcy is covered under two parts of the U.S. Bankruptcy Code: Chapter 7 and Chapter 13. Chapter 7 bankruptcy is a liquidation code that gives you the ability to erase most of your debts by forfeiting assets to creditors. Chapter 13 bankruptcy is a reorganization code that lets you pay off debts during a three to five year time span, but doesn’t require you to forfeit any belongings or assets to pay unsecured debts. Chapter 13 may be used only if you have a regular income and debts are within certain limits.
Each personal bankruptcy options give you different measures to protect you from collection attempts, utility shut-offs, professional discrimination and future lawsuits. Each measure is granted upon your ability to meet obligations and guidelines set down by a bankruptcy court. You need to meet with a bankruptcy attorney to get a clear explanation of your rights and options.
Bankruptcy Information: How can I become Bankrupt?
There are two simple ways a person can become bankrupt: by filing a petition to voluntarily go bankrupt or for creditors to ask the court to make an order that a person is bankrupt. In both these cases a bankruptcy trustee is required to administer the bankruptcy process. People are forced to file for bankruptcy due to unemployment, large medical expenses, seriously overextended credit and marital problems. Generally people file chapter 7 bankruptcy if they have a large amount of unsecured debt, such as credit card debt or medical expenses, that they are no longer in a position to pay. Unemployment, unexpected medical expenses or divorce often prompts the debtor to seek protection from creditors by filing chapter 7 bankruptcy.
After going through the bankruptcy information you will find that there is no explanation to whether filing bankruptcy will affect your credit or not. Unfortunately, if you are behind on your bills, your credit may already be bad. Bankruptcy will not make things any worse. The fact is that filing bankruptcy will be less damaging than a history of unpaid accounts. Your bankruptcy file will appear on your credit record for ten years, but since bankruptcy wipes out your old debts, you are likely to be in a better position to pay your current bills and you may be able to get new credit. The best way to restore your credit is to obtain new credit and make the payments on the new debt on time. The objective, of federal bankruptcy law is to provide the honest debtor with a fresh start.
There are debts that bankruptcy cannot erase, such as money owed for child support or alimony, fines, some taxes, debts not listed on your bankruptcy petition, loans you got by knowingly giving false information to a creditor, debts resulting from willful and malicious harm, student loans owed to a school or government body, except if the court decides that payment would be an undue hardship; mortgages and other liens which are not paid in the bankruptcy case. Bankruptcy will erase your obligation to pay any additional money if the property is sold by the creditor. Public utilities, such as electricity, cannot be cut off because you have filed for bankruptcy. However, the utility service providers can demand a deposit for future service and you do have to pay bills, which arise after your bankruptcy petition is filed.
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